SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 2000
SHOP AT HOME, INC.
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(Exact name of registrant as specified in its charter)
Tennessee 0-25596 62-1282758
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(State or other (Commission (IRS
Employer jurisdiction of File Number)
Identification No.)
incorporation)
5388 Hickory Hollow Parkway, Antioch, Tennessee 37013
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(Address, including zip code, of principal executive office)
(615) 263-8000
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(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
On June 30, 2000, Shop At Home, Inc. (the "Company") issued 2,000
shares of its Series B Convertible Preferred Stock and related Warrants in a
private placement to institutional investors. The Company estimates the net
proceeds of the offering, after expenses, to be approximately $19,735,000. The
Series B Convertible Preferred Stock is subject to the terms and conditions of
the Articles of Amendment to the Company's Charter attached hereto as Exhibit
3.1. The Warrants are subject to the terms and conditions of the form of Warrant
attached hereto as Exhibit 4.1. Pursuant to a Registration Rights Agreements
attached as Exhibit 10.1, the Company has agreed to prepare and file with the
Securities and Exchange Commission a registration statement covering the resale
of the shares of Common Stock issuable pursuant to the terms of the Series B
Convertible Preferred Stock and related Warrants. The terms of the private
placement are more fully set forth in the Securities Purchase Agreement attached
hereto as Exhibit 10.2.
A copy of the Revolving Credit Agreement dated December 15, 1999,
between the Company, certain lenders, and Union Bank of California, describing
the terms and conditions of the Company's $20,000,000 senior credit facility, is
attached hereto as Exhibit 10.3.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SHOP AT HOME, INC.
(Registrant)
By: /s/ George J. Phillips
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George J. Phillips
Executive Vice President and General Counsel
Date: July 3, 2000
EXHIBIT INDEX
3.1 Articles of Amendment
4.2 Form of Warrant
10.1 Registration Rights Agreement
10.2 Securities Purchase Agreement
10.3 Revolving Credit Agreement
99.1 Press Release
<PAGE>
Exhibit 3.1
ARTICLES OF AMENDMENT
TO THE CHARTER
OF
SHOP AT HOME, INC.
Pursuant to the provisions of Section 48-16-102 of the Tennessee Code
Annotated, the undersigned corporation adopts the following Articles of
Amendment to its Charter:
1. The name of the corporation is Shop At Home, Inc.
2. The purpose of this amendment is to set forth the designations, limitations
and relative rights of the corporation's Series B Convertible Preferred Stock, a
new series of the corporation's previously authorized preferred stock, par value
$10.00 per share.
3. The Charter of the corporation is amended by inserting therein as Section
7.4 the following text determining the terms of the Series B Convertible
Preferred Stock:
<PAGE>
(1) Dividends. The holders of shares of Series B Convertible Preferred
Stock, par value $10.00 per share (the "Preferred Shares"), of Shop At Home,
Inc. (the "Company") shall be entitled to receive dividends ("Dividends") at a
rate of 6.0% per annum, which shall be cumulative, accrue daily from the
Issuance Date (as defined below) and be due and payable on the following dates:
(i) January 1, 2001, (ii) July 1, 2001, and (iii) the first day of each Calendar
Quarter (as defined below) after July 1, 2001 (each, a "Dividend Date"). If a
Dividend Date is not a Business Day, then the Dividend shall be due and payable
on the Business Day immediately following the Dividend Date. Dividends shall be
payable in cash, or, at the option of the Company, in shares of Common Stock (as
defined below) ("Dividend Shares"), provided that the Dividends which accrued
during any period shall be payable as Dividend Shares only if the Company
provides written notice ("Dividend Election Notice") to each holder of Preferred
Shares at least ten (10) days prior to the Dividend Date. Dividends to be paid
in shares of Common Stock for each Preferred Share shall be paid in a number of
fully paid and nonassessable shares (rounded to the nearest whole share in
accordance with Section 2(b)) of Common Stock equal to the quotient of (a) the
Additional Amount (as defined below) divided by (b) the Dividend Conversion
Price (as defined below) on the applicable Dividend Date. Notwithstanding the
foregoing, the Company shall not be entitled to pay Dividends in shares of
Common Stock and shall be required to pay such Dividends in cash if (a) any
event constituting a Triggering Event (as defined in Section 3(a)), or an event
that with the passage of time and without being cured would constitute a
Triggering Event, has occurred and is continuing on the Dividend Date or the
date which is 10 days prior to the Dividend Date, unless otherwise consented to
in writing by the holder of Preferred Shares entitled to receive such Dividend
or (b) the Registration Statement (as defined in the Registration Rights
Agreement) is not effective and available for the resale of all of the
Registrable Securities (as defined in the Registration Rights Agreement),
including, without limitation, the Dividend Shares, on the Dividend Date or the
date which is 10 days prior to the Dividend Date. Any accrued and unpaid
Dividends which are not paid within five (5) Business Days of such accrued and
unpaid Dividends' Dividend Date shall bear interest at the rate of 18.0% per
annum (or if lower, the maximum amount allowed by applicable law) from such
Dividend Date until the same is paid in full (the "Default Interest").
(2) Conversion of Preferred Shares. Preferred Shares shall be
convertible into shares of the Company's common stock, par value $0.0025 per
share (the "Common Stock"), on the terms and conditions set forth in this
Section 2.
(a) Certain Defined Terms. For purposes of these Articles of
Amendment, the following terms shall have the following meanings:
(i) "Additional Amount" means, on a per share basis,
the sum of (A) unpaid Default Interest through the date of determination plus
(B) the result of the following formula: (0.06)(N/365)($10,000).
(ii) "Approved Stock Plan" means any employee benefit
plan which has been approved by the Board of Directors of the Company, pursuant
to which the Company's securities may be issued to any employee, officer or
director for services provided to the Company.
(iii)"Articles of Amendment" means Section 7.4 of
the Company's Charter.
(iv) "Business Day" means any day other than
Saturday, Sunday or other day on which commercial banks in The City of New York
are authorized or required by law to remain closed.
(v) "Calendar Quarter" means each of (A) the period
beginning on and including January 1 and ending on and including March 31, (B)
the period beginning on and including April 1 and ending on and including June
30,(C) the period beginning on and including July 1 and ending on and including
September 30, and (D) the period beginning on and including October 1 and ending
on and including December 31.
(vi) "Closing Bid Price" means, for any security as
of any date, the last closing bid price for such security on the Principal
Market (as defined below) as reported by Bloomberg Financial Markets
("Bloomberg"), or if the Principal Market begins to operate on an extended hours
basis, and does not designate the closing bid price, then the last bid price at
4:00 p.m., New York City Time, as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no last closing bid price is reported for such security by
Bloomberg, the last closing trade price of such security as reported by
Bloomberg, or, if no last closing trade price is reported for such security
by Bloomberg, the average of the closing bid prices of any market makers for
such security as reported in the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Bid Price cannot be calculated for such security on such
date on any of the foregoing bases, the Closing Bid Price of such security on
such date shall be the fair market value as mutually determined by the Company
and the holders of a majority of the Preferred Shares then outstanding. If the
Company and the holders of Preferred Shares are unable to agree upon the fair
market value of the Common Stock, then such dispute shall be resolved pursuant
to Section 2(d)(iii) below. All such determinations shall be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period.
(vii) "Closing Sale Price" means, for any security as
of any date, the last closing trade price for such security on the Principal
Market as reported by Bloomberg, or if the Principal Market begins to operate
on an extended hours basis, and does not designate the closing trade price, then
the last trade price at 4:00 p.m., New York City Time, as reported by Bloomberg,
or if the foregoing do not apply, the last closing trade price of such security
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the last closing ask price of such
security as reported by Bloomberg, or, if no last closing ask price is reported
for such security by Bloomberg, the average of the highest bid price and the
lowest ask price of any market makers for such security as reported in the
"pink sheets" by the National Quotation Bureau, Inc. If the Closing Sale Price
cannot be calculated for such security on such date on any of the foregoing
bases, the Closing Sale Price of such security on such date shall be the fair
market value as mutually determined by the Company and the holders of a majority
of the Preferred Shares then outstanding. If the Company and the holders of
Preferred Shares are unable to agree upon the fair market value of the Common
Stock, then such dispute shall be resolved pursuant to Section 2(d)(iii) below.
All such determinations to be appropriately adjusted for any stock dividend,
stock split or other similar transaction during such period.
(viii) "Common Stock Deemed Outstanding" means, at
any given time, the number of shares of Common Stock actually outstanding at
such time, plus the number of shares of Common Stock deemed to be outstanding
pursuant to Sections 2(f)(i)(A) and 2(f)(i)(B) hereof regardless of whether
the Options or Convertible Securities are actually exercisable at such time
but excluding any shares of Common Stock owned or held by or for the account
of the Company or issuable upon conversion of the Preferred Shares or
exercise of the Warrants (as defined below).
(ix) "Conversion Amount" means the sum of (1) the
Additional Amount (as defined above), and (2)$10,000.
(x) "Conversion Percentage" means 100% on the
Issuance Date; provided that the Conversion Percentage then in effect shall be
permanently adjusted on the first day of every calendar month beginning on and
following August 1, 2000 by decreasing the Conversion Percentage then in
effect by one percentage point (for example, on August 1, 2000 the Conversion
Percentage will be reduced from 100% to 99%, and on September 1, 2000 the
Conversion Percentage will be reduced from 99% to 98% and so forth); provided,
further, that the Conversion Percentage shall never be less than 88%.
(xi) "Conversion Price" means, as of any Conversion
Date (as defined below) or other date of determination, the product of (A) the
Conversion Percentage multiplied by (B) the lowest Closing Bid Price during the
four (4) consecutive trading days ending on and including such Conversion Date
or other date of determination (such product is referred to herein as the
"Applicable Daily Price"); provided that in no event shall the Conversion Price
exceed the Fixed Conversion Price (as defined below), each in effect as of
such date and subject to adjustment as provided herein.
(xii) "Convertible Securities" means any stock or
securities (other than Options) directly or indirectly convertible into or
exchangeable or exercisable for Common Stock.
(xiii) "Dividend Conversion Price" means, with
respect to any Dividend Date, that price which shall be computed as the product
of (A) 95% multiplied by (B) the arithmetic average of the Closing Sale Prices
of the Common Stock on each of the five (5) consecutive trading days immediately
preceding such Dividend Date.
(xiv) "Excluded Securities" means shares of Common
Stock (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions) issued by the Company as
consideration for mergers, consolidations or the acquisition of businesses
of other Persons, provided that the Board of Directors of the Company
has made a good faith, reasonable determination that the consideration received
for such shares is not less than the fair market value of such shares.
(xv) "Fixed Conversion Price" means, with respect to
any Preferred Share, as of any Conversion Date or other date of determination,
$12.00, subject to adjustment as provided herein.
(xvi) "Issuance Date" means, with respect to each
Preferred Share, the date of issuance of the applicable Preferred Share.
(xvii) "Maturity Date" means the date which is three
(3) years after the Issuance Date, unless extended pursuant to
Section 2(d)(vii).
(xviii)"N" means the number of days from, but
excluding, the last Dividend Date with respect to which dividends, along with
any Default Interest, have been paid by the Company on the applicable Preferred
Share, or the Issuance Date if no Dividend Date has occurred, through and
including the Conversion Date, the Maturity Date or other date of determination
for such Preferred Share, as the case may be, for which such determination is
being made.
(xix) "Options" means any rights, warrants or options
to subscribe for or purchase Common Stock or Convertible Securities.
(xx) "Person" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(xxi) "Principal Market" means the Nasdaq National
Market, or if the Common Stock is not traded on the Nasdaq National Market, then
the principal securities exchange or trading market for the Common Stock.
(xxii) "Redemption Percentage" means 100% on the
Issuance Date; provided that the Redemption Percentage then in effect shall
be permanently adjusted on the first day of every calendar month beginning on
and following August 1, 2000 by increasing the Redemption Percentage then in
effect by one percentage point; provided, further, that the Redemption
Percentage shall never be greater than 120%.
(xxiii) "Registration Rights Agreement" means that
certain registration rights agreement between the Company and the initial
holders of the Preferred Shares relating to the filing of a registration
statement covering the resale of the shares of Common Stock issuable upon
conversion of the Preferred Shares and exercise of the Warrants, as such
agreement may be amended from time to time as provided in such agreement.
(xxiv) "Securities Purchase Agreement" means that
certain securities purchase agreement between the Company and the initial
holders of the Preferred Shares, as such agreement may be amended from time to
time as provided in such agreement.
(xxv) "Stated Value" means $10,000.
(xxvi) "Warrants" means the warrants to purchase
shares of Common Stock issued by the Company pursuant to the Securities Purchase
Agreement, as such warrants may be amended from time to time as provided in such
warrants.
(b) Holder's Conversion Right; Mandatory Redemption or
Conversion. Subject to the provisions of Sections 5 and 8, at any time or times
on or after the Issuance Date, any holder of Preferred Shares shall be entitled
to convert any whole or fractional number of Preferred Shares into fully paid
and nonassessable shares of Common Stock in accordance with Section 2(d) at the
Conversion Rate (as defined below). If any Preferred Shares remain outstanding
on the Maturity Date, then, pursuant to Section 2(d)(vii), all such Preferred
Shares shall be converted at the Conversion Rate as of such date in accordance
with Section 2(d) or redeemed by the Company. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
Preferred Share by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of a fraction of
a share of Common Stock. If, after the aforementioned aggregation, the issuance
would result in the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock up or down to the
nearest whole share.
(c) Conversion. The number of shares of Common Stock issuable
upon conversion of each Preferred Share pursuant to Section 2(b) shall be
determined according to the following formula (the "Conversion Rate"):
Conversion Amount/Conversion Price
(d) Mechanics of Conversion. The conversion of Preferred
Shares shall be conducted in the following manner:
(i) Holder's Delivery Requirements. To convert
Preferred Shares into shares of Common Stock on any date (the"Conversion Date"),
the holder thereof shall (A) transmit by facsimile (or otherwise deliver), for
receipt on or prior to 11:59 p.m., New York City Time, on such date, a copy
of an executed notice of conversion in the form attached hereto as Exhibit I
(the "Conversion Notice") to the Company and (B) if required by
Section 2 (d) (viii), surrender to a common carrier for delivery to
the Company as soon as practicable following such date the original certificates
representing the Preferred Shares being converted (the "Preferred Stock
Certificates") (or an indemnification undertaking with respect to such shares in
the case of their loss, theft or destruction).
(ii) Company's Response. Upon receipt by the
Company of a copy of a Conversion Notice, the Company
shall (1) as soon as practicable, but in no event later than within one (1)
Business Day, send, via facsimile, a confirmation of receipt of such Conversion
Notice to such holder and the Company's designated transfer agent (the "Transfer
Agent"), which confirmation shall constitute an instruction to the Transfer
Agent to process such Conversion Notice in accordance with the terms herein and
(2) on or before the second (2nd) Business Day following the date of receipt by
the Company of such Conversion Notice (the "Share Delivery Date") (A) provided
the Transfer Agent is participating in The Depository Trust Company ("DTC") Fast
Automated Securities Transfer Program and provided that the holder is eligible
to receive shares through DTC, credit such aggregate number of shares of Common
Stock to which the holder shall be entitled to the holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent Commission system
or (B) issue and deliver to the address as specified in the Conversion Notice, a
certificate, registered in the name of the holder or its designee, for the
number of shares of Common Stock to which the holder shall be entitled. If the
number of Preferred Shares represented by the Preferred Stock Certificate(s)
submitted for conversion, as may be required pursuant to Section 2(d)(viii), is
greater than the number of Preferred Shares being converted, then the Company
shall, as soon as practicable and in no event later than three Business Days
after receipt of the Preferred Stock Certificate(s) (the "Preferred Stock
Delivery Date") and at its own expense, issue and deliver to the holder a new
Preferred Stock Certificate representing the number of Preferred Shares not
converted.
(iii) Dispute Resolution. In the case of a dispute
as to the determination of the Closing Bid Price, Closing Sale Price or the
arithmetic calculation of the Conversion Rate, the Company shall instruct
the Transfer Agent to issue to the holder the number of shares of Common Stock
that is not disputed and shall transmit an explanation of the disputed
determinations or arithmetic calculations to the holder via
facsimile within one (1) Business Day of receipt of such holder's Conversion
Notice or other date of determination. If such holder and the Company are unable
to agree upon the determination of the Closing Bid Price, the Closing Sale Price
or arithmetic calculation of the Conversion Rate within two (2) Business Days of
such disputed determination or arithmetic calculation being transmitted to the
holder, then the Company shall within one (1) Business Day submit via facsimile
(A) the disputed determination of the Closing Bid Price or Closing Sale Price to
an independent, reputable investment bank selected by the Company and approved
by the holders of a majority of the Preferred Shares then outstanding or (B) the
disputed arithmetic calculation of the Conversion Rate to the Company's
independent, outside accountant. The Company shall cause the investment bank or
the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the holder of the results no later than
two (2) Business Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
manifest error.
(iv) Record Holder. The person or persons
entitled to receive the shares of Common Stock issuable upon a conversion of
Preferred Shares shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Conversion Date.
(v) Company's Failure to Timely Convert.
(A) Cash Damages. If (I) within three
(3) Business Days after the Company's receipt of the facsimile copy of a
Conversion Notice the Company shall fail to issue and deliver a certificate
to a holder or credit such holder's balance account with DTC for the number of
shares of Common Stock to which such holder is entitled upon such holder's
conversion of Preferred Shares or (II) within five (5) Business Days of the
Company's receipt of a Preferred Stock Certificate the Company shall fail
to issue and deliver a new Preferred Stock Certificate representing the
number of Preferred Shares to which such holder is entitled pursuant to
Section 2(d)(ii), then in addition to all other available remedies which such
holder may pursue hereunder and under the Securities Purchase Agreement
(including indemnification pursuant to Section 8 thereof), the Company
shall pay additional damages to such holder for each day after the Share
Delivery Date such conversion is not timely effected and/or each day after the
Preferred Stock Delivery Date such Preferred Stock Certificate is not delivered
in an amount equal to 0.5% of the product of (I) the sum of the number of shares
of Common Stock not issued to the holder on or prior to the Share Delivery Date
and to which such holder is entitled and, in the event the Company has failed to
deliver a Preferred Stock Certificate to the holder on or prior to the Preferred
Stock Delivery Date, the number of shares of Common Stock issuable upon
conversion of the Preferred Shares represented by such Preferred Stock
Certificate as of the Preferred Stock Delivery Date and (II) the Closing Bid
Price of the Common Stock on the Share Delivery Date, in the case of the failure
to deliver Common Stock, or the Preferred Stock Delivery Date, in the case of
failure to deliver a Preferred Stock Certificate. If the Company fails to pay
the additional damages set forth in this Section 2(d)(v) within five Business
Days of the date incurred, then the holder entitled to such payments shall have
the right at any time, so long as the Company continues to fail to make such
payments, to require the Company, upon written notice, to immediately issue, in
lieu of such cash damages, the number of shares of Common Stock equal to the
quotient of (X) the aggregate amount of the damages payments described herein
divided by (Y) the Conversion Price in effect on the Conversion Date as
specified by the holder in the applicable Conversion Notice. The foregoing
notwithstanding, the damages set forth in this Section 2(d)(v)(A) shall be
stayed with respect to the number of shares of Common Stock and, if applicable,
the Preferred Stock Certificate for which there is a good faith dispute being
resolved pursuant to, and within the time periods provided for in, Section
2(d)(iii), pending the resolution of such dispute.
(B) Void Conversion Notice; Adjustment
of Fixed Conversion Price. If for any reason a holder
has not received all of the shares of Common Stock prior to the tenth (10th)
Business Day after the Share Delivery Date with respect to a conversion of
Preferred Shares, then the holder, upon written notice to the Company, may void
its Conversion Notice with respect to, and retain or have returned, as the case
may be, any Preferred Shares that have not been converted pursuant to such
holder's Conversion Notice; provided that the voiding of a holder's Conversion
Notice shall not effect the Company's obligations to make any payments which
have accrued prior to the date of such notice pursuant to Section 2(d)(v)(A) or
otherwise. Thereafter, the Fixed Conversion Price of any Preferred Shares
returned or retained by the holder for failure to timely convert shall be
adjusted to the lesser of (I) the Fixed Conversion Price as in effect on the
date on which the holder voided the Conversion Notice and (II) the lowest
Closing Bid Price during the period beginning on the Conversion Date and ending
on the date such holder voided the Conversion Notice, subject to further
adjustment as provided in these Articles of Amendment.
(C) Conversion Failure. If for any
reason a holder has not received all of the shares of Common Stock prior to
the tenth (10th) Business Day after the Share Delivery Date with respect to a
conversion of Preferred Shares (a "Conversion Failure"), then the holder, in
addition to any other remedies available to such holder, shall be entitled to
the remedies set forth in Section 3.
(vi) Pro Rata Conversion. Subject to Section 15,
in the event the Company receives a Conversion Notice from more than one holder
of Preferred Shares for the same Conversion Date and the Company can convert
some, but not all, of such Preferred Shares, the Company shall convert from each
holder of Preferred Shares electing to have Preferred Shares converted at
such time a pro rata amount of such holder's Preferred Shares submitted for
conversion based on the number of Preferred Shares submitted for conversion
on such date by such holder relative to the number of Preferred Shares submitted
for conversion on such date.
(vii) Mandatory Redemption or Conversion at
Maturity at Company's Option. If any Preferred Shares remain outstanding on
the Maturity Date, then all such Preferred Shares, at the Company's option,
either (i) shall be converted at the Conversion Rate as of such date without
the holders of such Preferred Shares being required to give a
Conversion Notice on the Maturity Date (a "Maturity Date Mandatory Conversion"),
or (ii) shall be redeemed as of such date for an amount in cash per Preferred
Share (the "Maturity Date Redemption Price") equal to the Conversion Amount (a
"Maturity Date Mandatory Redemption"). The Company shall be deemed to have
elected a Maturity Date Mandatory Redemption unless it delivers written notice
to each holder of Preferred Shares at least 20 Business Days prior to the
Maturity Date of its election to effect a Maturity Date Mandatory Conversion. If
the Company elects a Maturity Date Mandatory Redemption, then on the Maturity
Date the Company shall pay to each holder of Preferred Shares outstanding on the
Maturity Date, by wire transfer of immediately available funds, an amount per
Preferred Share equal to the Maturity Date Redemption Price. If the Company
elects a Maturity Date Mandatory Redemption and fails to redeem all of the
Preferred Shares outstanding on the Maturity Date by payment of the Maturity
Date Redemption Price, then in addition to any remedy such holder of Preferred
Shares may have under these Articles of Amendment, the Securities Purchase
Agreement and the Registration Rights Agreement, (X) the applicable Maturity
Date Redemption Price payable in respect of such unredeemed Preferred Shares
shall bear interest at the rate of 1.5% per month (or if lower, the maximum
amount allowed by applicable law), prorated for partial months, until paid in
full, and (Y) any holder of Preferred Shares shall have the option to require
the Company to convert any or all of such holder's Preferred Shares that the
Company elected to redeem under this Section 2(d)(vii) and for which the
Maturity Date Redemption Price (together with any interest thereon) has not been
paid into shares of Common Stock equal to the number which results from dividing
the Maturity Date Redemption Price (together with any interest thereon) which
has not been paid by the Conversion Price in effect on the Maturity Date.
Promptly following the Maturity Date, all holders of Preferred Shares shall
surrender all Preferred Stock Certificates, duly endorsed for cancellation, to
the Company or the Transfer Agent. If the Company has elected a Maturity Date
Mandatory Conversion or has failed to pay the Maturity Date Redemption Price in
a timely manner as described above, then the Maturity Date shall be extended for
any Preferred Shares for as long as (A) the conversion of such Preferred Shares
would violate the provisions of Section 5, (B) a Triggering Event shall have
occurred and be continuing, or (C) an event shall have occurred and be
continuing which with the passage of time and the failure to cure would result
in a Triggering Event.
(viii) Book-Entry. Notwithstanding anything to the
contrary set forth herein, upon conversion of Preferred Shares in accordance
with the terms hereof, the holder thereof shall not be required to physically
surrender the certificate representing the Preferred Shares to the Company
unless the full number of Preferred Shares represented by the certificate are
being converted. The holder and the Company shall maintain records showing the
number of Preferred Shares so converted and the dates of such conversions or
shall use such other method, reasonably satisfactory to the holder and the
Company, so as not to require physical surrender of the certificate
representing the Preferred Shares upon each such conversion. In the event of
any dispute or discrepancy, such records of the Company establishing the
number of Preferred Shares to which the record holder is entitled shall be
controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if Preferred Shares represented by a
certificate are converted as aforesaid, the holder may not transfer the
certificate representing the Preferred Shares unless the holder first physically
surrenders the certificate representing the Preferred Shares to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the
holder a new certificate of like tenor, registered as the holder may request,
representing in the aggregate the remaining number of Preferred Shares
represented by such certificate. The holder and any assignee, by acceptance of a
certificate, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of any Preferred Shares, the number of Preferred
Shares represented by such certificate may be less than the number of Preferred
Shares stated on the face thereof. Each certificate for Preferred Shares shall
bear the following legend:
ANY TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE
TERMS OF THE COMPANY'S ARTICLES OF AMENDMENT RELATING TO THE
PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE, INCLUDING
SECTION 2(d)(viii) THEREOF. THE NUMBER OF PREFERRED SHARES
PRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF
PREFERRED SHARES STATED ON THE FACE HEREOF PURSUANT TO SECTION
2(d)(viii) OF THE ARTICLES OF AMENDMENT RELATING TO THE
PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE.
(e) Taxes. The Company shall pay any and all taxes that may be
payable with respect to the issuance and delivery of Common Stock upon the
conversion of Preferred Shares.
(f) Adjustments to Conversion Price. The Conversion Price will
be subject to adjustment from time to time as provided in this Section 2(f).
(i) Adjustment of Fixed Conversion Price upon
Issuance of Common Stock. If and whenever on or after the date of issuance of
the Preferred Shares, the Company issues or sells, or in accordance with this
Section 2(f) is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding (A) shares of Common Stock deemed
to have been issued by the Company in connection with an Approved
Stock Plan or upon conversion of the Preferred Shares or exercise of the
Warrants and (B) the Excluded Securities) for a consideration per share less
than a price (the "Applicable Price") equal to the Fixed Conversion Price in
effect immediately prior to such time, then immediately after such issue or
sale, the Fixed Conversion Price then in effect shall be reduced to an amount
equal to the product of (x) the Fixed Conversion Price in effect immediately
prior to such issue or sale and (y) the quotient of (1) the sum of (I) the
product of the Applicable Price and the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale and (II) the consideration,
if any, received by the Company upon such issue or sale, divided by (2) the
product of (I) the Applicable Price multiplied by (II) the number of shares of
Common Stock Deemed Outstanding immediately after such issue or sale; provided,
however, that the Fixed Conversion Price shall not be reduced pursuant to this
Section 2(f)(i) at any time that the amount of such reduction would be an amount
less than 2% of the Fixed Conversion Price immediately preceding such reduction,
but any such amount shall be carried forward and a reduction in the Fixed
Conversion Price pursuant to this Section 2(f)(i) shall be made when those
amounts which have been carried forward pursuant to this proviso together with
the most recent reduction pursuant to this Section 2(f)(i) shall aggregate 2% or
more of the Fixed Conversion Price immediately preceding the last such
reduction. For purposes of determining the adjusted Fixed Conversion Price under
this Section 2(f)(i), the following shall be applicable:
(A) Issuance of Options. If the Company
in any manner grants or sells any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exchange or exercise of any Convertible Securities
issuable upon exercise of such Option is less than the Applicable Price, then
such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the granting or sale of such
Option for such price per share. For purposes of this Section 2(f)(i)(A), the
"lowest price per share for which one share of Common Stock is issuable upon
the exercise of any such Option or upon conversion, exchange or exercise of
any Convertible Securities issuable upon exercise of such Option" shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon
granting or sale of the Option, upon exercise of the Option and upon conversion,
exchange or exercise of any Convertible Security issuable upon exercise of such
Option. No further adjustment of the Fixed Conversion Price shall be made upon
the actual issuance of such Common Stock or of such Convertible Securities
upon the exercise of such Options or upon the actual issuance of such Common
Stock upon conversion, exchange or exercise of such Convertible Securities.
(B) Issuance of Convertible Securities. If
the Company in any manner issues or sells any Convertible Securities and the
lowest price per share for which one share of Common Stock is issuable upon such
conversion, exchange or exercise thereof is less than the Applicable Price, then
such share of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance of sale of such
Convertible Securities for such price per share. For the purposes of this
Section 2(f)(i)(B), the "lowest price per share for which one share of Common
Stock is issuable upon such conversion, exchange or exercise" shall be equal
to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon
the issuance or sale of the Convertible Security and upon the conversion,
exchange or exercise of such Convertible Security. No further adjustment of
the Fixed Conversion Price shall be made upon the actual issuance of such Common
Stock upon conversion, exchange or exercise of such Convertible Securities, and
if any such issue or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of the Fixed Conversion Price had been or
are to be made pursuant to other provisions of this Section 2(f)(i), no further
adjustment of the Fixed Conversion Price shall be made by reason of such issue
or sale.
(C) Change in Option Price or Rate of
Conversion. If the purchase or exercise price provided for in any Options, the
additional consideration, if any, payable upon the issue, conversion,
exchange or exercise of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable or exercisable for
Common Stock changes at any time, the Fixed Conversion Price in effect at the
time of such change shall be adjusted to the Fixed Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities provided for such changed purchase price, additional consideration
or changed conversion rate, as the case may be, at the time initially
granted, issued or sold. For purposes of this Section 2(f)(i)(C), if the terms
of any Option or Convertible Security that was outstanding as of the date of
issuance of the Preferred Shares are changed in the manner described in
the immediately preceding sentence, then such Option or Convertible Security and
the Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such change. No adjustment
shall be made if such adjustment would result in an increase of the Fixed
Conversion Price then in effect.
(D) Calculation of Consideration Received.
In case any Option is issued in connection with
the issue or sale of other securities of the Company, together comprising one
integrated transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have been issued
for a consideration of $0.01. If any Common Stock, Options or Convertible
Securities are issued or sold or deemed to have been issued or sold for cash,
the consideration received therefor will be deemed to be the gross amount
received by the Company therefor, less expenses in excess of 5% of the gross
amount received. If any Common Stock, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of marketable
securities, in which case the amount of consideration received by the Company
will be the arithmetic average of the Closing Bid Prices of such securities
during the 10 consecutive trading days ending on the date of receipt of such
securities. If any Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor will
be deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined jointly by the Company and the
holders of a majority of the Preferred Shares then outstanding. If such parties
are unable to reach agreement within 10 days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined within five Business Days after the tenth
(10th) day following the Valuation Event by an independent, reputable appraiser
jointly selected by the Company and the holders of a majority of the Preferred
Shares then outstanding. The determination of such appraiser shall be deemed
binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.
(E) Record Date. If the Company takes a
record of the holders of Common Stock for the purpose of entitling them (1)
to receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (2) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be. If after the occurrence of such record date
the transaction or event for which such record date was set is abandoned or
terminated, then any adjustments resulting from this Section 2(f)(i)(E) as
it relates to such terminated or abandoned transaction or event shall be
reversed as if such record date had never occurred.
(ii) Adjustment of Fixed Conversion Price upon
Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Fixed Conversion Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at
any time combines (by combination, reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Fixed Conversion Price in effect immediately prior to such
combination will be proportionately increased.
(iii) Holder's Right of Alternative Conversion
Price Following Issuance of Convertible Securities. If the Company in any
manner issues or sells any Options or Convertible Securities after the Initial
Issuance Date that are convertible into or exchangeable or exercisable for
Common Stock at a price which varies or may vary with the market price of the
Common Stock, including by way of one or more reset(s) to a fixed
price (each of the formulations for such variable price being herein referred to
as, the "Variable Price"), the Company shall provide written notice thereof via
facsimile and overnight courier to each holder of Preferred Shares ("Variable
Notice") on the date of issuance of such Convertible Securities or Options. From
and after the date the Company issues any such Convertible Securities or Options
with a Variable Price, a holder of Preferred Shares shall have the right, but
not the obligation, in its sole discretion to substitute the Variable Price for
the Conversion Price upon conversion of any Preferred Shares by designating in
the Conversion Notice delivered upon conversion of such Preferred Shares that
solely for purposes of such conversion the holder is relying on the Variable
Price rather than the Conversion Price then in effect. A holder's election to
rely on a Variable Price for a particular conversion of Preferred Shares shall
not obligate the holder to rely on a Variable Price for any future conversions
of Preferred Shares. In the event that a holder of Preferred Shares delivers a
Conversion Notice after the Company's issuance of Convertible Securities with a
Variable Price but before such holder's receipt of the Company's Variable
Notice, then such holder shall have the option by written notice to the Company
to rescind such Conversion Notice or to have the Conversion Price be equal to
such Variable Price for the conversion effected by such Conversion Notice.
(iv) Adjustment of the Fixed Conversion Price
Upon Major Corporate Event Announcement. In the event (A) the Company makes a
public announcement that it intends to consolidate or merge with or into another
Person or engage in a business combination involving the issuance or exchange
of more than 50% of the Company's outstanding Common Stock, (B) the Company
makes a public announcement that it intends to sell or transfer all or
substantially all of the Company's assets, or (C) any Person (including
the Company) publicly announces a purchase, tender or exchange offer for more
than 50% of the Company's outstanding Common Stock, (the transactions described
in clauses (A), (B), and (C) above are hereinafter referred to as "Major
Corporate Events" and the date of the announcement referred to in clause (A),
(B), or (C) is hereinafter referred to as the "Announcement Date"), then the
Fixed Conversion Price shall, effective upon the Announcement Date and
continuing through and including the Adjusted Conversion Price Termination Date
(as defined below), be equal to the Conversion Price which would have been
applicable for a conversion by the holder on the Announcement Date. From and
after the Adjusted Conversion Price Termination Date, the Conversion Price shall
be determined as set forth in Section 2. For purposes hereof, "Adjusted
Conversion Price Termination Date" shall mean, with respect to any proposed
Major Corporate Event for which a public announcement as contemplated by this
Section 2(f)(iv) has been made, the date upon which the Company or other Person
(in the case of clause (C) above) consummates or publicly announces the
termination or abandonment of the proposed Major Corporate Event which was the
subject of the previous public announcement.
(v) Adjustment of Fixed Conversion Price for
Credit Agreement Covenant Failure. In addition to any other adjustment to the
Fixed Conversion Price provided for in these Articles of Amendment, if an
Adjustment Event (as defined below) and the Closing Bid Price of the Common
Stock on the date which is five (5) trading days after the date of
such Adjustment Event (such 5th trading day is referred to herein as an
"Adjustment Date") is less than the Fixed Conversion Price in effect immediately
prior to such Adjustment Date, then from and after such Adjustment Date the
Fixed Conversion Price shall be equal to the Closing Bid Price of the Common
Stock on such Adjustment Date, subject to further adjustment as provided in
these Articles of Amendment. For purposes of this Section 2(f)(v), "Adjustment
Event" means any of (A) the first date on which the Company fails to comply in
any respect with its obligations under Section 4(n) of the Securities Purchase
Agreement, (B) October 31, 2000, if on October 31, 2000 the Company is not a
party to one of the Loan Facilities (as defined in Section 4(l) of the
Securities Purchase Agreement), (C) October 31, 2000, unless on or prior to
October 31, 2000 the Company (I) has delivered written notice to each holder of
Preferred Shares confirming that as of October 31, 2000 the Company is party to
one or more of the Loan Facilities pursuant to which it has the ability to
borrow, as of October 31, 2000, at least $20,000,000 (less any amounts already
borrowed and outstanding, as of October 31, 2000, under such agreement), and
(II) has either (x) delivered written confirmation to each holder of Preferred
Shares confirming that the Company is party to the Revolving Credit Agreement
(as defined in Section 4(l) of the Securities Purchase Agreement), the Revolving
Credit Agreement has not been amended since the Issuance Date and that the
Company is in compliance with the Revolving Credit Agreement as of October 31,
2000, (y) publicly disclosed the terms of an amendment to the Revolving Credit
Agreement and that the Company is in compliance with the Revolving Credit
Agreement as of October 31, 2000, or (z) publicly disclosed the terms of a New
Facility (as defined in Section 4(l) of the Securities Purchase Agreement) and
that the Company is in compliance with the terms of such New Facility as of
October 31, 2000, and (D) the Form 10-K Deadline (as defined in Section 4(l) of
the Securities Purchase Agreement), if the Company fails to file its Annual
Report on Form 10-K for the year ended June 30, 2000 on or prior to the Form
10-K Deadline which publicly discloses the Company's compliance with all of its
obligations and covenants under the Loan Facilities (or to the extent that the
Company was not in compliance with the Revolving Credit Agreement (as defined in
the Securities Purchase Agreement) on June 30, 2000, the Company has received an
irrevocable, permanent, written waiver from Union Bank of California, N.A.
waiving any claim or right it has with respect to any specific occurrence of
noncompliance as of June 30, 2000); subject to further adjustment as provided in
these Articles of Amendment.
(vi) Other Events. If any event occurs of the
type contemplated by the provisions of this Section 2(f) (as determined in good
faith by the board of directors of the Company) but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of the Preferred
Shares; provided that no such adjustment will increase the Conversion Price
as otherwise determined pursuant to this Section 2(f).
(vii) Notices.
(A) Immediately upon any adjustment of
the Conversion Price pursuant to this Section 2(f), the Company will give
written notice thereof to each holder of Preferred Shares, setting forth in
reasonable detail, and certifying, the calculation of such adjustment.
(B) The Company will give written notice
to each holder of Preferred Shares at least ten (10) Business Days prior to the
date on which the Company closes its books or takes a record (I) with respect to
any dividend or distribution upon the Common Stock, (II) with respect to any pro
rata subscription offer to holders of Common Stock or (III) for determining
rights to vote with respect to any Organic Change (as defined in Section 4(a)),
dissolution or liquidation, provided that such information shall be made
known to the public prior to or in conjunction with such notice being provided
to such holder.
(C) The Company will also give written
notice to each holder of Preferred Shares at least ten (10) Business Day prior
to the date on which any Organic Change, dissolution or liquidation will take
place, provided that such information shall be made known to the public prior
to or in conjunction with such notice being provided to such holder.
(3) Triggering Events.
(a) Definition. A "Triggering Event" shall be deemed
to have occurred at such time as any of the following events:
(i) the Company's notice or the Transfer Agent's
notice, at the Company's direction, to any holder of Preferred Shares,
including by way of public announcement, at any time, of its intention not to
comply with a request for conversion of any Preferred Shares into shares of
Common Stock that is tendered in accordance with the provisions of these
Articles of Amendment; provided, however, that this Triggering Event
will not be applicable if the Company is unable to issue shares upon receipt of
a Conversion Notice pursuant to the requirements of Section 5 or Section 15 and
the Company or its Transfer Agent, at the Company's direction, has provided a
notice to that effect to such holder;
(ii) a Conversion Failure (as defined in Section
2(d)(v)(C));
(iii) upon the Company's receipt of a Conversion
Notice, the Company shall not be obligated to issue shares of Common Stock upon
such conversion due to the provisions of Section 15;
(iv) the Company shall have failed to make any
Triggering Event Daily Payment (as defined in Section 3(g)) in a timely manner
in accordance with Section 3(g);
(v) the failure of the applicable Registration
Statement to be declared effective by the Securities and Exchange Commission
(the "SEC") on or prior to the date that is 130 days after the Issuance Date;
(vi) the failure of the applicable Registration
Statement to be declared effective by the SEC on or prior to the date that is
150 days after the Issuance Date;
(vii) while the Registration Statement is required
to be maintained effective pursuant to the terms of the Registration Rights
Agreement, except for days during an Allowable Grace Period (as defined in the
Registration Rights Agreement), the effectiveness of the Registration Statement
lapses for any reason (including, without limitation, the issuance of a stop
order) or is unavailable to the holder of the Preferred Shares for sale of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) in accordance with the terms of the Registration Rights Agreement,
and such lapse or unavailability continues for a period of 5 consecutive
trading days or for more than an aggregate of 10 trading days in any 365-day
period (other than days during an Allowable Grace Period);
(viii) the suspension from trading or failure of
the Common Stock to be listed on the Nasdaq National Market or The New York
Stock Exchange, Inc. for a period of five (5) consecutive trading days or
for more than an aggregate of 10 trading days in any 365-day period; or
(ix) the Company fails to receive the Stockholder
Approval (as defined in Section 4(j) of the Securities Purchase Agreement) on or
before the Stockholder Meeting Deadline (as defined in Section 4(j) of the
Securities Purchase Agreement); or
(x) either, (A) an event of default has occurred
under any mortgage, bond, loan agreement or other document evidencing an issue
of indebtedness of the Company, which default has resulted in indebtedness
becoming, whether by declaration or otherwise, due and payable prior to the
date on which it would otherwise become due and payable, or (B) a default by the
Company in any payment when due at final maturity of any indebtedness.
(xi) unless otherwise provided for under Sections
3(a)(i) through 3(a)(x) above, the Company breaches any representation,
warranty, covenant or other term or condition of the Securities Purchase
Agreement (except for a breach of Sections 4(e), 9(j) or 9(k) of the Securities
Purchase Agreement), the Registration Rights Agreement (except for a breach of
Sections 3(d), 3(r) or 11(i) of the Registration Rights Agreement), the
Warrants, these Articles of Amendment or any other agreement, document,
certificate or other instrument delivered in connection with the
transactions contemplated thereby and hereby, except to the extent that such
breach would not have a Material Adverse Effect (as defined in Section 3(a) of
the Securities Purchase Agreement) and except, in the case of a breach of a
covenant which is curable, only if such breach continues for a period of at
least 10 Business Days. For the purpose of clarification, any provision which
requires action to be taken within a specific period of time or prior to a given
date shall be considered a covenant which, solely for purposes of determining
the applicability of this Section 3(a)(xi), is curable and the 10 Business Day
period referred to in the preceding sentence of this Section 3(a)(xi) shall
commence if such action has not taken place at the end of such specified period
of time or on such date during or by which such action was required to be taken.
(b) Notice of Triggering Event. Within one (1) Business Day
after the occurrence of a Triggering Event, the Company shall deliver written
notice thereof via facsimile and overnight courier ("Notice of Triggering
Event") to each holder of Preferred Shares. In addition, within one (1) Business
Day after the occurrence of a Triggering Event described in Section 3(a)(iii),
the Company shall notify each holder of Preferred Shares by facsimile of the
Company's irrevocable election to either (i) redeem all Preferred Shares
submitted for redemption pursuant to this Section 3(b) based on the Triggering
Event described in Section 3(a)(iii), or (ii) to delist from the Principal
Market within five Business Days of the occurrence of such Triggering Event
described in Section 3(a)(iii) so that the Exchange Cap (as defined in Section
15) no longer applies and is of no force or effect after such fifth Business
Day. If the Company elects to delist the Common Stock from the Principal Market
pursuant to the preceding sentence but fails to delist the Common Stock from the
Principal Market such that the Exchange Cap no longer applies and is of no force
or effect on or prior to such fifth Business Day, then the Company shall be
deemed to have irrevocably elected to redeem all Preferred Shares submitted for
redemption pursuant to this Section 3(b) based on the Triggering Event described
in Section 3(a)(iii). If the Company elects to redeem Preferred Shares pursuant
to the previous two sentences or fails to delist within five Business Days
pursuant to the previous sentence, any holder of Preferred Shares then
outstanding may require the Company to redeem up to all of such holder's
Preferred Shares by delivering written notice thereof via facsimile and
overnight courier ("Notice of Redemption at Option of Buyer") to the Company,
which Notice of Redemption at Option of Buyer shall indicate the number of
Preferred Shares that such holder is electing to redeem. Any redemption pursuant
to the previous sentence shall be at a price per Preferred Share equal to the
greater of (i) 125% of the Conversion Amount and (ii) the product of (A) the
Conversion Rate in effect at such time as such holder delivers a Notice of
Redemption at Option of Buyer (as defined below) and (B) the Closing Sale Price
of the Common Stock on the trading day immediately preceding such Triggering
Event on which the Principal Market is open for trading or, if no Closing Sale
Price is reported by the Principal Market on such trading day, then the most
recently reported Closing Sale Price (the "Redemption Price").
(c) Payment of Redemption Price. Upon the Company's receipt of
a Notice(s) of Redemption at Option of Buyer from any holder of Preferred
Shares, the Company shall immediately notify each holder of Preferred Shares by
facsimile of the Company's receipt of such notice(s). The Company shall deliver
the applicable Redemption Price to a holder which delivers a Notice of
Redemption at Option of Buyer within five Business Days after the Company's
receipt of a Notice of Redemption at Option of Buyer; provided that, if required
by Section 2(d)(viii), a holder's Preferred Stock Certificates shall have been
delivered to the Transfer Agent. If the Company is unable to redeem all of the
Preferred Shares submitted for redemption, the Company shall (i) redeem a pro
rata amount from each holder of Preferred Shares based on the number of
Preferred Shares submitted for redemption by such holder relative to the total
number of Preferred Shares submitted for redemption by all holders of Preferred
Shares and (ii) in addition to any remedy such holder of Preferred Shares may
have under these Articles of Amendment and the Securities Purchase Agreement,
pay to each holder interest at the rate of 1.5% per month (or if lower, the
maximum amount allowed by applicable law) (prorated for partial months) in
respect of each unredeemed Preferred Share until paid in full.
(d) Void Redemption. In the event that the Company does not
pay the Redemption Price within the time period set forth in Section 3(c), at
any time thereafter and until the Company pays such unpaid applicable Redemption
Price in full, a holder of Preferred Shares shall have the option (the "Void
Optional Redemption Option") to, in lieu of redemption, require the Company to
promptly return to such holder any or all of the Preferred Shares that were
submitted for redemption by such holder under this Section 3 and for which the
applicable Redemption Price (together with any interest thereon) has not been
paid, by sending written notice thereof to the Company via facsimile (the "Void
Optional Redemption Notice"). Upon the Company's receipt of such Void Optional
Redemption Notice, (i) the Notice of Redemption at Option of Buyer shall be null
and void with respect to those Preferred Shares subject to the Void Optional
Redemption Notice, (ii) the Company shall immediately return any Preferred
Shares subject to the Void Optional Redemption Notice, and (iii) the Fixed
Conversion Price of such returned Preferred Shares shall be adjusted to the
lesser of (A) the Fixed Conversion Price as in effect on the date on which the
Void Optional Redemption Notice is delivered to the Company and (B) the lowest
Closing Bid Price of the Common Stock during the period beginning on the date on
which the Notice of Redemption at Option of Buyer is delivered to the Company
and ending on the date on which the Void Optional Redemption Notice is delivered
to the Company.
(e) Disputes; Miscellaneous. In the event of a dispute as to
the determination of the arithmetic calculation of the Redemption Price, such
dispute shall be resolved pursuant to Section 2(d)(iii) above with the term
"Redemption Price" being substituted for the term "Conversion Rate". A holder's
delivery of a Void Optional Redemption Notice and exercise of its rights
following such notice shall not effect the Company's obligations to make any
payments which have accrued prior to the date of such notice. In the event of a
redemption pursuant to this Section 3 of less than all of the Preferred Shares
represented by a particular Preferred Stock Certificate, the Company shall
promptly cause to be issued and delivered to the holder of such Preferred Shares
a Preferred Stock Certificate representing the remaining Preferred Shares which
have not been redeemed, if necessary.
(g) Rights of the Holders of the Preferred Shares upon the
Occurrence of a Triggering Event. In addition to any other remedies the holders
of the Preferred Shares may have at law or in equity, if a Triggering Event
occurs then:
(i) if the Triggering Event is pursuant to
clause (i), (ii), (iii), (iv), (v), (vii), viii), (ix) or (x) of Section 3(a),
on each day during the period beginning on and including the first day following
the occurrence of such Triggering Event and ending on and including the date on
which such Triggering Event is cured, the Company shall pay to each holder
of Preferred Shares an amount in cash per Preferred Share equal to two percent
(2%) of the Liquidation Preference of such Preferred Share (each such
payment, a "Triggering Event Daily Payment"); provided, however, that the
Company shall not be obligated to make a Triggering Event Daily Payment to
any holder of Preferred Shares for more than 15 days in any 365-day period; and
(ii) (A) if the Triggering Event is pursuant
to Section 3(a)(vi), then immediately upon the occurrence of such a Triggering
Event (and from time to time as applicable), the Fixed Conversion Price of
the Preferred Shares shall be permanently adjusted (subject to further
adjustment pursuant to these Articles of Amendment subsequent to such
adjustment) to equal the lesser of (I) the Fixed Conversion Price in effect for
such Preferred Shares on the date which is 130 days after the Issuance Date or
(II) the product of (a) 0.68 multiplied by (b) the lowest Applicable Daily
Price during the period beginning on and including the date which is 130 days
after the Issuance Date and ending on and including (x) on any date prior to the
date the Registration Statement is declared effective by the SEC, the Conversion
Date or other date of determination with respect to which the determination
is being made with respect to this Section 3(g)(ii)(A) and (y) on any date on
or after the date the Registration Statement is declared effective by the
SEC, the date the Registration Statement was declared effective by the SEC; and
(B) if the Triggering Event is
pursuant to clause (i), (ii), (iii), (iv), (vii), (viii), (ix), (x) or (xi) of
Section 3(a), then immediately upon the occurrence of such a Triggering Event
(and from time to time as applicable), the Fixed Conversion Price of the
Preferred Shares shall be permanently adjusted (subject to further adjustment
pursuant to these Articles of Amendment subsequent to such adjustment) to equal
the lesser of (I) the Fixed Conversion Price in effect for such Preferred Shares
on the date of the initial occurrence of such Triggering Event or (II) the
product of (a) 0.68 multiplied by (b) the lowest Applicable Daily Price during
the period beginning on and including the date of the initial
occurrence of such Triggering Event and ending on and including (x) on any date
prior to the date on which the Company cures such Triggering Event and delivers
written notice to each holder of Preferred Shares stating that such Triggering
Event has been cured, the Conversion Date or other date of determination with
respect to which the determination is being made with respect to this Section
3(g)(ii)(B) and (y) on any date on or after the date on which the Company
cures such Triggering Event and delivers written notice to each holder of
Preferred Shares stating that such Triggering Event has been cured, the date
on which the Company cured such Triggering Event and delivered written notice to
each holder of Preferred Shares stating that such Triggering Event had been
cured.
Notwithstanding anything to the contrary in clause (i) of this Section 3(g), the
Company shall not be required to make Triggering Event Daily Payments to any
holder of Preferred Shares in excess of such holder's Daily Payment Maximum
Allocation (as defined below). For purposes of this Section 3(g), "Daily Payment
Maximum Allocation" means, with respect to any Purchaser (as defined in Section
15), an amount equal to the product of (A) $5,000,000, or such greater amount
that the Company may pay without being in breach of the Loan Facilities or the
Indenture (each, as defined in Section 4(l) of the Securities Purchase
Agreement), multiplied by (B) a fraction, the numerator of which is the number
of Preferred Shares issued to such Purchaser pursuant to the Securities Purchase
Agreement and the denominator of which is the aggregate number of all the
Preferred Shares issued to the Purchasers pursuant to the Securities Purchase
Agreement. In the event that any Purchaser shall sell or otherwise transfer any
of such Purchaser's Preferred Shares, the transferee shall be allocated a pro
rata portion of such Purchaser's Daily Payment Maximum Allocation. In the event
that any holder of Preferred Shares shall convert all of such holder's Preferred
Shares into a number of shares of Common Stock which, in the aggregate, is less
than such holder's Daily Payment Maximum Allocation, then the difference between
such holder's Daily Payment Maximum Allocation and the number of shares of
Common Stock actually issued to such holder shall be allocated to the respective
Daily Payment Maximum Allocation of the remaining holders of Preferred Shares on
a pro rata basis in proportion to the number of Preferred Shares then held by
each such holder.
(4) Other Rights of Holders.
(a) Reorganization, Reclassification, Consolidation, Merger or
Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to another
Person or other transaction which is effected in such a way that holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as "Organic Change." Prior to the
consummation of any (i) sale of all or substantially all of the Company's assets
to an acquiring Person or (ii) other Organic Change following which the Company
is not a surviving entity, the Company will secure from the Person purchasing
such assets or the successor resulting from such Organic Change (in each case,
the "Acquiring Entity") a written agreement (in form and substance reasonably
satisfactory to the holders of at least two-thirds (2/3) of the Preferred Shares
then outstanding) to deliver to each holder of Preferred Shares in exchange for
such shares, a security of the Acquiring Entity evidenced by a written
instrument substantially similar in form and substance to the Preferred Shares
(including, without limitation, having a stated value and liquidation preference
equal to the Stated Value and the Liquidation Preference of the Preferred Shares
held by such holder) and reasonably satisfactory to the holders of at least
two-thirds (2/3) of the Preferred Shares then outstanding. Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the holders of a
majority of the Preferred Shares then outstanding) to insure that each of the
holders of the Preferred Shares will thereafter have the right to acquire and
receive in lieu of or in addition to (as the case may be) the shares of Common
Stock immediately theretofore acquirable and receivable upon the conversion of
such holder's Preferred Shares such shares of stock, securities or assets that
would have been issued or payable in such Organic Change with respect to or in
exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the conversion of such holder's Preferred Shares
as of the date of such Organic Change (without taking into account any
limitations or restrictions on the convertibility of the Preferred Shares).
(b) Optional Redemption Upon Change of Control. In addition to
the rights of the holders of Preferred Shares under Section 4(a), upon a Change
of Control (as defined below) of the Company each holder of Preferred Shares
shall have the right, at such holder's option, to require the Company to redeem
all or a portion of such holder's Preferred Shares at a price per Preferred
Share equal to 125% of the Conversion Amount ("Change of Control Redemption
Price"). No sooner than 60 days nor later than 10 days prior to the consummation
of a Change of Control, but not prior to the public announcement of such Change
of Control, the Company shall deliver written notice thereof via facsimile and
overnight courier (a "Notice of Change of Control") to each holder of Preferred
Shares; provided, however, if such potential Change of Control is the result of
an unsolicited tender offer made to the holders of more than 50% of the
outstanding shares of Common Stock, then such Notice of Change of Control shall
be delivered within two (2) Business Days of such tender offer being made. At
any time during the period beginning after receipt of a Notice of Change of
Control (or, in the event a Notice of Change of Control is not delivered at
least 10 days prior to a Change of Control, at any time on or after the date
which is 10 days prior to a Change of Control) and ending on the date of such
Change of Control, any holder of the Preferred Shares then outstanding may
require the Company to redeem all or a portion of the holder's Preferred Shares
then outstanding by delivering written notice thereof via facsimile and
overnight courier (a "Notice of Redemption Upon Change of Control") to the
Company, which Notice of Redemption Upon Change of Control shall indicate (i)
the number of Preferred Shares that such holder is submitting for redemption,
and (ii) the applicable Change of Control Redemption Price, as calculated
pursuant to this Section 4(b). Upon the Company's receipt of a Notice(s) of
Redemption Upon Change of Control from any holder of Preferred Shares, the
Company shall promptly, but in no event later than two (2) Business Days
following such receipt, notify each holder of Preferred Shares by facsimile of
the Company's receipt of such Notice(s) of Redemption Upon Change of Control.
The Company shall deliver the applicable Change of Control Redemption Price
simultaneously with the consummation of the Change of Control; provided that, if
required by Section 2(d)(viii), a holder's Preferred Stock Certificates shall
have been so delivered to the Company. Payments provided for in this Section
4(b) shall have priority to payments to other stockholders in connection with a
Change of Control. For purposes of this Section 4(b), "Change of Control" means
(i) the consolidation, merger or other business combination of the Company with
or into another Person (other than (A) a consolidation, merger or other business
combination in which holders of the Company's voting power immediately prior to
the transaction continue after the transaction to hold, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities, or (B) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company), (ii) the sale or transfer of all or substantially
all of the Company's assets, (iii) a purchase, tender or exchange offer made to
and accepted by the holders of more than 50% of the outstanding shares of Common
Stock, (iv) any event constituting a "change of control" as defined in Section
101 of the Indenture (as defined in the Securities Purchase Agreement), or (v)
any other similarly defined event in any Credit Agreement (as defined in the
Securities Purchase Agreement) which gives the lender under such agreement the
right to accelerate payment of the obligations under such agreement.
(c) Forced Delisting. If a redemption voided pursuant to
Section 3(e) was caused by a Triggering Event involving the Company's inability
to issue Conversion Shares because of the Exchange Cap (as defined in Section
15), and if so directed in one or more Void Optional Redemption Notices by the
holders of at least two-thirds (2/3) of the Preferred Shares then outstanding,
including Preferred Shares submitted for redemption pursuant to Section 3 with
respect to which the applicable Redemption Price has not been paid the Company
shall promptly as practicable delist the Common Stock from the exchange or
automated quotation system on which the Common Stock is traded and have the
Common Stock, at such holders' option, traded on the electronic bulletin board
or the "pink sheets."
(d) Purchase Rights. If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then the holders of Preferred
Shares will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could have acquired if
such holder had held the number of shares of Common Stock acquirable upon
complete conversion of the Preferred Shares (without taking into account any
limitations or restrictions on the convertibility of the Preferred Shares)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(5) Limitation on Beneficial Ownership. The Company shall not effect
any conversion of Preferred Shares, and no holder of Preferred Shares shall have
the right to convert any Preferred Shares, to the extent that after giving
effect to such conversion, the beneficial owner of such shares (together with
such Person's affiliates) would have acquired, through conversion of Preferred
Shares or otherwise, beneficial ownership of a number of shares of Common Stock
during the 60-day period ending on and including the Conversion Date of such
conversion (the "60 Day Period"), that, when added to the number of shares of
Common Stock beneficially owned by such Person (together with such Person's
affiliates) at the beginning of the 60 Day Period, exceeds 9.99% of the number
of shares of Common Stock outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by a Person and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of the Preferred
Shares with respect to which the determination of such sentence is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (A) conversion of the remaining, nonconverted Preferred Shares beneficially
owned by such Person or any of its affiliates and (B) exercise or conversion of
the unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially
owned by such Person or any of its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 5, beneficial ownership shall
be calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. For any reason at any time, upon the written or oral request
of any holder, the Company shall within two Business Days confirm orally and in
writing to any such holder the number of shares of Common Stock then
outstanding. For purposes of this Section 5, in determining the number of
outstanding shares of Common Stock a holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company's most recent
Form 10-Q, Form 10-K or other public filing with the SEC, as the case may be,
(2) a more recent public announcement by the Company, or (3) any other notice by
the Company or its transfer agent setting forth the number of shares of Common
stock outstanding. Upon the written request of any holder, the Company shall
promptly, but in no event later than one (1) Business Day following the receipt
of such notice, confirm in writing to any such holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the Preferred Shares and
exercise of the Warrants, by such holder or its affiliates since the date as of
which such number of outstanding shares of Common Stock was reported.
(6) Redemption at the Company's Election. On or after the date which is
20 days after the date on which the Registration Statement is declared effective
by the SEC, the Company shall have the right, in its sole discretion, to require
that some or all of the outstanding Preferred Shares be redeemed ("Redemption at
Company's Election"), for consideration per Preferred Share equal to the product
of (A) the Redemption Percentage multiplied by (B) the Conversion Amount for
such Preferred Share (the "Company's Election Redemption Price"); provided that
the Conditions to Redemption at the Company's Election (as set forth below) are
satisfied as of the Company's Election Redemption Date (as defined below) or
waived by all the holders of the Preferred Shares then outstanding. The Company
may exercise its right to Redemption at Company's Election only by providing
each holder of Preferred Shares written notice ("Notice of Redemption at
Company's Election") at least 10 Business Days but not more than 20 Business
Days prior to the date of consummation of such redemption ("Company's Election
Redemption Date"). The date on which each of such holders of the Preferred
Shares actually receives the Notice of Redemption at the Company's Election is
referred to herein as the "Redemption at Company's Election Notice Date". If the
Company elects to require redemption of some, but not all, of the Preferred
Shares then outstanding, the Company shall require redemption of an amount from
each holder of such Preferred Shares equal to the product of (I) the total
number of Preferred Shares which the Company has elected to redeem multiplied by
(II) a fraction, the numerator of which is the number of Preferred Shares
initially purchased by such holder and the denominator of which is the total
number of Preferred Shares purchased on the Issuance Date (such fraction with
respect to each holder being referred to as its "Allocation Percentage", and
such amount with respect to each holder being referred to herein as its "Pro
Rata Redemption Amount"). In the event that any initial holder of the Preferred
Shares shall sell or otherwise transfer any of such holder's Preferred Shares,
the transferee shall be allocated a pro rata portion of such holder's Allocation
Percentage. The Company's Notice of Redemption at Company's Election shall
indicate (x) the aggregate number of Preferred Shares the Company has elected to
redeem from all holders of Preferred Shares, (y) the date selected by the
Company for the Company's Election Redemption Date, and (z) each holder's Pro
Rata Redemption Amount of the Preferred Shares selected for redemption. If the
Company has exercised its right of Redemption at Company's Election and the
conditions of this Section 6, including the Conditions to Redemption at
Company's Election, have been satisfied, then each holder's Pro Rata Redemption
Amount of the Preferred Shares selected for redemption which remain outstanding
on the Company's Election Redemption Date shall be redeemed as of the Company's
Election Redemption Date by payment by the Company to each such holder of
Preferred Shares of the Company's Election Redemption Price for each Preferred
Share. If required by Section 2(d)(viii), all such holders of the Preferred
Shares being redeemed shall thereupon and within two (2) Business Days after the
Company's Election Redemption Date, or such earlier date as the Company and each
such holder of Preferred Shares mutually agree, surrender all Preferred Shares
being redeemed on such date to the Company. If the Company fails to pay the full
Company's Election Redemption Price on the Company's Election Redemption Date
with respect to a Preferred Share selected for redemption, then the Redemption
at Company's Election shall be null and void with respect to such Preferred
Share and the Holder shall be entitled to all the rights of a holder of
outstanding Preferred Shares. "Conditions to Redemption at the Company's
Election" means the following conditions: (i) on each day during the period
beginning on the Issuance Date and ending on and including the Company's
Election Redemption Date, the Company shall have delivered Conversion Shares
upon conversion of the Preferred Shares and Warrant Shares upon exercise of the
Warrants to the holders on a timely basis as set forth in Section 2(d)(ii)
hereof and Sections 2(a) and 2(b) of the Warrants, respectively; (ii) during the
period beginning 20 days prior to the Redemption at Company's Election Notice
Date and ending on and including the Company's Election Redemption Date, the
Registration Statement shall be effective and available for the sale of at least
all of the Registrable Securities required to be included in such Registration
Statement and there shall not have been any Grace Periods (as defined in the
Registration Rights Agreement); (iii) on each day during the period beginning 20
days prior to the Redemption at Company's Election Notice Date and ending on and
including the Company's Election Redemption Date, the Common Stock is designated
for quotation on the Nasdaq National Market or listed on The New York Stock
Exchange, Inc. and shall not have been suspended from trading on such market or
exchange (other than suspensions of not more than one day and occurring prior to
the date on which the Company gives its Notice of Redemption at Company's
Election due to business announcements by the Company) nor shall delisting or
suspension by such market or exchange been threatened or pending either (A) in
writing by such market or exchange or (B) by falling below the minimum listing
maintenance requirements of such market or exchange; (iv) during the period
beginning on and including the Issuance Date and ending on and including the
Company's Election Redemption Date, there shall not have occurred a Triggering
Event or an event that with the passage of time and without being cured would
constitute a Triggering Event; (v) during the period beginning on the Issuance
Date and ending on and including the Company's Election Redemption Date, there
shall not have occurred the public announcement of a pending, proposed or
intended Change of Control, unless such pending, proposed or intended Change of
Control has been terminated, abandoned or consummated and the Company has
publicly announced such termination, abandonment or consummation of such Change
of Control; (vi) on the earlier to occur of (A) the Stockholder Meeting Deadline
(as defined in the Securities Purchase Agreement) and (B) the date on which the
Company holds its first meeting of stockholders after the Issuance Date, the
Company shall have received the Stockholder Approval (as defined in Section 4(j)
of the Securities Purchase Agreement); (v) at all times during the period
beginning on and including the date beginning on the Redemption at Company's
Election Notice Date and ending on and including the Company's Election
Redemption Date, the redemption by the Company of the Preferred Shares is
permitted under the terms of each Credit Agreement; (vi) the Company shall have
complied in all respects with Section 4(n) of the Securities Purchase Agreement;
(vii) on October 31, 2000, the Company shall be a party to one of the Loan
Facilities (as defined in Section 4(l) of the Securities Purchase Agreement);
(viii) on or prior to October 31, 2000 the Company (A) has delivered written
notice to each holder of Preferred Shares confirming that as of October 31, 2000
the Company is party to one or more of the Loan Facilities pursuant to which it
has the ability to borrow, as of October 31, 2000, at least $20,000,000 (less
any amounts already borrowed and outstanding, as of October 31, 2000, under such
agreement), and (B) has either (x) delivered written confirmation to each holder
of Preferred Shares confirming that the Company is party to the Revolving Credit
Agreement (as defined in Section 4(l) of the Securities Purchase Agreement), the
Revolving Credit Agreement has not been amended since the Issuance Date and that
the Company is in compliance with the Revolving Credit Agreement as of October
31, 2000, (y) publicly disclosed the terms of an amendment to the Revolving
Credit Agreement and that the Company is in compliance with the Revolving Credit
Agreement as of October 31, 2000, or (z) publicly disclosed the terms of a New
Facility (as defined in Section 4(l) of the Securities Purchase Agreement) and
that the Company is in compliance with the terms of such New Facility as of
October 31, 2000; (ix) with respect to any date on or after the Form 10-K
Deadline (as defined in Section 4(l) of the Securities Purchase Agreement), the
Company shall have disclosed in its Annual Report on Form 10-K for the year
ended June 30, 2000, as filed with the SEC on or prior to the Form 10-K
Deadline, that the Company was in compliance with all of its obligations under
the Loan Facilities (as defined in Section 4(l) of the Securities Purchase
Agreement) (or to the extent that the Company was not in compliance with the
Revolving Credit Agreement (as defined in the Securities Purchase Agreement) on
June 30, 2000, the Company has received an irrevocable and permanent, written
waiver from Union Bank of California, N.A. waiving any claim or right it has
with respect to any specific occurrence of noncompliance as of June 30, 2000);
and (x) the Company otherwise shall have been in compliance in all material
respects with all provisions, and shall not have breached in any material
respect any provisions of, these Articles of Amendment, the Securities Purchase
Agreement, the Warrants and the Registration Rights Agreement. Notwithstanding
the above, but subject to Section 5 and Section 8, any holder of Preferred
Shares may convert any Preferred Shares (including Preferred Shares selected for
redemption) into Common Stock pursuant to Section 2 on or prior to the date
immediately preceding the Company's Election Redemption Date. If the Company
fails to timely pay any Company's Election Redemption Price in accordance with
this Section 6, then the Company shall not be permitted to submit another Notice
of Redemption at Company's Election without the prior written consent of the
holders of at least two-thirds (2/3) of the Preferred Shares then outstanding.
The Company may combine a Notice of Redemption at Company's Election with a
Company's Conversion Election Notice (as defined below) provided all the
information required by such notices is present in such combined notice.
(7) Conversion at the Company's Election. On or after the date which is
20 days after the date on which the Registration Statement has been declared
effective by the SEC (the "First Conversion Election Date"), the Company shall
have the right, in its sole discretion, to require that some or all of the
outstanding Preferred Shares be converted ("Company's Conversion Election") at
the applicable Conversion Rate; provided that the Conditions to Conversion at
the Company's Election (as set forth below) are satisfied as of the Company's
Election Conversion Date (as defined below) or waived by all the holders of the
Preferred Shares then outstanding. The Company shall exercise its right to
Company's Conversion Election by providing each holder of Preferred Shares
written notice ("Company's Conversion Election Notice") by facsimile and
overnight courier on or after the First Conversion Election Date. The date on
which each of such holders of the Preferred Shares actually receives the
Company's Conversion Election Notice is referred to herein as the "Company's
Conversion Election Notice Date." If the Company elects to require conversion of
some, but not all, of such Preferred Shares then outstanding, the Company shall
require conversion of an amount from each holder of such Preferred Shares equal
to the product of (I) the total number of Preferred Shares which the Company has
elected to convert multiplied by (II) such holder's Allocation Percentage (such
amount with respect to each holder of such Preferred Shares being referred to
herein as its "Pro Rata Conversion Amount"). In the event that any initial
holder of the Preferred Shares shall sell or otherwise transfer any of such
holder's Preferred Shares, the transferee shall be allocated a pro rata portion
of such holder's Allocation Percentage. The Company's Conversion Election Notice
shall indicate (x) the aggregate number of such Preferred Shares the Company has
selected for conversion, (y) the date selected by the Company for conversion
("Company's Election Conversion Date"), which date shall be not less than 20
Business Days or more than 60 Business Days after the Company's Conversion
Election Notice Date, and (z) each holder's Pro Rata Conversion Amount. Subject
to the satisfaction of all the conditions of this Section 7 except to the extent
restricted by Section 5, on the Company's Election Conversion Date each holder
of Preferred Shares selected for conversion will be deemed to have submitted a
Conversion Notice in accordance with Section 2(d)(i) for a number of Preferred
Shares equal to the result of (a) such holder's Pro Rata Conversion Amount,
minus (b) the number of such Preferred Shares converted by such holder during
the Company's Mandatory Conversion Period (as defined below); provided, however,
in no event shall any holder of Preferred Shares be required to convert a number
of Preferred Shares during any Company's Mandatory Conversion Period into a
number of shares of Common Stock in excess of such holder's pro rata portion
(determined in the same manner as the Pro Rata Conversion Amount above) of 20%
of the aggregate trading volume of the Common stock on the Principal Market (as
reported by Bloomberg) during the Company's Mandatory Conversion Period,
provided further, however, if the Principal Market modifies the method by which
it calculates or reports the trading volume, then such percentage will be
modified accordingly. "Conditions to Conversion at the Company's Election" means
the following conditions: (i) on each day (other than days during an Allowable
Grace Period) during the period beginning on and including the date the
Registration Statement is declared effective by the SEC and ending on and
including the date which is 20 days prior to the date of the Company's
Conversion Election Notice Date, the Registration Statement which includes the
Registrable Securities relating to the Preferred Shares selected for conversion
shall be effective and available for the sale of at least all the Registrable
Securities other than for a period prior to the Company's Conversion Election
Notice of five (5) consecutive trading days or 10 trading days in any 365 day
period; (ii) on each day during the period beginning 20 days prior to the date
of the Company's Conversion Election Notice Date and ending on and including the
Company's Election Conversion Date, the Registration Statement shall be
effective and available for the sale of at least all of the Registrable
Securities required to be included in such Registration Statement and there
shall not have been any Grace Periods; (iii) on each day during the period
beginning on the Issuance Date and ending on and including the Company's
Election Conversion Date, the Common Stock is designated for quotation on the
Nasdaq National Market or listed on The New York Stock Exchange, Inc. and shall
not have been suspended from trading on such market or exchange (other than
suspensions of not more than one day and occurring prior to the Company's
Conversion Election Notice Date due to business announcements by the Company)
nor shall delisting or suspension by such market or exchange been threatened or
pending either (A) in writing by such market or exchange or (B) by falling below
the minimum listing maintenance requirements of such market or exchange; (iv)
during the period beginning on the Issuance Date and ending on and including the
Company's Election Conversion Date, there shall not have occurred (A) an event
constituting a Triggering Event, (B) an event that with the passage of time and
without being cured would constitute a Triggering Event, or (C) the public
announcement of a pending, proposed or intended Change of Control, unless such
pending, proposed or intended Change of Control has been terminated, abandoned
or consummated and the Company has publicly announced such termination,
abandonment or consummation of such Change of Control; (v) the aggregate number
of Preferred Shares selected for conversion by the Company as reflected in the
Company's Conversion Election Notice is at least 100 or, if all the Preferred
Shares which remain outstanding is less than 100, then the aggregate number of
Preferred Shares which are outstanding; (vi) during the period beginning on the
Issuance Date and ending on and including the Company's Election Conversion
Date, the Company shall have delivered Conversion Shares upon conversion of the
Preferred Shares and Warrant Shares upon exercise of the Warrants to the holders
on a timely basis as set forth in Section 2(d)(ii) hereof and Sections 2(a) and
2(b) of the Warrants, respectively; (vii) on the earlier to occur of (A) the
Stockholder Meeting Deadline and (B) the date on which the Company holds its
first meeting of stockholders after the Issuance Date, the Company shall have
received the Stockholder Approval; (viii) the Company shall have complied in all
respects with Section 4(n) of the Securities Purchase Agreement; (ix) on October
31, 2000, the Company shall be a party to one of the Loan Facilities (as defined
in Section 4(l) of the Securities Purchase Agreement); (x) on or prior to
October 31, 2000 the Company (A) has delivered written notice to each holder of
Preferred Shares confirming that as of October 31, 2000 the Company is party to
one or more of the Loan Facilities pursuant to which it has the ability to
borrow, as of October 31, 2000, at least $20,000,000 (less any amounts already
borrowed and outstanding, as of October 31, 2000, under such agreement), and (B)
has either (x) delivered written confirmation to each holder of Preferred Shares
confirming that the Company is party to the Revolving Credit Agreement (as
defined in Section 4(l) of the Securities Purchase Agreement), the Revolving
Credit Agreement has not been amended since the Issuance Date and that the
Company is in compliance with the Revolving Credit Agreement as of October 31,
2000, (y) publicly disclosed the terms of an amendment to the Revolving Credit
Agreement and that the Company is in compliance with the Revolving Credit
Agreement as of October 31, 2000, or (z) publicly disclosed the terms of a New
Facility (as defined in Section 4(l) of the Securities Purchase Agreement) and
that the Company is in compliance with the terms of such New Facility as of
October 31, 2000; (xi) with respect to any date on or after the Form 10-K
Deadline (as defined in Section 4(l) of the Securities Purchase Agreement), the
Company shall have disclosed in its Annual Report on Form 10-K for the year
ended June 30, 2000, as filed with the SEC on or prior to the Form 10-K
Deadline, that the Company was in compliance with all of its obligations under
the Loan Facilities (as defined in Section 4(l) of the Securities Purchase
Agreement) (or to the extent that the Company was not in compliance with the
Revolving Credit Agreement (as defined in the Securities Purchase Agreement) on
June 30, 2000, the Company has received an irrevocable and permanent, written
waiver from Union Bank of California, N.A. waiving any claim or right it has
with respect to any specific occurrence of noncompliance as of June 30, 2000);
(xii) the Company otherwise shall have been in compliance in all material
respects with all provisions, and shall not have breached in any material
respect any provisions of, these Articles of Amendment, the Securities Purchase
Agreement, the Warrants and the Registration Rights Agreement; and (xiii) the
Company shall not be entitled to, and shall not have, delivered a Company's
Conversion Election Notice during a Company's Mandatory Conversion Period.
"Company's Mandatory Conversion Period" means, with respect to any Company's
Conversion Election, the period beginning on and including the Company's
Conversion Election Notice Date and ending on and including the Company's
Election Conversion Date. Notwithstanding the above, any holder of Preferred
Shares may, subject to Sections 5, 8 and 15, convert such shares (including
Preferred Shares selected for conversion) into Common Stock pursuant to Section
2(b) on or prior to the Company's Election Conversion Date.
(8) Restrictions on Conversions. The right of a holder of Preferred
Shares to convert Preferred Shares pursuant to Section 2(b) shall be limited as
set forth below. Subject to the exceptions described below, without the prior
consent of the Company, no holder of Preferred Shares shall be entitled to
convert any Preferred Shares during the period beginning on the Issuance Date
and ending on and including December 31, 2000. Notwithstanding the foregoing,
the conversion restrictions set forth in this Section 8 shall not apply: (i)
with respect to each holder of Preferred Shares, to the number of Preferred
Shares equal to the aggregate of all such holder's Pro Rata Conversion Amounts
set forth in each Company's Election Conversion Notice received by such holder
on or prior to the date of determination; (ii) on or after any date on which the
Common Stock is not quoted on the Nasdaq National Market or listed on The New
York Stock Exchange, Inc. or has been suspended from trading on such market or
exchange (other than suspensions of not more than one day due to business
announcements by the Company) or on which delisting or suspension by such market
or exchange has been threatened or is pending either (I) in writing by such
market or exchange or (II) by falling below the minimum listing maintenance
requirements of such market or exchange; (iii) on or after any date on which
there shall have occurred a Triggering Event or an event that with the passage
of time and without being cured would constitute a Triggering Event; (iv) on or
after any date on which a Change of Control shall have been consummated or there
has been a public announcement of a pending, proposed or intended Change of
Control; (v) on or after any date on which the Company issues or sells or is
deemed to have issued or sold any Convertible Securities or Options that are
convertible into or exercisable or exchangeable for shares of Common Stock at a
conversion or exercise price which varies or may vary with the market price of
the Common Stock, including by way of one or more reset(s) to a fixed price;
(vi) on or after any date on which the Company fails to pay the Company's
Election Redemption Price for any Preferred Shares in a timely manner in
accordance with a Redemption at Company's Election pursuant to Section 6; (vii)
at any time after the first date after the Issuance Date on which the Closing
Sale Price of the Common Stock is less than $3.00 per share (subject to
adjustment for stock splits, stock dividends, stock combinations and other
similar transactions) for any 10 trading days during the 15 consecutive trading
days immediately preceding such date of determination; (viii) at any time after
the first date after the Issuance Date on which the Closing Sale Price of the
Common Stock is less than $2.50 per share (subject to adjustment for stock
splits, stock dividends, stock combinations and other similar transactions) for
any 3 consecutive trading days immediately preceding such date of determination;
(ix) with respect to any conversion of Preferred Shares at a price equal to the
Fixed Conversion Price then in effect; (x) at any time on or after the earlier
to occur of (A) the Stockholder Meeting Deadline and (B) the date on which the
Company holds its next meeting of stockholders, if the Company fails to receive
the Stockholder Approval on or before such date; (xi) on and after the first
date on which the Company fails to comply in any respect with its obligations
under Section 4(n) of the Securities Purchase Agreement; (xii) on and after
October 31, 2000, if on October 31, 2000 the Company is not a party to one of
the Loan Facilities; (xiii) on and after October 31, 2000, unless on or prior to
October 31, 2000 the Company (A) has delivered written notice to each holder of
Preferred Shares confirming that as of October 31, 2000 the Company is party to
one or more of the Loan Facilities pursuant to which it has the ability to
borrow, as of October 31, 2000, at least $20,000,000 (less any amounts already
borrowed and outstanding, as of October 31, 2000, under such agreement), and (B)
has either (x) delivered written confirmation to each holder of Preferred Shares
confirming that the Company is party to the Revolving Credit Agreement (as
defined in Section 4(l) of the Securities Purchase Agreement), the Revolving
Credit Agreement has not been amended since the Issuance Date and that the
Company is in compliance with the Revolving Credit Agreement as of October 31,
2000, (y) publicly disclosed the terms of an amendment to the Revolving Credit
Agreement and that the Company is in compliance with the Revolving Credit
Agreement as of October 31, 2000, or (z) publicly disclosed the terms of a New
Facility (as defined in Section 4(l) of the Securities Purchase Agreement) and
that the Company is in compliance with the terms of such New Facility as of
October 31, 2000; or (xiv) with respect to any date on or after the Form 10-K
Deadline (as defined in Section 4(l) of the Securities Purchase Agreement), the
Company shall have disclosed in its Annual Report on Form 10-K for the year
ended June 30, 2000, as filed with the SEC on or prior to the Form 10-K
Deadline, that the Company was in compliance with all of its obligations under
the Loan Facilities (as defined in Section 4(l) of the Securities Purchase
Agreement) (or to the extent that the Company was not in compliance with the
Revolving Credit Agreement (as defined in the Securities Purchase Agreement) on
June 30, 2000, the Company has received an irrevocable and permanent, written
waiver from Union Bank of California, N.A. waiving any claim or right it has
with respect to any specific occurrence of noncompliance as of June 30, 2000).
(9) Reservation of Shares. The Company shall initially reserve 200% of
the number of shares of Common Stock for which the Preferred Shares are
convertible on the Issuance Date (without regard to any limitations on
conversion), provided that, so long as any of the Preferred Shares are
outstanding, the Company shall take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversions of the Preferred Shares, such number of
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares then outstanding; provided that the
number of shares of Common Stock so reserved shall at no time be less than 150%
of the number of shares of Common Stock for which the Preferred Shares are at
any time convertible (without regard to any limitations on conversions). The
initial number of shares of Common Stock reserved for conversions of the
Preferred Shares and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Preferred Shares based on the number
of Preferred Shares held by each holder at the time of issuance of the Preferred
Shares or increase in the number of reserved shares, as the case may be. In the
event a holder shall sell or otherwise transfer any of such holder's Preferred
Shares, each transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any shares of
Common Stock reserved and allocated to any Person which ceases to hold any
Preferred Shares shall be allocated to the remaining holders of Preferred
Shares, pro rata based on the number of Preferred Shares then held by such
holders.
(10) Voting Rights. Holders of Preferred Shares shall have no voting
rights, except as required by law, including but not limited to the Tennessee
Business Corporation Law, and as expressly provided in these Articles of
Amendment.
(11) Liquidation, Dissolution, Winding-Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the holders of the Preferred Shares shall be entitled to receive in cash out of
the assets of the Company, whether from capital or from earnings available for
distribution to its stockholders (the "Liquidation Funds"), before any amount
shall be paid to the holders of any of the capital stock of the Company of any
class junior in rank to the Preferred Shares in respect of the preferences as to
distributions and payments on the liquidation, dissolution and winding up of the
Company, an amount per Preferred Share equal to the sum of (i) the Stated Value
and (ii) the Additional Amount for such Preferred Share; provided that, if the
Liquidation Funds are insufficient to pay the full amount due to the holders of
Preferred Shares and holders of shares of other classes or series of preferred
stock of the Company that are of equal rank with the Preferred Shares as to
payments of Liquidation Funds, including shares of the Company's Series A
Preferred Stock which are outstanding on the Issuance Date pursuant to the terms
of Section 7.3 of the Company's Charter as in effect on the Issuance Date (the
"Series A Shares") (the "Pari Passu Shares"), then each holder of Preferred
Shares and Pari Passu Shares shall receive a percentage of the Liquidation Funds
equal to the full amount of Liquidation Funds payable to such holder as a
liquidation preference, in accordance with their respective Articles of
Amendment to the Company's Charter, as a percentage of the full amount of
Liquidation Funds payable to all holders of Preferred Shares and Pari Passu
Shares. The purchase or redemption by the Company of stock of any class, in any
manner permitted by law, shall not, for the purposes hereof, be regarded as a
liquidation, dissolution or winding up of the Company. Neither the consolidation
or merger of the Company with or into any other Person, nor the sale or transfer
by the Company of less than substantially all of its assets, shall, for the
purposes hereof, be deemed to be a liquidation, dissolution or winding up of the
Company.
(12) Preferred Rank. All shares of Common Stock shall be of junior rank
to all Preferred Shares with respect to the preferences as to distributions and
payments upon the liquidation, dissolution and winding up of the Company. The
rights of the shares of Common Stock shall be subject to the preferences and
relative rights of the Preferred Shares. Without the prior express written
consent of the holders of not less than two-thirds (2/3) of the then outstanding
Preferred Shares, the Company shall not hereafter authorize or issue additional
or other capital stock that is of senior or equal rank to the Preferred Shares
in respect of the preferences as to distributions and payments upon the
liquidation, dissolution and winding up of the Company. Without the prior
express written consent of the holders of not less than two-thirds (2/3) of the
then outstanding Preferred Shares, the Company shall not hereafter authorize or
make any amendment to the Company's Charter or bylaws, or file any resolution of
the board of directors of the Company with the Secretary of State of the State
of Tennessee or enter into any agreement containing any provisions, which would
adversely affect or otherwise impair the rights or relative priority of the
holders of the Preferred Shares relative to the holders of the Common Stock or
the holders of any other class of capital stock. In the event of the merger or
consolidation of the Company with or into another Person, the Preferred Shares
shall maintain their relative powers, designations and preferences provided for
herein and no merger shall have a result inconsistent therewith.
(13) Participation. Subject to the rights of the holders, if any, of
the Pari Passu Shares, the holders of the Preferred Shares shall, as holders of
Preferred Shares, be entitled to such dividends paid and distributions made to
the holders of Common Stock to the same extent as if such holders of Preferred
Shares had converted the Preferred Shares into Common Stock (without regard to
any limitations on conversion herein or elsewhere) and had held such shares of
Common Stock on the record date for such dividends and distributions. Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.
(14) Restriction on Redemption and Cash Dividends. Until all of the
Preferred Shares have been converted or redeemed as provided herein, the Company
shall not, directly or indirectly, redeem, or declare or pay any cash dividend
or distribution on, its capital stock (other than the Preferred Shares and the
Series A Shares pursuant to Section 7.3 of the Company's Charter as in effect on
the Issuance Date) without the prior express written consent of the holders of
not less than two-thirds (2/3) of the then outstanding Preferred Shares.
(15) Limitation on Number of Conversion Shares. Notwithstanding
anything to the contrary contained herein, the Company shall not be obligated to
issue any shares of Common Stock upon conversion of the Preferred Shares if the
issuance of such shares of Common Stock would exceed that number of shares of
Common Stock which the Company may issue upon conversion of the Preferred Shares
without breaching the Company's obligations under the rules or regulations of
the Principal Market, or the market or exchange where the Common Stock is then
traded (the "Exchange Cap"), except that such limitation shall not apply in the
event that the Company (a) obtains the approval of its stockholders as required
by the applicable rules of the Principal Market (or any successor rule or
regulation) for issuances of Common Stock in excess of such amount, (b) obtains
a written opinion from outside counsel to the Company that such approval is not
required, which opinion shall be reasonably satisfactory to the holders of a
majority of the Preferred Shares then outstanding or (c) the required number of
the holders of the Preferred Shares have exercised their rights pursuant to
Section 4(c) to have the Company remove the Common Stock from the Principal
Market. Until such approval or written opinion is obtained or such action has
been taken by the required number of holders of Preferred Shares, no purchaser
of Preferred Shares pursuant to the Securities Purchase Agreement (the
"Purchasers") shall be issued, upon conversion of Preferred Shares, shares of
Common Stock in an amount greater than the product of (i) the Exchange Cap
amount multiplied by (ii) a fraction, the numerator of which is the number of
Preferred Shares issued to such Purchaser pursuant to the Securities Purchase
Agreement and the denominator of which is the aggregate amount of all the
Preferred Shares issued to the Purchasers pursuant to the Securities Purchase
Agreement (the "Cap Allocation Amount"). In the event that any Purchaser shall
sell or otherwise transfer any of such Purchaser's Preferred Shares, the
transferee shall be allocated a pro rata portion of such Purchaser's Cap
Allocation Amount. In the event that any holder of Preferred Shares shall
convert all of such holder's Preferred Shares into a number of shares of Common
Stock which, in the aggregate, is less than such holder's Cap Allocation Amount,
then the difference between such holder's Cap Allocation Amount and the number
of shares of Common Stock actually issued to such holder shall be allocated to
the respective Cap Allocation Amounts of the remaining holders of Preferred
Shares on a pro rata basis in proportion to the number of Preferred Shares then
held by each such holder.
(16) Vote to Change the Terms of or Issue Additional Preferred Shares.
The affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than two-thirds (2/3) of
the then outstanding Preferred Shares, shall be required for (a) any change to
these Articles of Amendment or the Company's Charter which would amend, alter,
change or repeal any of the powers, designations, preferences and rights
of the Preferred Shares and (b) the issuance of Preferred Shares other than
pursuant to the Securities Purchase Agreement.
(17) Lost or Stolen Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of an indemnification
undertaking by the holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall not
be obligated to re-issue preferred stock certificates if the holder
contemporaneously requests the Company to convert such Preferred Shares into
Common Stock.
(18) Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in these Articles of Amendment shall be
cumulative and in addition to all other remedies available under these Articles
of Amendment, at law or in equity (including a decree of specific performance
and/or other injunctive relief). No remedy contained herein shall be deemed a
waiver of compliance with the provisions giving rise to such remedy. Nothing
herein shall limit a holder's right to pursue actual damages for any failure by
the Company to comply with the terms of this Articles of Amendment. The Company
covenants to each holder of Preferred Shares that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the holder thereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holders of the Preferred Shares and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holders of the Preferred Shares shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
(19) Specific Shall Not Limit General; Construction. No specific
provision contained in these Articles of Amendment shall limit or modify any
more general provision contained herein. These Articles of Amendment shall be
deemed to be jointly drafted by the Company and all Buyers and shall not be
construed against any person as the drafter hereof.
(20) Failure or Indulgence Not Waiver. No failure or delay on the part
of a holder of Preferred Shares in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
(21) Notice. Whenever notice is required to be given under these
Articles of Amendment, unless otherwise provided herein, such notice shall be
given in accordance with Section 9(f) of the Securities Purchase Agreement.
(22) Transfer of Preferred Shares. A holder of Preferred Shares may
assign or transfer some or all of the Preferred Shares held by such holder
without the consent of the Company.
(23) Number of Preferred Shares. The Company shall not issue more than
2,000 Preferred Shares.
* * * * *
<PAGE>
4. This amendment was duly adopted by the Board of Directors of the corporation
on June 30, 2000. Under Section 48-16-102 of the Tennessee Code Annotated
shareholder approval of this amendment is not required.
June 30, 2000 Shop At Home, Inc.
Signature Date
Executive Vice President and General Counsel /s/ George J. Phillips
Signer's Capacity
Signature
George J. Phillips
Name (typed or printed)
<PAGE>
EXHIBIT I
SHOP AT HOME, INC.
CONVERSION NOTICE
Reference is made to the Articles of Amendment for Series B Convertible
Preferred Stock to the Charter of Shop At Home, Inc. (the "Articles of
Amendment"). In accordance with and pursuant to the Articles of Amendment, the
undersigned hereby elects to convert the number of shares of Series B
Convertible Preferred Stock, par value $10.00 per share (the "Preferred
Shares"), of Shop At Home, Inc., a Tennessee corporation (the "Company"),
indicated below into shares of Common Stock, par value $0.0025 per share (the
"Common Stock"), of the Company, as of the date specified below.
Date of Conversion:
Number of Preferred Shares to be converted:
Stock certificate no(s). of Preferred Shares to be converted:
Please confirm the following information:
Conversion Price:
Number of shares of Common Stock to be issued:
Holders Taxpayer ID#:
Is the Variable Price being relied on pursuant to Section 2(f)(iii) of the
Articles of Amendment? (check one) YES___ NO_____
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to:
Taxpayer ID#:
Facsimile Number:
Authorization:
By:
Title:
Dated:
Account Number (if electronic book entry transfer):
Transaction Code Number (if electronic book entry transfer):
<PAGE>
Doc #:CH02 (08239-00003) 1137986vRED;6/30/2000/Time:9:14
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby
directs [TRANSFER AGENT] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated June __, 2000
from the Company and acknowledged and agreed to by [TRANSFER AGENT].
SHOP AT HOME, INC.
By:_________________________________
Name:
Title:
<PAGE>
Exhibit 4.1
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B)
AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY THE SECURITIES.
Shop At Home, Inc.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: Number of Shares: 1,000,000
-----------------------
Date of Issuance: June __, 2000
Shop At Home, Inc., a Tennessee corporation (the "Company"), hereby certifies
that, for Ten United States Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
____________________, the registered holder hereof or its permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Warrant, at any time or times on or after the date
hereof, but not after 11:59 P.M. New York City Time on the Expiration Date (as
defined herein) ________________ __________________) 1,000,000 fully paid
nonassessable shares of Common Stock (as defined herein) of the Company (the
"Warrant Shares") at the purchase price per share provided in Section 1(b)
below; provided, however, that the Company shall not effect the exercise of this
Warrant and no holder of this Warrant shall have the right to exercise this
Warrant to the extent that after giving effect to such exercise, such Person
(together with such Person's affiliates) would have acquired, through exercise
of this warrant or otherwise, beneficial ownership of a number of shares of
Common Stock during the 60-day period ending on and including the date this
Warrant was exercised (the "60 Day Period"), that, when added to the number of
shares of Common Stock beneficially owned by such Person (together with such
Person's affiliates) at the beginning of the 60 Day Period, exceeds 9.99% of the
number of shares of Common Stock outstanding immediately after giving effect to
such exercise. For purposes of the foregoing provision, the aggregate number
of shares of Common Stock beneficially owned by such Person and its affiliates
shall include the number of shares of Common Stock issuable upon exercise of
this Warrant with respect to which the determination of such sentence is being
made, but shall exclude shares of Common Stock which would be issuable upon (i)
exercise of the remaining, unexercised portion of this Warrant beneficially
owned by such Person and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by such Person and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a limitation
on conversion or exercise analogous to the limitation contained herein. Except
as set forth in the preceding sentence, for purposes of this paragraph,
beneficial ownership shall be calculated in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended. For purposes of this
Warrant, in determining the number of outstanding shares of Common stock a
holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company's most recent Form 10-Q or Form 10-K, as the case may be,
(2) a more recent public announcement by the Company or (3) any other notice by
the Company or its transfer agent setting forth the number of shares of Common
Stock outstanding. Upon the written request of any holder, the Company shall
promptly, but in no event later than two (2) Business Days following the receipt
of such notice, confirm in writing to any such holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to conversions of Preferred
Shares (as defined below) and exercise of Warrants (as defined below) by such
holder and its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported.
Section 1.
(a) Securities Purchase Agreement. This Warrant is one of the
Warrants (the "Preferred Share Warrants") issued pursuant to Section 1 of that
certain Securities Purchase Agreement dated as of June 30, 2000, among the
Company and the Persons referred to therein (the "Securities Purchase
Agreement").
(b) Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
(i) "Approved Stock Plan" means any employee
benefit plan which has been approved by the Board of Directors of the Company,
pursuant to which the Company's securities may be issued to any employee,
officer or director for services provided to the Company.
(ii) "Business Day" means any day other than
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized or required by law to remain closed.
(iii) "Articles of Amendment" means the Articles of
Amendment for Series B Convertible Preferred Stock to the Company's Charter.
(iv) "Closing Bid Price" means, for any security as
of any date, the last closing bid price for such security on the Principal
Market (as defined below) as reported by Bloomberg Financial Markets
("Bloomberg"), or if the Principal Market begins to operate on an extended hours
basis, and does not designate the closing bid price, then the last bid price at
4:00 p.m. New York City Time as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, the last closing trade price for such security as reported by
Bloomberg, or, if no last closing trade price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Bid Price cannot be calculated for such security on such date on any of
the foregoing bases, the Closing Bid Price of such security on such date shall
be the fair market value as mutually determined by the Company and the holders
of the Preferred Share Warrants representing at least a majority of the shares
of Common Stock obtainable upon exercise of the Preferred Shares Warrants then
outstanding. If the Company and the holders of the Preferred Share Warrants are
unable to agree upon the fair market value of the Common Stock, then such
dispute shall be resolved pursuant to Section 2(a) of this Warrant with the term
"Closing Bid Price" being substituted for the term "Market Price." All such
determinations to be appropriately adjusted for any stock dividend, stock split
or other similar transaction during such period.
(v) "Closing Sale Price" means, for any security
as of any date, the last closing trade price for such security on the Principal
Market as reported by Bloomberg, or if the Principal Market begins to operate
on an extended hours basis, and does not designate the
closing trade price, then the last trade price at 4:00 p.m., New York City Time,
as reported by Bloomberg, or if the foregoing do not apply, the last closing
trade price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no last
closing trade price is reported for such security by Bloomberg, the last closing
ask price of such security as reported by Bloomberg, or, if no last closing ask
price is reported for such security by Bloomberg, the average of the highest bid
price and the lowest ask price of any market makers for such security as
reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Sale Price cannot be calculated for such security on such date on any of
the foregoing bases, the Closing Sale Price of such security on such date shall
be the fair market value as mutually determined by the Company and the holders
of the Preferred Share Warrants representing at least a majority of the shares
of Common Stock obtainable upon exercise of the Preferred Shares Warrants then
outstanding. If the Company and the holders of Preferred Share Warrants are
unable to agree upon the fair market value of the Common Stock, then such
dispute shall be resolved pursuant to Section 2(a) below with the term "Closing
Sale Price" being substituted for the term "Market Price". All such
determinations to be appropriately adjusted for any stock dividend, stock split
or other similar transaction during such period.
(vi) "Common Stock" means (i) the Company's common
stock, par value $0.0025 per share, and (ii) any capital stock into which such
Common Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.
(vii) "Convertible Securities" means any stock or
securities (other than Options) directly or indirectly convertible into or
exchangeable or exercisable for Common Stock.
(viii) "Excluded Securities" means shares of Common
Stock (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions) issued by the Company as
consideration for mergers, consolidations or the acquisition of businesses
of other Persons, provided that the Board of Directors of the Company has made a
good faith, reasonable determination that the consideration received for such
shares is not less than the fair market value of such shares.
(ix) "Expiration Date" means the date three (3)
years from the date of this Warrant or, if such date does not fall on a Business
Day or on a day on which trading takes place on the principal exchange or
automated quotation system on which the Common Stock is traded, then the next
date Business Day.
(x) "Market Price" means, with respect to any
security for any date of determination, that price which shall be computed as
the arithmetic average of the Closing Bid Prices for such security on each of
the ten (10) trading days immediately preceding such date of determination. All
such determinations to be appropriately adjusted for any stock dividend,
stock split or other similar transaction during the pricing period.
(xi) "Options" means any rights, warrants or
options to subscribe for or purchase Common Stock or Convertible Securities.
(xii) "Other Securities" means (i) those warrants of
the Company issued prior to, and outstanding on, the date of issuance of this
Warrant, (ii) the Preferred Shares and (iii) the shares of Common Stock
issued upon conversion of the Preferred Shares or exercise of the Preferred
Share Warrants.
(xiii) "Person" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(xiv) "Preferred Shares" means the shares of the
Company's Series B Convertible Preferred Stock issued pursuant to the Securities
Purchase Agreement.
(xv) "Principal Market" means the Nasdaq National
Market or if the Common Stock is not traded on the Nasdaq National Market, then
the principal securities exchange or trading market for the Common Stock.
(xvi) "Registration Rights Agreement" means that
registration rights agreement dated June 30, 2000 by and among the Company and
the Persons referred to therein.
(xvii) "Securities Act" means the Securities Act of
1933, as amended.
(xviii)"Warrant" means this Warrant and all Warrants
issued in exchange, transfer or replacement thereof.
(xix) "Warrant Exercise Price" shall be equal to
$5.00, subject to adjustment as hereinafter provided.
(xx) "Weighted Average Price" means, for any
security as of any date, the dollar volume-weighted average price for such
security on the Principal Market as reported by Bloomberg through its "Volume at
Price" function or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no dollar
volume-weighted average price is reported for such security by Bloomberg, the
average of the bid prices of each of the market makers for such security as
reported in the "pink sheets" by the National Quotation Bureau, Inc. If
the Weighted Average Price cannot be calculated for such security on such date
on any of the foregoing bases, the Weighted Average Price of such security on
such date shall be the fair market value as mutually determined by the Company
and the holders of the Preferred Share Warrants representing at least a
majority of the shares of Common Stock obtainable upon exercise of the Preferred
Share Warrants then outstanding. If the Company and the holders of the
Preferred Share Warrants are unable to agree upon the fair market value of the
Common Stock, then such dispute shall be resolved pursuant to Section 2(a)
below with the term "Weighted Average Price" being substituted for the term
"Market Price." All such determinations to be appropriately adjusted for
any stock dividend, stock split or other similar transaction during such period.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant
may be exercised by the holder hereof then registered on the books of the
Company, in whole or in part, at any time on any Business Day on or after the
opening of business on the date hereof and prior to 11:59 P.M., New York City
Time, on the Expiration Date by (i) delivery of a written notice, in the form of
the subscription notice attached as Exhibit A hereto (the "Exercise Notice"), of
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) (A) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the "Aggregate Exercise
Price") by wire transfer of immediately available funds (or by check if the
Company has not provided the holder of this Warrant with wire transfer
instructions for such payment) or (B) by notifying the Company that this Warrant
is being exercised pursuant to a Cashless Exercise (as defined in Section 2(e)),
and (iii) the surrender to a common carrier for overnight delivery to the
Company as soon as practicable following such date, this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction); provided, that if such Warrant Shares are to be
issued in any name other than that of the registered holder of this Warrant,
such issuance shall be deemed a transfer and the provisions of Section 7 shall
be applicable. In the event of any exercise of the rights represented by this
Warrant in compliance with this Section 2(a), the Company shall on the second
(2nd) Business Day (the "Warrant Share Delivery Date") following the date of its
receipt of the Exercise Notice, the Aggregate Exercise Price (or notice of
Cashless Exercise) and this Warrant (or an indemnification undertaking with
respect to this Warrant in the case of its loss, theft or destruction) (the
"Exercise Delivery Documents"), (A) provided the transfer agent is participating
in The Depository Trust Company ("DTC") Fast Automated Securities Transfer
Program and provided that the holder is eligible to receive shares through DTC,
credit such aggregate number of shares of Common Stock to which the holder shall
be entitled to the holder's or its designee's balance account with DTC through
its Deposit Withdrawal Agent Commission system or (B) issue and deliver to the
address as specified in the Exercise Notice, a certificate, registered in the
name of the holder or its designee, for the number of shares of Common Stock to
which the holder shall be entitled. Upon delivery of the Exercise Notice and
Aggregate Exercise Price referred to in clause (ii)(A) above or notification to
the Company of a Cashless Exercise referred to in Section 2(e), the holder of
this Warrant shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of this Warrant as required
by clause (iii) above or the certificates evidencing such Warrant Shares. In the
case of a dispute as to the determination of the Warrant Exercise Price, the
Market Price of a security or the arithmetic calculation of the number of
Warrant Shares, the Company shall promptly issue to the holder the number of
shares of Common Stock that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the holder via facsimile within one
(1) Business Day of receipt of the holder's subscription notice. If the holder
and the Company are unable to agree upon the determination of the Warrant
Exercise Price, the Market Price or arithmetic calculation of the number of
Warrant Shares within one (1) Business Day of such disputed determination or
arithmetic calculation being submitted to the holder, then the Company shall
immediately submit via facsimile (i) the disputed determination of the Warrant
Exercise Price or the Market Price to an independent, reputable investment
banking firm or (ii) the disputed arithmetic calculation of the number of
Warrant Shares to its independent, outside accountant. The Company shall cause
the investment banking firm or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the holder of the
results no later than two (2) Business Days from the time it receives the
disputed determinations or calculations. Such investment banking firm's or
accountant's determination or calculation, as the case may be, shall be deemed
conclusive absent manifest error.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five (5) Business Days after any exercise
(the "Warrant Delivery Date") and at its own expense, issue a new Warrant
identical in all respects to this Warrant exercised except it shall represent
rights to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under this Warrant exercised, less the number of Warrant Shares
with respect to which such Warrant is exercised.
(c) No fractional shares of Common Stock are to be issued upon
the exercise of this Warrant, but rather the number of shares of Common Stock
issued upon exercise of this Warrant shall be rounded up or down to the nearest
whole number.
(d) If the Company shall fail for any reason or for no reason
to issue to the holder within three (3) Business Days of receipt of the Exercise
Delivery Documents, a certificate for the number of shares of Common Stock to
which the holder is entitled or to credit the holder's balance account with DTC
for such number of shares of Common Stock to which the holder is entitled upon
the holder's exercise of this Warrant or a new Warrant for the number of shares
of Common Stock to which such holder is entitled pursuant to Section 2(b)
hereof, the Company shall, in addition to any other remedies under this Warrant
or the Securities Purchase Agreement or otherwise available to such holder,
including any indemnification under Section 8 of the Securities Purchase
Agreement, pay as additional damages in cash to such holder on each day after
the Warrant Share Delivery Date such exercise is not timely effected and/or each
day after the Warrant Delivery Date such Warrant is not delivered, as the case
may be, in an amount equal to 0.5% of the product of (I) the sum of the number
of shares of Common Stock not issued to the holder on or prior to the Warrant
Share Delivery Date and to which such holder is entitled and, in the event the
Company has failed to deliver a Warrant to the holder on or prior to the Warrant
Delivery Date, the number of shares of Common Stock issuable upon exercise of
the Warrant as of the Warrant Delivery Date and (II) the Closing Bid Price of
the Common Stock on the Warrant Share Delivery Date, in the case of the failure
to deliver Common Stock, or the Warrant Delivery Date, in the case of failure to
deliver a Warrant, as the case may be. The foregoing notwithstanding, the
damages set forth in this Section 2(d) shall be stayed with respect to the
number of shares of Common Stock and, if applicable, the Warrant for which there
is a good faith dispute being resolved pursuant to, and within the time periods
provided for in, Section 2(a), pending the resolution of such dispute.
(e) If, despite the Company's obligations under the Securities
Purchase Agreement and the Registration Rights Agreement, the Warrant Shares to
be issued are not registered and available for resale pursuant to a registration
statement in accordance with the Registration Rights Agreement, including during
a Grace Period (as defined in the Registration Rights Agreement), then
notwithstanding anything contained herein to the contrary, the holder of this
Warrant may, at its election exercised in its sole discretion, exercise this
Warrant in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the "Net
Number" of shares of Common Stock determined according to the following formula
(a "Cashless Exercise"):
Net Number = (A x B) - (A x C)/B
For purposes of the foregoing formula:
A= the total number of shares with respect to which
this Warrant is then being exercised.
B= the Closing Sale Price of the Common Stock on the
trading day immediately preceding the date of the
Exercise Notice.
C= the Warrant Exercise Price then in effect for the
applicable Warrant Shares at the time of such
exercise.
(f) Adjustment to Warrant Exercise Price -- Market Price of
Common Stock. In addition to any other adjustment to the Warrant Exercise Price
provided for in this Warrant, in the event that the Market Price of the Common
Stock on the date which is one (1) year after the Warrant Date (the "Reset
Date") is less than the Warrant Exercise Price in effect immediately prior to
such Reset Date, then from and after such Reset Date the Warrant Exercise Price
shall be equal to the Market Price of the Common Stock on the Reset Date,
subject to further adjustment as provided herein.
Section 3. Covenants as to Common Stock. The Company hereby
covenants and agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution
for or replacement of this Warrant will upon issuance be, duly authorized and
validly issued.
(b) All Warrant Shares which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
created by or through the Company with respect to the issue thereof.
(c) During the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have authorized and
reserved at least 100% of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price.
(d) The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Warrant
Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
(f) This Warrant will be binding upon any entity succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets.
Section 4. Taxes. The Company shall pay any and all taxes which
may be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as
otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of shares
of the Company for any purpose, nor shall anything contained in this Warrant
be construed to confer upon the holder hereof, as such, any of the rights of
a stockholder of the Company or any right to vote, give or withhold consent to
any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of
this Warrant. In addition, nothing contained in this Warrant shall be construed
as imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder
of this Warrant with copies of the same notices and other information given to
the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.
Section 6. Representations of Holder. The holder of this
Warrant, by the acceptance hereof, represents that it is acquiring this
Warrant and the Warrant Shares for its own account for investment only and
not with a view towards, or for resale in connection with, the public sale or
distribution of this Warrant or the Warrant Shares, except pursuant to sales
registered or exempted under the Securities Act; provided, however, that
by making the representations herein, the holder does not agree to hold this
Warrant or any of the Warrant Shares for any minimum or other specific term and
reserves the right to dispose of this Warrant and the Warrant Shares at any time
in accordance with or pursuant to a registration statement or an exemption
under the Securities Act. The holder of this Warrant further represents, by
acceptance hereof, that, as of this date, such holder is an "accredited
investor" as such term is defined in Rule 501(a)(3) of Regulation D promulgated
by the Securities and Exchange Commission under the Securities Act (an
"Accredited Investor"). Upon exercise of this Warrant, other than pursuant to a
Cashless Exercise, the holder shall, if requested by the Company, confirm in
writing, in a form satisfactory to the Company, representations concerning the
Warrant Shares in substantially the form of the first sentence of this Section
6. If such holder cannot make such representations because they would be
factually incorrect, it shall be a condition to such holder's exercise of this
Warrant, other than pursuant to a Cashless Exercise, that the Company receive
such other representations as the Company considers reasonably necessary to
assure the Company that the issuance of its securities upon exercise of this
Warrant shall not violate any United States or state securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant and the rights granted hereunder shall be
assignable and transferable by the holder hereof without the consent of the
Company.
(c) The Company is obligated to register the Warrant Shares
for resale under the Securities Act pursuant to the Registration Rights
Agreement and the initial holder of this Warrant (and certain assignees thereof)
is entitled to the registration rights in respect of the Warrant Shares as set
forth in the Registration Rights Agreement.
Section 8. Adjustment of Warrant Exercise Price and Number of
Shares. The Warrant Exercise Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted from time to time as
follows:
(a) Adjustment of Warrant Exercise Price upon Issuance of
Common Stock. If and whenever on or after the date of issuance of this Warrant,
the Company issues or sells, or is deemed to have issued or sold, any shares of
Common Stock (including the issuance or sale of shares of Common Stock owned or
held by or for the account of the Company, but excluding (A) shares of Common
Stock issued or deemed to have been issued by the Company in connection with an
Approved Stock Plan or upon exercise or conversion of the Other Securities and
(B) the Excluded Securities) for a consideration per share less than a price
(the "Applicable Price") equal to the Warrant Exercise Price in effect
immediately prior to such issuance or sale, then immediately after such issue or
sale the Warrant Exercise Price then in effect shall be reduced to an amount
equal to the consideration, if any, received by the Company upon such issue or
sale; provided, however, that the Warrant Exercise Price shall not be reduced
pursuant to this Section 8(a) at any time that the amount of such reduction
would be an amount less than 2% of the Warrant Exercise Price immediately
preceding such reduction, but any such amount shall be carried forward and a
reduction in the Warrant Exercise Price pursuant to this Section 8(a) shall be
made with respect to such amount at the earlier of (x) such time as all such
amounts which have been carried forward pursuant to this proviso aggregate 2% or
more of the Warrant Exercise Price then in effect and (y) the next reduction of
the Warrant Exercise Price pursuant to this Section 8(a). Upon each such
adjustment of the Warrant Exercise Price pursuant to the immediately preceding
sentence, the number of shares of Common Stock acquirable upon exercise of this
Warrant shall be adjusted to the number of shares determined by multiplying the
Warrant Exercise Price in effect immediately prior to such adjustment by the
number of shares of Common Stock acquirable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by the
Warrant Exercise Price resulting from such adjustment.
(b) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Section 8(a)
above, the following shall be applicable:
(i) Issuance of Options. If the Company in any
manner grants any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon
conversion, exchange or exercise of any Convertible Securities issuable upon
exercise of any such Option is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Option for such
price per share. For purposes of this Section 8(b)(i), the "lowest price per
share for which one share of Common Stock is issuable upon exercise of any
such Option or upon conversion, exchange or exercise of any Convertible
Securities issuable upon exercise of any such Option" shall be equal to the sum
of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of Common Stock upon the granting
or sale of the Option, upon exercise of the Option and upon conversion, exchange
or exercise of any Convertible Security issuable upon exercise of such Option.
No further adjustment of the Warrant Exercise Price shall be made upon the
actual issuance of such Common Stock or of such Convertible Securities upon
the exercise of such Options or upon the actual issuance of such Common Stock
upon conversion, exchange or exercise of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Securities and the lowest
price per share for which one share of Common Stock is issuable upon such
conversion, exchange or exercise thereof is less than the Applicable Price,
then such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 8(b)(ii), the "lowest price per share for which one share of Common
Stock is issuable upon such conversion, exchange or exercise" shall be equal
to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to one share of Common Stock upon the
issuance or sale of the Convertible Security and upon conversion,
exchange or exercise of such Convertible Security. No further adjustment of the
Warrant Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion, exchange or exercise of such Convertible Securities, and
if any such issue or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of the Warrant Exercise Price had been or
are to be made pursuant to other provisions of this Section 8(b), no further
adjustment of the Warrant Exercise Price shall be made by reason of such issue
or sale.
(iii) Change in Option Price or Rate of
Conversion. If the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exchange or exercise
of any Convertible Securities, or the rate at which any Convertible Securities
are convertible into or exchangeable or exercisable for Common Stock changes at
any time, the Warrant Exercise Price in effect at the time of such change shall
be adjusted to the Warrant Exercise Price which would have been in effect at
such time had such Options or Convertible Securities provided for such changed
purchase price, additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold and the number of
shares of Common Stock acquirable hereunder shall be correspondingly
readjusted. For purposes of this Section 8(b)(iii), if the terms of any Option
or Convertible Security that was outstanding as of the date of issuance of
this Warrant are changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Common
Stock deemed issuable upon conversion, exchange or exercise thereof shall be
deemed to have been issued as of the date of such change. No adjustment shall be
made if such adjustment would result in an increase of the Warrant Exercise
Price then in effect.
(c) Effect on Warrant Exercise Price of Certain Events. For
purposes of determining the adjusted Warrant Exercise Price under Sections 8(a)
and 8(b), the following shall be applicable:
(i) Calculation of Consideration Received. In
case any Option is issued in connection with the issue
or sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been issued for a
consideration of $.01. If any Common Stock, Options or Convertible Securities
are issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the gross amount received
by the Company therefor, less expenses in excess of 5% of the gross amount
received. If any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of such consideration
received by the Company will be the fair value of such consideration, except
where such consideration consists of marketable securities, in which case the
amount of consideration received by the Company will be the Market Price of such
securities on the date of receipt of such securities. If any Common Stock,
Options or Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor will be deemed to be the fair value
of such portion of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the holders of Preferred Share
Warrants representing at least two-thirds (2/3) of the shares of Common Stock
obtainable upon exercise of the Preferred Share Warrants then outstanding. If
such parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the "Valuation Event"), the fair
value of such consideration will be determined within five (5) Business Days
after the tenth (10th) day following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the holders of Preferred
Share Warrants representing at least two-thirds (2/3) of the shares of Common
Stock obtainable upon exercise of the Preferred Share Warrants then outstanding.
The determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne
by the Company.
(ii) Record Date. If the Company takes a record
of the holders of Common Stock for the purpose of entitling them (1) to receive
a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be. If after the occurrence of such
record date the transaction or event for which such record date was set is
abandoned or terminated, then any adjustments resulting from this Section
2(c)(ii) as it relates to such terminated or abandoned transaction or event
shall be reversed as if such record date had never occurred.
(d) Adjustment of Warrant Exercise Price upon Subdivision or
Combination of Common Stock. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased. Any adjustment under this Section 8(d) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(e) Distribution of Assets. If the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a
"Distribution"), at any time after the issuance of this Warrant, then, in each
such case:
(i) the Warrant Exercise Price in effect
immediately prior to the close of business on the record date
fixed for the determination of holders of Common Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on such
record date, to a price determined by multiplying such Warrant Exercise Price by
a fraction of which (A) the numerator shall be the Weighted Average Price of the
Common Stock on the trading day immediately preceding such record date minus the
value of the Distribution (as determined in good faith by the Company's Board of
Directors) applicable to one share of Common Stock, and (B) the denominator
shall be the Weighted Average Price of the Common Stock on the trading day
immediately preceding such record date; and
(ii) either (A) the number of Warrant Shares
obtainable upon exercise of this Warrant shall be increased to a number of
shares equal to the number of shares of Common Stock obtainable immediately
prior to the close of business on the record date fixed
for the determination of holders of Common Stock entitled to receive the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding clause (i), or (B) in the event that the Distribution is
of common stock of a company whose common stock is traded on a national
securities exchange or a national automated quotation system, then the holder of
this Warrant shall receive an additional warrant to purchase Common Stock, the
terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the amount of the assets that would have been
payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such record date and with an
exercise price equal to the amount by which the exercise price of this Warrant
was decreased with respect to the Distribution pursuant to the terms of the
immediately preceding clause (i).
(f) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 8 (as determined in good faith by
the board of directors of the Company) but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the Warrant
Exercise Price and the number of shares of Common Stock obtainable upon exercise
of this Warrant so as to protect the rights of the holders of the Preferred
Share Warrants; provided that no such adjustment will increase the Warrant
Exercise Price or decrease the number of shares of Common Stock obtainable as
otherwise determined pursuant to this Section 8.
(g) Notices.
(i) Immediately upon any adjustment of the
Warrant Exercise Price, the Company will give written notice thereof to the
holder of this Warrant, setting forth in reasonable detail, and certifying,
the calculation of such adjustment.
(ii) The Company will give written notice to the
holder of this Warrant at least ten (10) days prior to
the date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the Common Stock, (B) with respect
to any pro rata subscription offer to holders of Common Stock or (C) for
determining rights to vote with respect to any Organic Change (as defined
below), dissolution or liquidation, provided that such information shall be made
known to the public prior to or in conjunction with such notice being provided
to such holder.
(iii) The Company will also give written notice to
the holder of this Warrant at least ten (10) days prior to the date on which any
Organic Change, dissolution or liquidation will take place, provided that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder.
Section 9. Purchase Rights; Reorganization, Reclassification,
Consolidation, Merger or Sale.
(a) In addition to any adjustments pursuant to
Section 8 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then the holder of this Warrant will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(b) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock (except an unsolicited tender offer to which the
Company is not a party) is referred to herein as
"Organic Change." Prior to the consummation of any (i) sale of all or
substantially all of the Company's assets to an acquiring Person or (ii) other
Organic Change following which the Company is not a surviving entity, the
Company will secure from the Person purchasing such assets or the successor
resulting from such Organic Change (in each case, the "Acquiring Entity")
written agreement (in form and substance reasonably satisfactory to the holders
of Preferred Share Warrants representing at least two-thirds (2/3) of the shares
of Common Stock obtainable upon exercise of the Preferred Share Warrants then
outstanding) to deliver to each holder of Preferred Share Warrants in exchange
for such Warrants, a security of the Acquiring Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant and
reasonably satisfactory to the holders of the Preferred Share Warrants
(including, an adjusted warrant exercise price equal to the value for the Common
Stock reflected by the terms of such consolidation, merger or sale, and
exercisable for a corresponding number of shares of Common Stock acquirable and
receivable upon exercise of the Preferred Share Warrants (without regard to any
limitations on exercises), if the value so reflected is less than the Warrant
Exercise Price in effect immediately prior to such consolidation, merger or
sale). Prior to the consummation of any other Organic Change, the Company shall
make appropriate provision (in form and substance reasonably satisfactory to the
holders of Preferred Share Warrants representing at least two-thirds (2/3) of
the shares of Common Stock obtainable upon exercise of the Preferred Share
Warrants then outstanding) to insure that each of the holders of the Preferred
Share Warrants will thereafter have the right to acquire and receive in lieu of
or in addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the exercise of such holder's
Preferred Share Warrants (without regard to any limitations on exercises), such
shares of stock, securities or assets that would have been issued or payable in
such Organic Change with respect to or in exchange for the number of shares of
Common Stock which would have been acquirable and receivable upon the exercise
of such holder's Warrant as of the date of such Organic Change (without taking
into account any limitations or restrictions on the exerciseability of this
Warrant).
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly, on
receipt of an indemnification undertaking (or in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Shop At Home, Inc.
5388 Hickory Hollow Parkway
Antioch, Tennessee 37013
Telephone: (615) 263-8000
Facsimile: (615) 263-8911
Attention: George J. Phillips,
Executive Vice President and General Counsel
With a copy to:
Wyatt, Tarrant & Combs
1500 Nashville City Center
511 Union Street
Nashville, Tennessee 37219-1750
Telephone: (615) 244-0020
Facsimile: (615) 256-1726
Attention: Charles W. Bone, Esq.
If to a holder of this Warrant, to it at the address and facsimile number set
forth on the Schedule of Buyers to the Securities Purchase Agreement, with
copies to such holder's representatives as set forth on such Schedule of Buyers,
or at such other address and facsimile as shall be delivered to the Company upon
the issuance or transfer of this Warrant. Each party shall provide five days'
prior written notice to the other party of any change in address or facsimile
number. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
Section 12. Amendments. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought and shall be binding on such party's
or holder's assignees and transferees.
Section 13. Limitation on Number of Warrant Shares. The Company shall
not be obligated to issue any Warrant Shares upon exercise of this Warrant if
the issuance of such shares of Common Stock would cause the Company to exceed
that number of shares of Common Stock which the Company may issue upon exercise
of this Warrant (the "Exchange Cap") without breaching the Company's obligations
under the rules or regulations of Principal Market, except that such limitation
shall not apply in the event that the Company (a) obtains the approval of its
stockholders as required by the Principal Market (or any successor rule or
regulation) for issuances of Common Stock in excess of such amount or (b)
obtains a written opinion from outside counsel to the Company that such approval
is not required, which opinion shall be reasonably satisfactory to the holders
of Warrants representing at least two-thirds (2/3) of the Warrant Shares then
issuable upon exercise of outstanding Warrants. Until such approval or written
opinion is obtained, the holder of this Warrant shall not be issued, upon
exercise of this Warrant, Warrant Shares in an amount greater than such holder's
Cap Allocation Amount (as defined in the Articles of Amendment). In the event
the Company is prohibited from issuing Warrant Shares as a result of the
operation of this Section 13, then the Company, within one (1) Business Day
after its receipt of the Exercise Delivery Documents with respect to which the
Company can not deliver shares of Common Stock pursuant to this Section 13, the
Company shall notify each holder of Preferred Share Warrants by facsimile of the
Company's irrevocable election to either (i) redeem Preferred Share Warrants
submitted for redemption pursuant to this Section 13, or (ii) to delist from the
Principal Market within five Business Days of the Company's receipt of such
Exercise Delivery Documents so that the Exchange Cap (as defined in this Section
13) no longer applies and is of no force or effect after such fifth Business
Day. If the Company elects to delist the Common Stock from the Principal Market
pursuant to the preceding sentence but fails to delist the Common Stock from the
Principal Market such that the Exchange Cap no longer applies and is of no force
or effect on or prior to such fifth Business Day, then the Company shall be
deemed to have irrevocably elected to redeem all Preferred Share Warrants
submitted for redemption pursuant to this Section 13. If the Company elects to
redeem Preferred Share Warrants pursuant to the previous two sentences or fails
to delist within five Business Days pursuant to the previous sentence, any
holder of Preferred Share Warrants then outstanding may require the Company to
redeem up to all of such holder's Preferred Share Warrants by delivering written
notice thereof via facsimile and overnight courier ("Notice of Holder
Redemption") to the Company, which Notice of Holder Redemption shall indicate
the number of Preferred Share Warrants that such holder is electing to redeem.
Any redemption pursuant to the previous sentence shall be at a price per Warrant
Share covered by the Preferred Share Warrant equal to the difference between the
Market Price of the Common Stock and the Warrant Exercise Price of such Warrant
Shares as of the date of the attempted exercise.
Section 14. Date. The date of this Warrant is June 30, 2000 (the
"Warrant Date"). This Warrant, in all events, shall be wholly void and of no
effect after the close of business on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Section 7 shall
continue in full force and effect after such date as to any Warrant Shares or
other securities issued upon the exercise of this Warrant.
<PAGE>
Doc #:CH02 (08239-00003) 1137986vRED;6/30/2000/Time:9:14
Section 15. Amendment and Waiver. Except as otherwise provided herein,
the provisions of the Preferred Share Warrants may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the holders of Preferred Share Warrants representing at least
two-thirds (2/3) of the shares of Common Stock obtainable upon exercise of the
Preferred Share Warrants then outstanding; provided that no such action may
increase the Warrant Exercise Price or decrease the number of shares or class of
stock obtainable upon exercise of any Preferred Share Warrants without the
written consent of the holder of such Preferred Share Warrant.
Section 16. Descriptive Headings; Governing Law. The descriptive
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. All questions
concerning the construction, validity, enforcement and interpretation of this
Warrant shall be governed by the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule whether
of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
_______, its ___________, as of the 30th day of June, 2000.
SHOP AT HOME, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT A TO WARRANT
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
Shop At Home, Inc.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of Shop At
Home, Inc., a Tennessee corporation (the "Company"), evidenced by the attached
Warrant (the "Warrant"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment of
the Warrant Exercise Price shall be made as:
____________ "Cash Exercise" with respect to _______________
Warrant Shares; and/or
____________ "Cashless Exercise" with respect to ___________
Warrant Shares (to the extent permitted by the
terms of the Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the holder shall pay the sum of $___________________ to
the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _________________, ______
Name of Registered Holder Tax ID of Registered Holder
By:
Name:
Title:
<PAGE>
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
[TRANSFER AGENT] to issue the above indicated number of shares of Common Stock
in accordance with the Transfer Agent Instructions dated __________, 2000 from
the Company and acknowledged and agreed to by [TRANSFER AGENT].
SHOP AT HOME, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Shop At Home, Inc., a Tennessee
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.
Dated: _________, 200_
By:
Its:
<PAGE>
Exhibit 10.1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 30,
2000, by and among Shop At Home, Inc., a Tennessee corporation, with
headquarters located at 5388 Hickory Hollow Parkway, Antioch, Tennessee 37013
(the "Company"), and the undersigned buyers (each, a "Buyer" and collectively,
the "Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers (i) shares of the
Series B Convertible Preferred Stock (the "Preferred Shares"), which will be
convertible into shares of the Company's common stock, par value $0.0025 per
share (the "Common Stock") (as converted, the "Conversion Shares") in accordance
with the terms of the Company's Articles of Amendment for Series B Convertible
Preferred Stock to the Company's Charter (the "Articles of Amendment"), and (ii)
warrants to purchase shares of Common Stock (the "Warrants;" and as exercised,
the "Warrant Shares");
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "Investor" means a Buyer, any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section 9
and any transferee or assignee thereof to whom a transferee or assignee assigns
its rights under this Agreement and who agrees to become bound by the provisions
of this Agreement in accordance with Section 9.
b. "Person" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a governmental or any department or agency thereof.
c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
d. "Registrable Securities" means (i) the Conversion Shares
issued or issuable upon conversion of the Preferred Shares, (ii) the Warrant
Shares issued or issuable upon exercise of the Warrants, (iii) the Dividend
Shares (as defined in the Articles of Amendment) issued in relation to the
Preferred Shares and (iv) any shares of capital stock issued or issuable with
respect to the Conversion Shares, the Preferred Shares, the Warrant Shares, the
Warrants or the Dividend Shares issued in relation to the Preferred Shares as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, without regard to any limitations on conversions of
Preferred Shares or exercises of Warrants.
e. "Registration Statement" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Registrable Securities.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, as
soon as practicable but in no event later than 45 days after the Closing Date
(as defined in the Securities Purchase Agreement) (the "Filing Deadline"), file
with the SEC the Registration Statement on Form S-3 covering the resale of all
of the Registrable Securities. In the event that Form S-3 is unavailable for
such a registration, the Company shall use such other form as is available for
such a registration, subject to the provisions of Section 2(d). The Registration
Statement prepared pursuant hereto shall register for resale at least that
number of shares of Common Stock equal to the sum of (i) the product of (x) 2.0
and (y) the number of Conversion Shares issuable upon conversion of the
Preferred Shares (without regard to any limitations on conversions) as of the
trading day immediately preceding the date the Registration Statement is
initially filed with the SEC, plus (ii) the number of Warrant Shares issuable
upon exercise of the Warrants (without regard to any limitations on exercise) as
of the date immediately preceding the date the Registration Statement is
initially filed with the SEC, subject in each case to adjustment as provided in
Section 2(e). The Company shall use its best efforts to have the Registration
Statement declared effective by the SEC as soon as practicable, but in no event
later than the date which is 120 days after the Closing Date (the "Effectiveness
Deadline").
b. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement.
c. Legal Counsel. Subject to Section 5 hereof, the Buyers
holding at least two-thirds (2/3) of the Registrable Securities shall have the
right to select one legal counsel to review any offering pursuant to this
Section 2 ("Legal Counsel"), which shall be Katten Muchin Zavis or such other
counsel as thereafter designated by the holders of at least two-thirds (2/3) of
Registrable Securities. The Company shall reasonably cooperate with Legal
Counsel in performing the Company's obligations under this Agreement.
d. Ineligibility for Form S-3. In the event that Form S-3 is
not available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to the holder of at
least two-thirds (2/3) of the Registrable Securities and (ii) undertake to
register the Registrable Securities on Form S-3 as soon as such form is
available, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.
e. Sufficient Number of Shares Registered. Subject to Section
3(s), in the event the number of shares available under a Registration Statement
filed pursuant to Section 2(a) is insufficient to cover all of the Registrable
Securities required to be covered by such Registration Statement or an
Investor's allocated portion of the Registrable Securities pursuant to Section
2(b), the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover at least 200% of the number of such Registrable Securities
as of the trading day immediately preceding the date of the filing of such
amendment or new Registration Statement, in each case, as soon as practicable,
but in any event not later than fifteen (15) days after the necessity therefor
arises. The Company shall use its best efforts to cause such amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof. For purposes of the foregoing provision, the number of
shares available under a Registration Statement shall be deemed "insufficient to
cover all of the Registrable Securities" if at any time the number of
Registrable Securities issued or issuable upon conversion of the Preferred
Shares and exercise of the Warrants covered by such Registration Statement is
greater than the quotient determined by dividing (i) the number of shares of
Common Stock available for resale under such Registration Statement by (ii) 1.5.
The calculation set forth in the foregoing sentence shall be made without regard
to any limitations on the conversion of the Preferred Shares or exercise of the
Warrants and such calculation shall assume that the Preferred Shares and the
Warrants are then convertible and exercisable, respectively, into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the Articles
of Amendment) and Warrant Exercise Price (as defined in the Warrants),
respectively, if applicable.
f. Effect of Failure to File and Obtain and Maintain
Effectiveness of Registration Statement. If (i) a Registration Statement
covering all the Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not (A) filed with the SEC on or before the Filing
Deadline or (B) declared effective by the SEC on or before the Effectiveness
Deadline or (ii) on any day after the Registration Statement has been declared
effective by the SEC sales of all the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined below) pursuant to the Registration Statement
(including, without limitation, because of a failure to keep the Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to the Registration Statement or to register sufficient shares
of Common Stock), then, as partial relief for the damages to any holder by
reason of any such delay in or reduction of its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each holder of
Preferred Shares an amount in cash per Preferred Share held equal to the product
of (i) $10,000 multiplied by (ii) the sum of (A) 0.015, if the Registration
Statement is not filed by the Filing Deadline, plus (B) 0.015, if the
Registration Statement is not declared effective by the Effectiveness Deadline,
plus, (C) the product of (I) 0.0005 multiplied by (II) the sum of (x) the number
of days after the Filing Deadline that such Registration Statement is not filed
with the SEC, plus (y) the number of days after the Effectiveness Deadline that
the Registration Statement is not declared effective by the SEC, plus (z) the
number of days after the Registration Statement has been declared effective by
the SEC that such Registration Statement is not available (other than during an
Allowable Grace Period) for the sale of at least all the Registrable Securities
required to be included on such Registration Statement pursuant to section 2(e).
The payments to which a holder shall be entitled pursuant to this Section 2(f)
are referred to herein as "Registration Delay Payments." Registration Delay
Payments shall be paid on the earlier of (I) the last day of the calendar month
during which such Registration Delay Payments are incurred and (II) the third
Business Day after the event or failure giving rise to the Registration Delayed
Payments is cured. In the event the Company fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of 1.5% per month (or if lower, the maximum allowed by
applicable law) (prorated for partial months) until paid in full.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 2(a) or 2(e), the Company will use
its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (but in no
event later than the Filing Deadline) and use its best efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective as soon as practicable after such filing (but in no event later than
the Effectiveness Deadline). Subject to Section 3(s), the Company shall keep
each Registration Statement effective pursuant to Rule 415 at all times until
the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or successor thereto) promulgated under the
1933 Act or (ii) the date on which the Investors shall have sold all the
Registrable Securities covered by such Registration Statement (the "Registration
Period"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. The term "best efforts"
shall mean, among other things, that the Company shall submit to the SEC, within
two (2) business days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on the Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement to a
time and date not later than 48 hours after the submission of such request.
b. Subject to Section 3(s), the Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with such Registration Statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 Act"), the Company shall have incorporated such
report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement the Registration Statement.
c. The Company shall (A) permit Legal Counsel to review and
comment upon (i) the Registration Statement at least seven (7) days prior to its
filing with the SEC and (ii) all other Registration Statements and all
amendments and supplements to all Registration Statements (except for Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K and any similar or successor reports) within a reasonable number of days
prior to their filing with the SEC, and (B) not file any Registration Statement
or amendment or supplement thereto in a form to which Legal Counsel reasonably
objects. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or supplement thereto
without the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld. The Company shall furnish to Legal Counsel, without
charge, (i) any correspondence from the SEC or the staff of the SEC to the
Company or its representatives relating to any Registration Statement, (ii)
promptly after the same is prepared and filed with the SEC, one copy of any
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits and (iii) upon the effectiveness of any Registration Statement, one
copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto. The Company shall reasonably cooperate with
Legal Counsel in performing the Company's obligations pursuant to this Section
3.
d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably request)
and (iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned by such
Investor.
e. Subject to Section 3(s), the Company shall use its best
efforts to (i) register and qualify, unless an exemption from registration and
qualification applies, the resale by Investors of the Registrable Securities
covered by a Registration Statement under such other securities or "blue sky"
laws of all the states in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
Legal Counsel and each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
f. The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and , subject to Section
3(s), promptly prepare a supplement or amendment to such Registration Statement
to correct such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to Legal Counsel and each Investor (or such other
number of copies as Legal Counsel or such Investor may reasonably request). The
Company shall also promptly notify Legal Counsel and each Investor in writing
(i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to Legal Counsel and each Investor by facsimile on the same day of
such effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
g. Subject to Section 3(s), the Company shall use its best
efforts to prevent the issuance of any stop order or other suspension of
effectiveness of a Registration Statement, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such
order or suspension at the earliest possible moment and to notify Legal Counsel
and each Investor who holds Registrable Securities being sold of the issuance of
such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
h. At the request of any Investor, the Company shall furnish
to such Investor, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as an Investor may reasonably
request (i) a letter, dated such date, from the Company's independent certified
public accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the Investors, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the Investors.
i. Following reasonable advance notice, the Company shall make
available, during normal business hours, for inspection by (i) any Investor,
(ii) Legal Counsel and (iii) one firm of accountants or other agents retained by
the Investors (collectively, the "Inspectors"), all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall agree to hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential.
j. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement. The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
k. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on each securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market, or (iii) if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
secure the inclusion for quotation on The Nasdaq SmallCap Market for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(k).
l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Investors may reasonably request and
registered in such names as the Investors may request.
m. The Company shall provide a transfer agent and registrar of
all such Registrable Securities not later than the effective date of the
Registration Statement.
n. Subject to Section 3(s), if requested by an Investor, the
Company shall (i) as soon as practicable incorporate in a prospectus supplement
or post-effective amendment such information as an Investor requests to be
included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
number of Registrable Securities being offered or sold, the purchase price being
paid therefor and any other terms of the offering of the Registrable Securities
to be sold in such offering; (ii) as soon as practicable make all required
filings of such prospectus supplement or post-effective amendment after being
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) as soon as practicable, supplement or make
amendments to any Registration Statement if reasonably requested by an Investor
of such Registrable Securities.
o. The Company shall use its best efforts to cause the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
p. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
q. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
r. Within two (2) Business Days after a Registration Statement
which covers Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.
s. Notwithstanding anything to the contrary herein, at any
time after the Registration Statement has been declared effective by the SEC,
the Company may delay the disclosure of material non-public information
concerning the Company the disclosure of which at the time is not, in the good
faith opinion of the Board of Directors of the Company and its counsel, in the
best interest of the Company and, in the opinion of counsel to the Company,
otherwise required (a "Grace Period"); provided, that the Company shall promptly
(i) notify the Investors in writing of the existence of material non-public
information giving rise to a Grace Period (provided that in each notice the
Company will not disclose the content of such material non-public information to
the Investors) and the date on which the Grace Period will begin, and (ii)
notify the Investors in writing of the date on which the Grace Period ends; and,
provided further, that no Grace Period shall exceed 15 consecutive days and
during any 365 day period such Grace Periods shall not exceed an aggregate of 30
days and the first day of any Grace Period must be at least two trading days
after the last day of any prior Grace Period (an "Allowable Grace Period"). For
purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the holders receive the notice referred to
in clause (i) and shall end on and include the later of the date the holders
receive the notice referred to in clause (ii) and the date referred to in such
notice. The second sentence of Section 3(a), and the provisions of Sections
3(b), 3(e), 3(g) and 3(n) hereof shall not be applicable during the period of
any Allowable Grace Period. Upon expiration of the Grace Period, the Company
shall again be bound by the second sentence of Section 3(a), and the provisions
of Sections 3(b), 3(e), 3(g) and 3(n) hereof with respect to the information
giving rise thereto unless such material non-public information is no longer
applicable.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) Business Days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's Registrable
Securities included in such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f) and for which the Investor has not
yet settled; provided that such Investor has delivered a prospectus in
connection with such sale prior to receiving such notice from the Company.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
reasonable fees and disbursements of counsel for the Company shall be paid by
the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "Claims") incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto ("Indemnified Damages"),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("Blue Sky Filing"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any material violation
of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations"). Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(d); (ii) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(d), and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
violation and such Indemnified Person, notwithstanding such advice, used it;
(iii) shall not be available to the extent such Claim is based on a failure of
the Investor to deliver or to cause to be delivered the prospectus made
available by the Company, including a corrected prospectus, if such prospectus
or such corrected prospectus, as the case may be, was timely made available by
the Company pursuant to Section 3(d); and (iv) shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act (each an
"Indemnified Party"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor will
reimburse any reasonable legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least two-thirds (2/3) in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprized at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its prior written
consent, provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.
d. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
e. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no person involved in the sale of Registrable Securities which person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) in connection with such sale shall be entitled to contribution
from any person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act so long as the Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company's obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement, if true,
by the Company that it has complied with the reporting requirements of Rule 144
and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested to permit the
investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such transfer or
assignment; (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the transferee or assignee is restricted under the 1933 Act and applicable
state securities laws; (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance with
the applicable requirements of the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold at least two-thirds (2/3) of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Registrable Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Shop At Home, Inc.
5388 Hickory Hollow Parkway
Antioch, Tennessee 37013
Telephone: (615) 263-8000
Facsimile: (615) 263-8911
Attention: George J. Phillips,
Executive Vice President and General Counsel
With a copy to:
Wyatt, Tarrant & Combs
1500 Nashville City Center
511 Union Street
Nashville, Tennessee 37219-1750
Telephone: (615) 244-0020
Facsimile: (615) 256-1726
Attention: Charles W. Bone, Esq.
If to Legal Counsel:
Katten Muchin Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Telephone: 312-902-5200
Facsimile: 312-902-1061
Attention: Robert J. Brantman, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or to such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting the City of New York, borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
e. This Agreement, the Securities Purchase Agreement, the
Warrants and the Articles of Amendment constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement, the Securities Purchase
Agreement, the Warrants and the Articles of Amendment supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations required to be made
by the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Investors holding at least two-thirds (2/3) of
the Registrable Securities, determined as if all of the Preferred Shares and the
Warrants then outstanding have been converted into or exercised for Registrable
Securities without regard to any limitations on conversion of the Preferred
Shares or the exercise of the Warrants.
k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
l. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
SHOP AT HOME, INC. HFTP INVESTMENT L.L.C.
By: /s/ George J. Phillips By: Promethean Asset Management L.L.C
Name: George J. Phillips Its: Investment Manager
Its: EVP, General Counsel & Secretary
By: /s/ Stefan Rosen
Name: Stefan Rosen
Title: Managing Member
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By:/s/ Michael L. Gordon
Name: Michael L. Gordon
Title: Chief Operating Officer
<PAGE>
SCHEDULE OF BUYERS
<PAGE>
<TABLE>
<CAPTION>
Investor's Name Investor Address Investor's Legal Representatives'
and Facsimile Number Address and Facsimile Number
---------------------- --------------------------------- ---------------------------------
<S> <C> <C>
HFTP Investment L.L.C. c/o Promethean Asset Management L.L.C. c/o Promethean Investment Group, L.L.C.
750 Lexington Avenue, 22nd Floor 750 Lexington Ave., 22nd Floor
New York, NY 10022 New York, NY 10022
Attention: David M. Kittay Attn: David M. Kittay
John Floegel John Floegel
Telephone: (212) 702-5200 Telephone: 212-702-5200
Facsimile: (212) 758-9334 Facsimile: 212-758-9334
Residence: New York
Katten Muchin Zavis
525 W. Monroe Street
Chicago, Illinois 60661-3693
Attention: Robert J. Brantman, Esq.
Telephone: (312) 902-5200
Facsimile: (312) 902-1061
Leonardo, L.P. c/o Angelo, Gordon & Co., L.P. c/o Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Ari Storch Attn: Ari Storch
Adam Chill Adam Chill
Telephone: (212) 692-2035 Telephone: (212) 692-2035
Facsimile: (212) 867-6449 Facsimile: (212) 867-6449
Residence: Cayman Islands
</TABLE>
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn:
Re: Shop At Home, Inc.
Ladies and Gentlemen:
We are counsel to Shop At Home, Inc., a Tennessee corporation (the
"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "Purchase Agreement") entered into by and
among the Company and the buyers named therein (collectively, the "Holders")
pursuant to which the Company issued to the Holders shares of its Series B
Convertible Preferred Stock, par value $10.00 per share, (the "Preferred
Shares") convertible into shares of the Company's common stock, par value
$0.0025 per share (the "Common Stock"), and related warrants to purchase shares
of the Common Stock (the "Warrants"). Pursuant to the Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "Registration Rights Agreement") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Preferred Shares and exercise of the Warrants, under the
Securities Act of 1933, as amended (the "1933 Act"). In connection with the
Company's obligations under the Registration Rights Agreement, on ___________,
2000, the Company filed a Registration Statement on Form S-3 (File No.
333-_____________) (the "Registration Statement") with the Securities and
Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or to our knowledge threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
cc: [LIST NAMES OF HOLDERS]
<PAGE>
Exhibit 10.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of June 30,
2000, by and among Shop At Home, Inc., a Tennessee corporation, with
headquarters located at 5388 Hickory Hollow Parkway, Antioch, Tennessee 37013
(the "Company"), and the investors listed on the Schedule of Buyers attached
hereto (individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Company has authorized the following new series of its preferred
stock, par value $10.00 per share: the Company's Series B Convertible Preferred
Stock (the "Preferred Stock"), which shall be convertible into shares of the
Company's common stock, par value $0.0025 per share (the "Common Stock") (as
converted, the "Conversion Shares"), in accordance with the terms of the
Articles of Amendment for Series B Convertible Preferred Stock to the Company's
Charter, substantially in the form attached hereto as Exhibit A (the "Articles
of Amendment");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, an aggregate of up to 2,000 shares of the Preferred Stock (the
"Preferred Shares") in the respective amounts set forth opposite each Buyer's
name on the Schedule of Buyers, and warrants, substantially in the form attached
hereto as Exhibit B (the "Warrants"), to acquire 1,000 shares of Common Stock
for each Preferred Share purchased (as exercised, collectively, the "Warrant
Shares"); and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit C (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. Purchase of Preferred Shares and Warrants. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to each Buyer and each Buyer severally agrees
to purchase from the Company the respective number of Preferred Shares set forth
opposite such Buyer's name on the Schedule of Buyers, along with the related
Warrants (the "Closing"). The purchase price (the "Purchase Price") of each
Preferred Share and the related Warrants at the Closing shall be $10,000.
"Business Days" means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.
b. The Closing Date. The date and time of the Closing (the
"Closing Date") shall be 10:00 a.m., Central Time, within two (2) Business Days
following the date hereof, subject to the satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 6 and 7 (or such later date as
is mutually agreed to by the Company and the Buyers). The Closing shall occur on
the Closing Date at the offices of Katten Muchin Zavis, 525 West Monroe Street,
Suite 1600, Chicago, Illinois 60661-3693, or such other location on which the
Company and the Buyers mutually agree.
c. Form of Payment. On the Closing Date, (A) each Buyer shall
pay the Purchase Price to the Company for the Preferred Shares and the related
Warrants to be issued and sold to such Buyer by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, less
any amount withheld for expenses pursuant to Section 4(h), and (B) the Company
shall deliver to each Buyer, stock certificates (in the denominations as such
Buyer shall request) (the "Preferred Stock Certificates") representing such
number of the Preferred Shares which such Buyer is then purchasing hereunder
along with warrants representing the related Warrants, duly executed on behalf
of the Company and registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the
Preferred Shares and the Warrants, (ii) upon conversion of the Preferred Shares,
will acquire the Conversion Shares then issuable and (iii) upon exercise of the
Warrants, will acquire the Warrant Shares issuable upon exercise thereof (the
Preferred Shares, the Conversion Shares, the Warrants, the Warrant Shares and
the Dividend Shares (as defined in the Articles of Amendment) collectively are
referred to herein as the "Securities"), for its own account for investment only
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof, except pursuant to sales registered or exempted under
the 1933 Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire the Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 9(m) below. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurances that such Securities can
be sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule thereto) ("Rule 144"); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register the Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder. Notwithstanding the foregoing, the
Securities may be pledged in connection with a bona fide margin account or other
loan secured by the Securities.
g. Legends. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and the Warrants and, until
such time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II)
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold.
h. Authorization; Enforcement; Validity. This Agreement and
the Registration Rights Agreement have been duly and validly authorized,
executed and delivered on behalf of such Buyer and are valid and binding
agreements of such Buyer enforceable against such Buyer in accordance with their
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country
specified in its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) are duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are organized, and have the requisite
power and authority to own their properties and to carry on their business as
now being conducted. Each of the Company and its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any
material adverse effect on the business, properties, assets, operations, results
of operations, financial condition or prospects of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below) or the Articles
of Amendment. The Company has no Subsidiaries except as set forth on Schedule
3(a).
b. Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5), the Warrants
and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction Documents"), and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the execution and filing of the Articles of
Amendment by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Preferred Shares and the Warrants and the reservation for issuance and the
issuance of the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise thereof, have been duly authorized by the Company's Board
of Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders (except to the extent that
stockholder approval may be required pursuant to the rules of the Nasdaq
National Market for the issuance of a number of Conversion Shares greater than
19.99% of the number of shares of Common Stock outstanding immediately prior to
the Closing Date). The Transaction Documents have been duly executed and
delivered by the Company. The Transaction Documents constitute the valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies. The Articles of Amendment have
been filed prior to the Closing Date with the Secretary of State of the State of
Tennessee and will be in full force and effect, enforceable against the Company
in accordance with its terms and shall not have been amended unless in
compliance with its terms.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 100,000,000 shares of Common Stock,
of which as of the date hereof 31,264,772 shares are issued and outstanding,
4,931,000 shares are reserved for issuance pursuant to the Company's stock
option and purchase plans and 2,170,066 shares are issuable and reserved for
issuance pursuant to securities (other than the Preferred Stock and the
Warrants) exercisable or exchangeable for, or convertible into, shares of Common
Stock , (ii) 30,000,000 shares of non-voting common stock, par value $0.0025 per
share, of which as of the date hereof none are issued and outstanding and (iii)
1,000,000 shares of preferred stock, par value $10.00 per share of which as of
the date hereof, 140,000 shares are designated as Series A Preferred Stock of
which 92,732 shares are issued and outstanding. All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), (A) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (B)
there are no outstanding debt securities issued by the Company; (C) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries; (D) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (E) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (F) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (G) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to each Buyer true and
correct copies of the Company's Charter, as amended and as in effect on the date
hereof (the "Charter"), and the Company's By-laws, as amended and as in effect
on the date hereof (the "By-laws"), and the terms of all securities convertible
into or exercisable or exchangeable for Common Stock and the material rights of
the holders thereof in respect thereto.
d. Issuance of Securities. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issuance thereof and (iii) entitled to the
rights and preferences set forth in the Articles of Amendment. At least
12,000,000 shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f) below) have been duly authorized
and reserved for issuance upon conversion of the Preferred Shares and upon
exercise of the Warrants. Upon conversion or exercise in accordance with the
Articles of Amendment or the Warrants, as the case may be, the Conversion Shares
and the Warrant Shares will be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.
The issuance by the Company of the Securities is exempt from registration under
the 1933 Act.
e. No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company, the performance by the Company of its
obligations under the Articles of Amendment and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and issuance of the Conversion Shares
and the Warrant Shares) will not (i) result in a violation of the Charter or the
By-laws; (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party; or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market (as
defined below)) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is bound or
affected. Neither the Company nor its Subsidiaries is in violation of any term
of its Charter or its By-laws or their organizational charter or by-laws,
respectively. Except as disclosed in Schedule 3(e), neither the Company or any
of its Subsidiaries is in violation of any term of or in default under any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except where such violations and defaults would not result,
either individually or in the aggregate, in a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect. Except as
specifically contemplated by this Agreement and as required under the 1933 Act,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by the Transaction
Documents or to perform its obligations under the Articles of Amendment in
accordance with the terms hereof or thereof. Except as disclosed in Schedule
3(e), all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company is not in violation of the listing
requirements of the Principal Market, including, without limitation, the
requirements set forth in Rule 4310(c)(25)(G)(i) of The Nasdaq Stock Market's
Marketplace Rules and has no actual knowledge of any facts which would
reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since June 30, 1998,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). A complete list of the Company's SEC Documents is set forth on
Schedule 3(f). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents.
None of the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d), contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Neither the Company nor any of its
Subsidiaries nor any of their officers, directors, employees or agents have
provided the Buyers with any material, nonpublic information. The Company meets
the requirements for use of Form S-3 for registration of the resale of
Registrable Securities (as defined in the Registration Rights Agreement).
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g), since June 30, 1999, there has been no material adverse change and no
material adverse development in the business, properties, assets, operations,
results of operations, financial conditions, or prospects of the Company or its
Subsidiaries. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
Except as disclosed in Schedule 3(g), since June 30, 1999, the Company has not
declared or paid any dividends, sold any assets, individually or in the
aggregate, in excess of $21,000 outside of the ordinary course of business or
had capital expenditures, individually or in the aggregate, in excess of
$4,000,000.
h. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, except as expressly set forth in Schedule 3(h). Except
as set forth in Schedule 3(h), to the knowledge of the Company none of the
directors or officers of the Company have been involved in securities related
litigation during the past five years.
i. Acknowledgment Regarding Buyer's Purchase of Preferred
Shares. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the Articles of Amendment and the transactions
contemplated hereby and thereby. The Company further acknowledges that each
Buyer is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the Articles
of Amendment and the transactions contemplated hereby and thereby and any advice
given by any of the Buyers or any of their respective representatives or agents
in connection with the Transaction Documents and the Articles of Amendment and
the transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each Buyer
that the Company's decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. Except for the issuance of the Preferred Stock and Warrants
contemplated by this Agreement, no event, liability, development or circumstance
has occurred or exists, or is contemplated to occur, with respect to the Company
or its Subsidiaries or their respective business, properties, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement on Form S-3
(including information permitted to be incorporated by reference therein) filed
with the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly disclosed.
k. No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
issuance by the Company of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration of the
issuance by the Company of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.
m. Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares and the Warrant Shares issuable upon exercise of the Warrants will
increase in certain circumstances. Subject to Sections 5 and 15 of the Articles
of Amendment, the first paragraph of the Warrants and Section 13 of the
Warrants, the Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Preferred Shares in accordance with
this Agreement and the Articles of Amendment and its obligation to issue the
Warrant Shares upon exercise of the Warrants in accordance with this Agreement
and the Warrants, is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
n. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union which relates to
such employee's relationship with the Company, neither the Company nor any of
its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that their relations with their employees
are good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has
notified the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company. No executive officer, to
the best knowledge of the Company and its Subsidiaries, is, or is now expected
to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.
o. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights necessary
to conduct their respective businesses as now conducted, except where the
failure to own or possess such rights would not result, either individual or in
the aggregate, in a Material Adverse Effect. Except as set forth on Schedule
3(o), none of the Company's trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses (other than licenses for commercially available software), approvals,
governmental authorizations, trade secrets or other intellectual property rights
have expired or terminated, or are expected to expire or terminate within two
years from the date of this Agreement, except where such expiration or
termination would not result, either individually or in the aggregate, in a
Material Adverse Effect. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, trade secrets or other
intellectual property rights of others, or of any development of similar or
identical trade secrets or technical information by others and, except as set
forth on Schedule 3(o), there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries regarding its trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, trade secrets, or infringement of other
intellectual property rights; and the Company and its Subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing,
except where any of the foregoing would not result, either individually or in
the aggregate, in a Material Adverse Effect. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties.
p. Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would not result, either individually
or in the aggregate, in a Material Adverse Effect.
q. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(q) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and facilities by the
Company and its Subsidiaries.
r. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect, taken as a
whole.
s. Regulatory Permits. Except the absence of which would not
result, either individually or in the aggregate, in a Material Adverse Effect,
the Company and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
t. Internal Accounting Controls. 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 authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
u. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
v. Tax Status. The Company and each of its Subsidiaries (i)
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes), (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and for which the Company has made appropriate reserves for on its
books, and (iii) has set aside on its books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations (referred to in clause (i) above) apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
w. Transactions With Affiliates. Except as set forth on
Schedule 3(w) and in the SEC Documents filed at least ten days prior to the date
hereof, and other than the grant of stock options disclosed on Schedule 3(c),
none of the officers, directors or employees of the Company is presently a party
to any transaction with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
x. Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Charter or the laws of the state of its
incorporation which is or could become applicable to the Buyers as a result of
the transactions contemplated by this Agreement, including, without limitation,
the Company's issuance of the Securities and the Buyers' ownership of the
Securities.
y. Rights Agreement. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
z. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for, sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.
c. Reporting Status. Until the later of (i) the date which is
one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto) and (ii) the date which is five (5) years from
the Closing Date (the "Reporting Period"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Reporting Period: (i) within two (2) days after the filing
thereof with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly
Reports on Form 10-Q, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933
Act, provided that if any such report is not filed with the SEC through EDGAR
then the Company shall deliver a copy of such report to each Investor by
facsimile on the same day it is filed with the SEC; (ii) on the same day as the
release thereof, facsimile copies or email copies of all press releases issued
by the Company or any of its Subsidiaries; and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 200% of the number of shares of Common Stock needed to
provide for the issuance of the shares of Common Stock upon conversion of all
outstanding Preferred Shares (without regard to any limitations on conversions)
and 100% of the number of shares of Common Stock needed to provide for the
issuance of the shares of Common Stock upon exercise of all outstanding Warrants
(without regard to any limitations on exercises).
g. Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents and the
Articles of Amendment. The Company shall maintain the Common Stock's
authorization for quotation on the Nasdaq National Market ("Nasdaq") or listing
on The New York Stock Exchange, Inc.("NYSE") (as applicable, the "Principal
Market"). Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Stock from the Principal Market other than pursuant to the Articles
of Amendment. The Company shall promptly, and in no event later than the
following Business Day, offer to provide to each Buyer copies of any notices it
receives from the Principal Market regarding the continued eligibility of the
Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(g).
h. Expenses. Subject to Section 9(l) below, at the Closing,
the Company shall pay an expense allowance of $50,000 (of which $20,000 has
previously been paid) to HFTP Investment L.L.C. (a Buyer), which amount shall be
withheld by such Buyer from its Purchase Price to be paid at the Closing.
i. Filing of Form 8-K. On or before the second (2nd) Business
Day following the Closing Date the Company shall file a Current Report on Form
8-K with the SEC describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K this Agreement, the Articles of Amendment, the Registration Rights Agreement
and the Form of Warrant in the form required by the 1934 Act. At or prior to the
time the Company files the Form 8-K referred to in the previous sentence, the
Company shall file a Current Report on Form 8-K with the SEC which includes as
an exhibit the Revolving Credit Agreement (as defined in Section 4(l)).
j. Proxy Statement. The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which
meeting shall occur on or before November 30, 2000 (the "Stockholder Meeting
Deadline"), a proxy statement, which has been previously reviewed by the Buyers
and a counsel of their choice, soliciting each such stockholder's affirmative
vote at such annual stockholder meeting for approval of the Company's issuance
of all of the Securities as described in this Agreement in accordance with
applicable law and the rules and regulations of the Principal Market (such
affirmative approval being referred to herein as the "Stockholder Approval"),
and the Company shall use its best efforts to solicit its stockholders' approval
of such issuance of the Securities and to cause the Board of Directors of the
Company to recommend to the stockholders that they approve such proposal. If the
Company fails to hold a meeting of its stockholders by the Stockholder Meeting
Deadline, then, as partial relief (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to each
holder of Preferred Shares an amount in cash per Preferred Share equal to the
product of (i) the Purchase Price multiplied by (ii) 0.015; multiplied by (iii)
the quotient of (x) the number of days after the Stockholder Meeting Deadline
and prior to the date that a meeting of the Company's stockholders seeking
Stockholder Approval is held, divided by (y) 30. The Company shall make the
payments referred to in the immediately preceding sentence within five days of
the earlier of (I) the holding of the meeting of the Company's stockholders, the
failure of which resulted in the requirement to make such payments, and (II) the
last day of each 30-day period beginning on the Stockholder Meeting Deadline. In
the event the Company fails to make such payments in a timely manner, such
payments shall bear interest at the rate of 1.5% per month (pro rated for
partial months) (or, if lower, the maximum amount allowed by applicable law)
until paid in full.
k. Corporate Existence. So long as a Buyer beneficially owns
any Preferred Stock or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's assets,
except in the event of a merger or consolidation or sale of all or substantially
all of the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is quoted on or listed for
trading on Nasdaq or NYSE.
l. Restriction on Short Sales. Each Buyer agrees that, subject
to the exceptions described below, during the period beginning on the Closing
Date and ending on the earlier of (i) the first date on which such Buyer no
longer holds any Preferred Shares and (ii) the date which is one (1) year after
the Closing Date, neither such Buyer nor any of its affiliates shall engage in
any transaction constituting a "short sale" (as defined in Rule 3b-3 of the 1934
Act) of the Common Stock (collectively, "Short Sales"); provided, however, that
each Buyer and its affiliates are entitled to engage in transactions which
constitute Short Sales to the extent that following such transaction the
aggregate short position of such Buyer and its affiliates does not exceed the
sum of (A) the number of shares of Common Stock equal to the aggregate number of
shares of Common Stock which such Buyer and its affiliates have the right to
acquire upon exercise of the Warrants held by such Buyer and its affiliates
(without regard to any limitations on exercises of the Warrants), plus (B) with
respect to each Buyer (and its affiliates), that number of shares of Common
Stock equal to the quotient of (i) the aggregate Conversion Amount with respect
to the number of Preferred Shares equal to the aggregate of all such Buyer's
(and its affiliates) Pro Rata Conversion Amounts set forth in each Company's
Conversion Election Notice (as defined in Section 7 of the Articles of
Amendment) (excluding any such Preferred Shares which are not outstanding on the
date of determination of compliance with this Section 4(l)) by (ii) the
Conversion Price (as defined in the Articles of Amendment) on the date of
determination of compliance with this Section 4(l). Notwithstanding the
foregoing, the restriction on Short Sales set forth in the first sentence of
this Section 4(l) shall not apply (a) on and after the first date on which there
shall have occurred a Triggering Event (as defined in Section 3(a) of the
Articles of Amendment) or an event that with the passage of time and without
being cured would constitute a Triggering Event; (b) on or after the first date
on which a Change of Control (as defined in Section 4(b) of the Articles of
Amendment) shall have been consummated or there shall have been the public
announcement of a pending, proposed or intended Change of Control; (c) on and
after the first date after the Closing Date on which the Closing Sale Price (as
defined in the Articles of Amendment) of the Common Stock is less than $3.00 per
share (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions) for any ten (10) trading days
during the fifteen (15) consecutive trading days immediately preceding such date
of determination; (d) on and after the first date after the Closing Date on
which the Closing Sale Price of the Common Stock is less than $2.50 per share
(subject to adjustment for stock splits, stock dividends, stock combinations,
and other similar transactions) for any three (3) consecutive trading days
preceding such date of determination; (e) with respect to a Short Sale so long
as such Buyer delivers a Conversion Notice (as defined in the Articles of
Amendment) within two (2) Business Days of such Short Sale entitling such Buyer
to receive a number of shares of Common Stock at least equal to the number of
shares of Common Stock sold in such Short Sale; (f) with respect to any
transaction involving options on the Common Stock; (g) on and after the first
date on which the Company fails to comply in any respect with its obligations
under Section 4(n); (h) on and after October 31, 2000, if on October 31, 2000
the Company is not a party to either a credit facility with a bank for pursuant
to which the Company has the ability to borrow, as of October 31, 2000, at least
$20,000,000 (less any amounts already borrowed and outstanding under such
facility as of October 31, 2000), a maturity date not earlier than October 31,
2001 and with terms which otherwise are in compliance with the second sentence
of Section 4(n) (a "New Facility") or the revolving credit agreement, dated as
of December 15, 1999 by and between the Company, the several lenders from time
to time parties thereto and Union Bank of California, N.A. pursuant to which the
Company has the ability to borrow, as of October 31, 2000, at least $20,000,000
(less any amounts already borrowed and outstanding under such agreement as of
October 31, 2000) (as such agreement may be amended from time to time in
compliance with Section 4(n), the "Revolving Credit Agreement" and such
agreement, collectively with a New Facility, if any, is referred to herein as
the "Loan Facilities"); (i) on and after October 31, 2000, unless on or prior to
October 31, 2000 the Company (A) has delivered written notice to each Buyer
confirming that as of October 31, 2000 the Company is party to one or more of
the Loan Facilities pursuant to which it has the ability to borrow, as of
October 31, 2000, at least $20,000,000 (less any amounts already borrowed and
outstanding, as of October 31, 2000, under such agreement), and (B) has either
(I) delivered written confirmation to each Buyer confirming that the Company is
party to the Revolving Credit Agreement, the Revolving Credit Agreement has not
been amended since the Closing Date and that the Company is in compliance with
the Revolving Credit Agreement as of October 31, 2000, (II) publicly disclosed
the terms of an amendment to the Revolving Credit Agreement and that the Company
is in compliance with the Revolving Credit Agreement as of October 31, 2000, or
(III) publicly disclosed the terms of a New Facility and that the Company is in
compliance with the terms of such New Facility as of October 31, 2000; (j) on
and after the earlier of (A) September 28, 2000 and (B) the date on which the
Company files its Annual Report on Form 10-K for the year ended June 30, 2000
(such earlier date is referred to herein as the "Form 10-K Deadline"), if the
Company fails to file its Annual Report on Form 10-K for the year ended June 30,
2000 on or prior to the Form 10-K Deadline which publicly discloses the
Company's compliance with all of its obligations and covenants under the Loan
Facilities (or to the extent that the Company was not in compliance with the
Revolving Credit Agreement on June 30, 2000, the Company has received an
irrevocable and permanent, written waiver from Union Bank of California, N.A.
waiving any claim or right it has with respect to any specific occurrence of
noncompliance as of June 30, 2000), the indenture, dated as of March 27, 1998,
between the Company and PNC Bank, National Association (as trustee) (the
"Indenture") and each other debt or payment agreement or obligation
(collectively, the "Credit Agreements"); and (k) on and after the first date on
which the Company shall have failed to be in compliance with the Articles of
Amendment, this Agreement, the Warrants or the Registration Rights Agreement and
shall not have breached any provision of the Articles of Amendment, this
Agreement, the Warrants or the Registration Rights Agreement.
m. Right of Participation. Subject to the exceptions described
below, the Company and its Subsidiaries agrees that during the period beginning
on the date hereof and ending on and including the date which is 365 days after
the Closing Date, neither the Company nor its Subsidiaries will negotiate or
contract with any party for any equity financing (including any debt financing
with an equity component) or issue any equity securities of the Company or any
Subsidiary or securities convertible into or exchangeable or exercisable for
equity securities of the Company or any Subsidiary (including debt securities
with an equity component) in any form (a "Future Offering") unless it shall have
first delivered to each Buyer or a designee appointed by such Buyer written
notice (the "Future Offering Notice") describing the proposed Future Offering,
including the buyer and terms and conditions thereof, and providing each Buyer
an option to purchase up to its Aggregate Percentage (as defined below) of the
securities to be issued in such Future Offering (the limitations referred to in
this and the preceding sentence are collectively referred to as the "Capital
Raising Limitations"). For purposes of this Section 4(m), "Aggregate Percentage"
shall mean 50% of the percentage obtained by dividing (i) the aggregate number
of Preferred Shares initially issued to such Buyer by (ii) the aggregate number
of Preferred Shares initially issued to all the Buyers. A Buyer can exercise its
option to participate in a Future Offering by delivering written notice to the
Company within ten (10) Business Days after receipt of a Future Offering Notice,
which notice shall state the quantity of securities being offered in the Future
Offering that such Buyer will purchase, up to its Aggregate Percentage, and that
number of securities it is willing to purchase in excess of its Aggregate
Percentage. In the event that one or more Buyers fail to elect to purchase up to
each such Buyer's Aggregate Percentage, then each Buyer which has indicated that
it is willing to purchase a number of securities in such Future Offering in
excess of its Aggregate Percentage shall be entitled to purchase its pro rata
portion (determined in the same manner as described in the preceding second
sentence) of 50% of the securities in the Future Offering which one or more of
the Buyers have not elected to purchase. In the event the Buyers fail to elect
to fully participate in the Future Offering within the periods described in this
Section 4(m), the Company shall have 45 days thereafter to sell the securities
in the Future Offering that the Buyers did not elect to purchase, upon terms and
conditions, no more favorable to the purchasers thereof than specified in the
Future Offering Notice. In the event the Company has not sold such securities of
the Future Offering within such 45 day period, the Company shall not thereafter
issue or sell such securities without first offering such securities to the
Buyers in the manner provided in this Section 4(m). The Capital Raising
Limitations shall not apply to (i) a loan from a commercial bank which does not
have any equity feature, (ii) any transaction involving the Company's issuances
of securities (A) as consideration in a merger or consolidation, (B) in
connection with any strategic partnership or joint venture (the primary purpose
of which is not to raise equity capital), or (C) as consideration for the
acquisition of a business, product, license or other assets by the Company,
(iii) the issuance of Common Stock in a firm commitment, underwritten public
offering, (iv) the issuance of securities upon exercise or conversion of the
Company's options, warrants or other convertible securities outstanding as of
the date hereof and (v) the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option plan,
restricted stock plan or stock purchase plan for the benefit of the Company's
employees or directors. The Buyers shall not be required to participate or
exercise their right of participation with respect to a particular Future
Offering in order to exercise their right of participation with respect to later
Future Offerings.
n. Debt and Payment Agreements. So long as any Preferred
Shares or Warrants are outstanding, the Company shall comply in all respects
with the Credit Agreements (as defined in Section 4(l)) and shall pay
immediately all amounts due and owing under the Credit Agreements. The Company
shall not amend, modify, increase, supplement, renew, extend, restate or
refinance the Credit Agreements, or issue any new debt or enter into any new
credit arrangements, except for amendments, modifications, increases,
supplements, renewals, extensions, restatements, refinancings or new issuances
which do not (i) increase the aggregate amount of debt outstanding or available
under the Credit Agreements as of the date of this Agreement, (ii) provide for
an interest rate which can reasonably be expected to exceed the interest rate
which otherwise would have been payable under the applicable Credit Agreement as
in effect on the date of this Agreement by more than 1.5%, (iii) shorten the
term under any Credit Agreement or provide for a shorter term than the Revolving
Credit Agreement as in effect on the date of this Agreement, unless no payments
of principal would be required under such shorter term prior to October 31,
2001, or (iv) have affirmative or negative financial covenants that are more
restrictive than those in the Credit Agreements as of the date of this
Agreement, except for the covenants set forth in Sections 6.1(c)(i), 6.2, 6.3,
6.4, 6.5, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.13 and 6.14 of the Revolving Credit
Agreement.
o. Restriction on Equity Issuances. On and after the
occurrence of a Triggering Event set forth in clause (i), (ii), (iii), or (iv)
of Section 3(a) of the Articles of Amendment which in any such case has not been
cured, the Company shall not negotiate or consummate any equity financing or
other issuance of equity securities.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent in the form attached hereto as Exhibit E (the "Irrevocable
Transfer Agent Instructions"), and any subsequent transfer agent, to issue
certificates, registered in the name of each Buyer or its respective nominee(s),
for the Conversion Shares and the Warrant Shares in such amounts as specified
from time to time by each Buyer to the Company upon conversion of the Preferred
Shares or exercise of the Warrants. Prior to registration of the Conversion
Shares and the Warrant Shares under the 1933 Act, all such certificates shall
bear the restrictive legend specified in Section 2(g) of this Agreement. The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5 and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and the
Warrant Shares, prior to registration of the Conversion Shares and the Warrant
Shares under the 1933 Act) will be given by the Company to its transfer agent
and that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. If a Buyer provides the Company with an opinion
of counsel, in a generally acceptable form, to the effect that a public sale,
assignment or transfer of Securities may be made without registration under the
1933 Act or the Buyer provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of the
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by such Buyer and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company to issue and sell the Preferred
Shares and the Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(ii) The Articles of Amendment shall have been filed with the
Secretary of State of the State of Tennessee;
(iii)Such Buyer shall have delivered to the Company the
Purchase Price (less in the case of HFT Investment L.L.C., the amounts
withheld pursuant to Section 4(h)) for the Preferred Shares and the Warrants
being purchased by such Buyer at the Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.
(iv) The representations and warranties of such Buyer shall be
true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties
that speak as of a specific date), and such Buyer shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the
Preferred Shares and the Warrants from the Company at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:
(i) The Company shall have executed each of the Transaction
Documents and delivered the same to such Buyer.
(ii) The Articles of Amendment shall have been filed with the
Secretary of State of the State of Tennessee, and a copy thereof
certified by the Secretary of State of the State of Tennessee shall
have been delivered to such Buyer.
(iii)The Common Stock (x) shall be designated for quotation
or listed on the Principal Market and (y) shall not have been suspended by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened either
(A) in writing by the SEC or the Principal Market or (B) by falling below the
minimum listing maintenance requirements of the Principal Market; and the
Conversion Shares and the Warrant Shares issuable upon conversion or exercise
of the Preferred Shares and the related Warrants, as the case may be shall be
listed upon the Principal Market.
(iv) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer or Chief Financial
Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by such
Buyer, including, without limitation, an update as of the Closing Date
regarding the representation contained in Section 3(c) above.
(v) Such Buyer shall have received the opinion of Wyatt,
Tarrant & Combs dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer in substantially the form of
Exhibit D, attached hereto.
(vi) The Company shall have executed and delivered to such
Buyer the Preferred Stock Certificates and the Warrants (in such
denominations as such Buyer shall request) for the Preferred Shares and
the Warrants being purchased by such Buyer at the Closing.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b) above and in a form reasonably
acceptable to such Buyer (the "Resolutions").
(viii)As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Preferred Shares and the exercise of
the Warrants, at least 12,000,000 shares of Common Stock.
(ix) The Irrevocable Transfer Agent Instructions, in the form
of Exhibit E attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each Subsidiary in such entity's state of incorporation or organization issued
by the Secretary of State of such state of incorporation or organization
as of a date within ten days of the Closing Date.
(xi) The Company shall have delivered to such Buyer a
certified copy of the Charter as certified by the Secretary of State of the
State of Tennessee as of a date within ten days of the Closing Date.
(xii) The Company shall have delivered to such Buyer a
secretary's certificate, dated as of the Closing Date, certifying as to (A) the
Resolutions, (B) the Charter and (C) the By-laws, each as in effect at the
Closing.
(xiii)The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws.
(xiv) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five days of the Closing Date.
(xv) The Company shall have delivered to the Buyers such
other documents relating to the transaction contemplated by the Transaction
Documents as the Buyers or their counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents and the Articles of Amendment, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities
and all of their stockholders, partners, members, officers, directors, employees
and direct or indirect investors and any of the foregoing persons' agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee (other than a cause of action, suit or
claim which is (x) brought or made by the Company and (y) is not a stockholder
derivative suit) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents, the Articles
of Amendment or any other certificate, instrument or document contemplated
hereby or thereby, (ii) any transaction financed or to be financed in whole or
in part, directly or indirectly, with the proceeds of the issuance of the
Securities or (iii) solely the status of such Buyer or holder of the Securities
as an investor in the Company. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 8 shall be the same as those set forth in
Sections 6(a) and 6(d) of the Registration Rights Agreement, including, without
limitation, those procedures with respect to the settlement of claims and the
Company's rights to assume the defense of claims.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between each Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Preferred Shares on
the Closing Date (or their respective assignees) or, if prior to the Closing
Date, the Buyers listed on the Schedule of Buyers as being obligated to purchase
at least two-thirds (2/3) of the Preferred Shares, and no provision hereof may
be waived other than by an instrument in writing signed by the party against
whom enforcement is sought. No such amendment shall be effective to the extent
that it applies to less than all of the holders of the Preferred Shares or
Warrants then outstanding. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents or the Articles of Amendment unless the same
consideration also is offered to all of the parties to the Transaction Documents
or holders of Preferred Shares, as the case may be.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one (1) Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Shop At Home, Inc.
5388 Hickory Hollow Parkway
Antioch, Tennessee 37013
Telephone: (615) 263-8000
Facsimile: (615) 263-8911
Attention: George J. Phillips,
Executive Vice President and General Counsel
With a copy to:
Wyatt, Tarrant & Combs
1500 Nashville City Center
511 Union Street
Nashville, Tennessee 37219-1750
Telephone: (615) 244-0020
Facsimile: (615) 256-1726
Attention: Charles W. Bone, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust, Inc.
12039 West Alameda Parkway, Suite Z-2
Lakewood, Colorado 80228
Telephone: (303) 984-4042
Facsimile: (303) 986-2444
Attention: John Hermann
If to a Buyer, to it at the address and facsimile number set forth on
the Schedule of Buyers, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or at such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
<PAGE>
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of at least two-thirds (2/3) of the Preferred
Shares then outstanding, including by merger or consolidation, except pursuant
to a Change of Control (as defined in Section 4(b) of the Articles of Amendment)
with respect to which the Company is in compliance with Section 4 of the
Articles of Amendment, Section 9 of the Warrant and Section 4(k) of this
Agreement. A Buyer may assign some or all of its rights hereunder without the
consent of the Company, provided, however, that any such assignment shall not
release such Buyer from its obligations hereunder unless such obligations are
assumed by such assignee and the Company has consented to such assignment and
assumption, which consent shall not be unreasonably withheld. Notwithstanding
anything to the contrary contained in the Transaction Documents, the Buyers
shall be entitled to pledge the Securities in connection with a bona fide margin
account or other loan secured by the Securities.
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive the
Closing. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before five (5) Business Days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse any
nonbreaching Buyer for the expenses described in Section 4(h) above to the
extent such expenses are actually incurred.
m. Placement Agent and Financial Advisors. The Company
acknowledges that it has not engaged any placement agent in connection with the
sale of the Preferred Shares and the Warrants; however, it has engaged ING
Barings LLC as its financial advisor in connection with the sale of the
Preferred Shares and the Warrants. The Company shall be responsible for the
payment of any placement agent's fees, financial advisor's fees or brokers'
commissions relating to or arising out of the transactions contemplated hereby.
The Company shall pay, and hold each Buyer harmless against, any liability, loss
or expense (including, without limitation, attorney's fees and out-of-pocket
expenses) arising in connection with any such claim.
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
the Articles of Amendment and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to any Buyer hereunder or pursuant to the Registration
Rights Agreement, the Articles of Amendment or the Warrants or the Buyers
enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
* * * * * *
<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
SHOP AT HOME, INC. HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By: /s/ George J. Phillips
Name: George J. Phillips
Title: EVP, General Counsel & Secretary By: /s/ Stefan Rosen
Name: Stefan Rosen
Title: Managing Member
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /s/ Michael L. Gordon
Name: Michael L. Gordon
Title: Chief Operating Officer
<PAGE>
<TABLE>
Doc #:CH02 (08239-00003) 1137905v6;6/30/2000/Time:11:10
SCHEDULE OF BUYERS
<CAPTION>
Number
of
Investor Address Preferred Investor's Representatives' Address
Investor Name and Facsimile Number Shares and Facsimile Number
--------------------------------------------------------------------------- -------------------------------------------
<S> <C> <C> <C>
HFTP Investment L.L.C. c/o Promethean Asset Management, L.L.C. 1,000 c/o Promethean Investment Group, L.L.C.
750 Lexington Avenue, 22nd Floor 750 Lexington Ave., 22nd Floor
New York, NY 10022 New York, NY 10022
Attn: David M. Kittay Attn: David M. Kittay
John Floegel John Floegel
Telephone: (212) 702-5200 Telephone: (212) 702-5200
Facsimile: (212) 758-9334 Facsimile: (212) 758-9334
Residence: New York
Katten Muchin Zavis
525 W. Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Telephone: (312) 902-5200
Facsimile: (312) 902-1061
Leonardo, L.P. c/o Angelo, Gordon & Co., L.P. 1,000 c/o Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attn: Ari Storch Attn: Ari Storch
Adam Chill Adam Chill
Telephone: (212) 692-2035 Telephone: (212) 692-2035
Facsimile: (212) 867-6449 Facsimile: (212) 867-6449
Residence: Cayman Islands
</TABLE>
<PAGE>
SCHEDULES
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(e) - Conflicts
Schedule 3(f) - SEC Documents
Schedule 3(g) - Material Changes
Schedule 3(h) - Litigation
Schedule 3(o) - Intellectual Property
Schedule 3(q) - Liens
Schedule 3(w) - Transactions with Affiliates
Schedule 4(d) - Use of Proceeds
EXHIBITS
Exhibit A - Form of Articles of Amendment
Exhibit B - Form of Warrant
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Company Counsel Opinion
Exhibit E - Form of Irrevocable Transfer Agent Instructions
<PAGE>
Exhibit 10.3
REVOLVING CREDIT AGREEMENT, dated as of December 15, 1999,
among Shop At Home, Inc., a Tennessee corporation (the "Borrower"), the several
banks and other financial institutions or entities from time to time parties to
this Agreement (the "Lenders") and Union Bank of California, N.A., as
administrative agent.
W I T N E S S E T H :
WHEREAS, the Borrower has requested that the Lenders provide a
revolving credit facility in the amount of $20,000,000.
WHEREAS, the Lenders are willing to provide such revolving
credit facility in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
herein set forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed
in this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in
effect on such day and (b) the Federal Funds Effective Rate in effect on such
day plus 2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of
interest per annum publicly announced from time to time by the Reference Lender
as its prime rate in effect at its principal office in Los Angeles (the Prime
Rate not being intended to be the lowest rate of interest charged by the
Reference Lender in connection with extensions of credit to debtors). Any change
in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective as of the opening of business on the effective day of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is
based upon the ABR.
"Acquisition Agreement": the Asset Purchase Agreement dated as
of February 26, 1999, among the Sellers, the Borrower and Paxson Communications
Corporation, as guarantor, as amended, supplemented or otherwise modified from
time to time.
"Administrative Agent": Union Bank of California, N.A.,
together with its affiliates, as the arranger of the Commitments and as the
administrative agent for the Lenders under this Agreement and the other Loan
Documents, together with any of its successors.
<PAGE>
"Affiliate": as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person means
the power, directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors (or
persons performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
"Aggregate Exposure": with respect to any Lender at any time,
an amount equal to (a) until the Closing Date, the aggregate amount of such
Lender's Commitments at such time and (b) thereafter, the amount of such
Lender's Commitment then in effect or, if the Commitments have been terminated,
the amount of such Lender's Extensions of Credit then outstanding.
"Aggregate Exposure Percentage": with respect to any Lender at
any time, the ratio (expressed as a percentage) of such Lender's Aggregate
Exposure at such time to the Aggregate Exposure of all Lenders at such time.
"Agreement": this Credit Agreement, as amended, supplemented
or otherwise modified from time to time.
"Applicable Margin": for each Loan, a rate per annum, until
the first Adjustment Date, equal to 2.125%, in the case of ABR Loans, and
3.375%, in the case of Eurodollar Loans, and, thereafter, the rate per annum set
forth under the relevant column below opposite the applicable Consolidated
Leverage Ratio:
Consolidated Leverage Ratio ABR Loans Eurodollar Loans
> 6.00 to 1.0 2.125% 3.375%
[less than or equal] 6.00 to 1.0 1.750% 3.000%
> 4.00 to 1.0
[less than or equal] 4.00 to 1.0 1.375% 2.625%
Changes in the Applicable Margin resulting from changes in the Consolidated
Leverage Ratio shall become effective on the date (the "Adjustment Date") that
is three Business Days after the date on which financial statements are
delivered to the Lenders pursuant to Section 5.1 and shall remain in effect
until the next change to be effected pursuant to this paragraph. If any
financial statements referred to above are not delivered within the time periods
specified in Section 5.1, then, until the date that is three Business Days after
the date on which such financial statements are delivered, the highest rate set
forth in the relevant column above shall apply. In addition, at all times while
an Event of Default shall have occurred and be continuing, the highest rate set
forth in the relevant column above shall apply. Each determination of the
Consolidated Leverage Ratio pursuant to the grid above shall be made in a manner
consistent with the determination thereof pursuant to Section 6.1.
"Application": an application, in such form as the Issuing
Lender may specify from time to time, requesting the Issuing Lender to open a
Letter of Credit.
<PAGE>
"Approved Fund": with respect to any Lender that is a fund
that invests in commercial loans, any other fund that invests in commercial
loans and is managed or advised by the same investment advisor as such Lender or
by an Affiliate of such investment advisor.
"Asset Sale": any Disposition of property or series of related
Dispositions of property (excluding any such Disposition permitted by clause
(a), (b), (c), (d) or (e) of Section 6.5) that yields gross proceeds to the
Borrower or any of its Subsidiaries (valued at the initial principal amount
thereof in the case of non-cash proceeds consisting of notes or other debt
securities and valued at fair market value in the case of other non-cash
proceeds) in excess of $250,000.
"Assignee": as defined in Section 9.6(c).
"Assignment and Acceptance": an Assignment and Acceptance,
substantially in the form of Exhibit D.
"Assignor": as defined in Section 9.6(c).
"Available Commitment": as to any Lender at any time, an
amount equal to the excess, if any, of (a) such Lender's Commitment then in
effect over (b) such Lender's Extensions of Credit then outstanding.
"Benefitted Lender": as defined in Section 9.7(a).
"Board": the Board of Governors of the Federal Reserve System
of the United States (or any successor).
"Borrower": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified by the Borrower
as a date on which the Borrower requests the relevant Lenders to make Loans
hereunder.
"Bridgeport Station": Television station WSAH(TV) in
Bridgeport, Connecticut.
"Business": as defined in Section 3.17(b).
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City or Los Angeles are authorized or
required by law to close, provided, that with respect to notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, such day is also a day for trading by and between banks in
Dollar deposits in the interbank eurodollar market.
"Canton Station": Television station WOAC(TV) in Canton, Ohio.
<PAGE>
"Capital Expenditures": for any period, with respect to any
Person, the aggregate of all expenditures by such Person and its Subsidiaries
for the acquisition or leasing (pursuant to a capital lease) of fixed or capital
assets or additions to equipment (including replacements, capitalized repairs
and improvements during such period) that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"Capital Stock": any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition; (b) U.S.
dollar-denominated (or fully hedged foreign currency) time deposits,
certificates of deposit, time deposits, eurodollar time deposits or eurodollar
certificates of deposit or acceptances having a maturity of one year or less of
any financial institution that is a member of the Federal Reserve System having
combined capital and surplus of not less than $500,000,000 or any bank (any such
financial institution or bank, an "Approved Lender") whose short-term commercial
paper rating from Standard & Poor's Ratings Services ("S&P") is at least A-1 or
the equivalent thereof or from Moody's Investor's Service, Inc. ("Moody's") is
at least P-1 or the equivalent thereof; (c) commercial paper with a maturity of
one year or less issued by an Approved Lender that is not an Affiliate of the
Borrower and is organized under the laws of any state of the United States or
the District of Columbia and having a rating from Moody's of at least P-2 or
from S&P of at least A-2; (d) repurchase obligations of any Lender or of any
commercial bank satisfying the requirements of clause (b) of this definition,
having a term of not more than 30 days, with respect to securities issued or
fully guaranteed or insured by the United States government; (e) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by Moody's; (f)
securities with maturities of six months or less from the date of acquisition
backed by standby letters of credit issued by any Lender or any commercial bank
satisfying the requirements of clause (b) of this definition; or (g) shares of
money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of this definition.
<PAGE>
"Change of Control": the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 50% of the voting power of
all classes of Capital Stock having ordinary voting power to elect at least a
majority of the Board of Directors of the Borrower (irrespective of whether or
not, at the time, stock of any other class or classes has, or might have, voting
power by reason of the happening of any contingency); (b) the Borrower, either
individually or in conjunction with one or more Subsidiaries, sells, assigns,
conveys, transfers, leases or otherwise disposes of, or the Subsidiaries sell,
assign, convey, transfer, lease or otherwise dispose of, all or substantially
all of the properties of the Borrower and the Subsidiaries, taken as a whole
(either in a transaction or a series of related transactions), including Capital
Stock of the Subsidiaries, to any Person (other than the Borrower or a
Restricted Subsidiary (as defined in the Indenture)); (c) during any consecutive
two-year period, individuals who at the beginning of such period constituted the
Board of Directors of the Borrower (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Borrower was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Borrower then in office; or (d) the Borrower is liquidated or
dissolved or adopts a plan of liquidation or dissolution, other than in a
transaction that complies with the provisions of Article Eight of the Indenture
and Section 6.4 of this Agreement.
"Closing Date": the date on which the conditions precedent set
forth in Section 4.1 shall have been satisfied.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": all property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any Security
Document; such term shall also include, without limitation, at any time after
the Senior Secured Notes have been paid or legally defeased in full, all assets
that, prior to such time, constituted or would have constituted Indenture
Collateral.
"Commitment": as to any Lender, the obligation of such Lender,
if any, to make Loans and participate in Letters of Credit in an aggregate
principal and/or face amount not to exceed the amount set forth under the
heading "Commitment" opposite such Lender's name on Schedule 1.1 or in the
Assignment and Acceptance pursuant to which such Lender became a party hereto,
as the same may be changed from time to time pursuant to the terms hereof. The
original amount of the Total Commitments is $20,000,000.
"Commitment Fee Rate": 1/2 of 1% per annum.
<PAGE>
"Commitment Percentage": as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the Total
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender's
Loans then outstanding constitutes of the aggregate principal amount of the
Loans then outstanding).
"Commitment Period": the period from and including the Closing
Date to the Termination Date.
"Commonly Controlled Entity": an entity, whether or not
incorporated, that is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group that includes the Borrower and
that is treated as a single employer under Section 414 of the Code.
"Communications Act": the Communications Act of 1934, as
amended.
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.
"Consolidated Core EBITDA": for any period, Consolidated
EBITDA for such period minus Consolidated Internet EBITDA for such period.
"Consolidated Current Assets": at any date, all amounts (other
than cash and Cash Equivalents) that would, in conformity with GAAP, be set
forth opposite the caption "total current assets" (or any like caption) on a
consolidated balance sheet of the Borrower and its Subsidiaries at such date.
"Consolidated Current Liabilities": at any date, all amounts
that would, in conformity with GAAP, be set forth opposite the caption "total
current liabilities" (or any like caption) on a consolidated balance sheet of
the Borrower and its Subsidiaries at such date, but excluding (a) the current
portion of any Funded Debt of the Borrower and its Subsidiaries and (b) without
duplication of clause (a) above, all Indebtedness consisting of Loans to the
extent otherwise included therein.
"Consolidated Debt Service Charges": for any period, the sum
of (a) the aggregate amount of regularly scheduled principal payments of
Consolidated Total Debt (including payments of Loans accompanying scheduled
reductions of the Commitments) of the Borrower and its Subsidiaries made during
such period (other than in respect of any revolving credit facility to the
extent there is not an equivalent permanent reduction of commitments thereunder)
and (b) and Consolidated Interest Expense for such period.
<PAGE>
"Consolidated EBITDA": for any period, Consolidated Net Income
for such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period, the sum
of (a) income tax expense, (b) interest expense, amortization or writeoff of
debt discount and debt issuance costs and commissions, discounts and other fees
and charges associated with Indebtedness (including the Loans), (c) depreciation
and amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary, unusual or
non-recurring expenses or losses (including, whether or not otherwise includable
as a separate item in the statement of such Consolidated Net Income for such
period, losses on sales of assets outside of the ordinary course of business)
and (f) any other non-cash charges, and minus, to the extent included in the
statement of such Consolidated Net Income for such period, the sum of (a)
interest income, (b) any extraordinary, unusual or non-recurring income or gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on the sales of
assets outside of the ordinary course of business) and (c) any other non-cash
income, all as determined on a consolidated basis. For the purposes of
calculating Consolidated EBITDA for any period of four consecutive fiscal
quarters (each, a "Reference Period"), if at any time during such Reference
Period the Borrower or any Subsidiary shall have made any Material Disposition,
the Consolidated EBITDA for such Reference Period shall be reduced by an amount
equal to the Consolidated EBITDA (if positive) attributable to the property that
is the subject of such Material Disposition for such Reference Period or
increased by an amount equal to the Consolidated EBITDA (if negative)
attributable thereto for such Reference Period. As used in this definition,
"Material Disposition" means any Disposition of property or series of related
Dispositions of property that yields gross proceeds to the Borrower or any of
its Subsidiaries in excess of $250,000.
"Consolidated Fixed Charge Coverage Ratio": for any period,
the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Fixed
Charges for such period.
"Consolidated Fixed Charges": for any period, the sum (without
duplication) of (a) Consolidated Debt Service Charges for such period, (b) cash
income tax payments for such period, (c) the aggregate amount actually paid by
the Borrower and its Subsidiaries in cash during such period on account of
Capital Expenditures (excluding the principal amount of Indebtedness incurred in
connection with such expenditures) and (d) consolidated dividend payments for
such period.
"Consolidated Interest Coverage Ratio": for any period, the
ratio of (a) the sum of (x) Consolidated EBITDA for such period and (y) interest
income for such period to (b) Consolidated Interest Expense for such period.
"Consolidated Interest Expense": for any period, total cash
interest expense (including that attributable to Capital Lease Obligations) of
the Borrower and its Subsidiaries for such period with respect to all
outstanding Indebtedness of the Borrower and its Subsidiaries, including any
Loans (including any commitment fees, all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under Hedge Agreements in respect of interest rates to
the extent such net costs are allocable to such period in accordance with GAAP).
<PAGE>
"Consolidated Internet EBITDA": for any period, Consolidated
EBITDA for such period attributable to the launch and operation of the Internet
website collectibles.com calculated in a manner consistent with the calculation
of "Income (loss) before taxes" attributable to collectibles.com in Note 4 to
the unaudited condensed consolidated financial statements included in the
Borrower's Quarterly Report on Form 10-Q for the quarter ended September 30,
1999.
"Consolidated Leverage Ratio": as at the last day of any
period, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated
EBITDA for such period.
"Consolidated Net Income": for any period, the consolidated
net income (or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the date it
becomes a Subsidiary of the Borrower or is merged into or consolidated with the
Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of the Borrower) in which the Borrower or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of the Borrower to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
"Consolidated Total Debt": at any date, the aggregate
principal amount of all Indebtedness of the Borrower and its Subsidiaries at
such date, determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital": at any date, the excess of
Consolidated Current Assets on such date over Consolidated Current Liabilities
on such date.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Default": any of the events specified in Section 7, whether
or not any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Disposition": with respect to any property, any sale, lease,
sale and leaseback, assignment, conveyance, transfer or other disposition
thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings.
"Dollars" and "$": dollars in lawful currency of the United
States.
"Domestic Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction within the United States.
"ECF Percentage": 66.667%.
<PAGE>
"Environmental Laws": any and all foreign, federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Escrow Agreement": the Closing Escrow Agreement dated as of
June 3, 1999, among the Borrower, MFP, Inc. (now known as SAH-Northeast), the
Sellers and First Union National Bank, as escrow agent, as amended, supplemented
or otherwise modified from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.
"Eurodollar Base Rate" with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum determined
on the basis of the rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period appearing on
Page 3750 of the Dow Jones Markets screen as of 11:00 A.M., London time, two
Business Days prior to the beginning of such Interest Period. In the event that
such rate does not appear on Page 3750 of the Dow Jones Markets screen (or
otherwise on such screen), the "Eurodollar Base Rate" shall be determined by
reference to such other comparable publicly available service for displaying
eurodollar rates as may be selected by the Administrative Agent or, in the
absence of such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York
City time, two Business Days prior to the beginning of such Interest Period in
the interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
<PAGE>
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the nearest
1/100th of 1%):
Eurodollar Base Rate/1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar
Loans the then current Interest Periods with respect to all of which begin on
the same date and end on the same later date (whether or not such Loans shall
originally have been made on the same day).
"Event of Default": any of the events specified in Section 7,
provided that any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrower, the
excess, if any, of (a) the sum, without duplication, of (i) Consolidated EBITDA
for such fiscal year and (ii) decreases in Consolidated Working Capital for such
fiscal year over (b) the sum, without duplication, of (i) Consolidated Debt
Service Charges for such fiscal year, (ii) the aggregate amount actually paid by
the Borrower and its Subsidiaries in cash during such fiscal year on account of
Capital Expenditures (excluding the principal amount of Indebtedness incurred in
connection with such expenditures), (iii) cash income tax payments, (iv)
consolidated Restricted Payments and (v) increases in Consolidated Working
Capital for such fiscal year.
"Excess Cash Flow Application Date": as defined in Section
2.6(d).
"Excluded Foreign Subsidiary": any Foreign Subsidiary in
respect of which either (a) the pledge of all of the Capital Stock of such
Subsidiary as Collateral or (b) the guaranteeing by such Subsidiary of the
Obligations, would, in the good faith judgment of the Borrower, result in
adverse tax consequences to the Borrower.
"Excluded Subsidiary": any Subsidiary of the Borrower other
than SAH- Houston and SAH-Northeast and any of their respective Subsidiaries.
"Extensions of Credit": as to any Lender at any time, an
amount equal to the sum of (a) the aggregate principal amount of all Loans held
by such Lender then outstanding and (b) such Lender's Commitment Percentage of
the L/C Obligations then outstanding.
"FCC": the Federal Communications Commission or any successor
to the functions and powers thereof.
"FCC Licenses": with respect to any television station, all
FCC licenses, permits and approvals necessary for the lawful operation of such
television station.
"FCC Rules": as defined in Section 3.23.
<PAGE>
"Federal Funds Effective Rate": for any day, the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average of
the quotations for the day of such transactions received by the Reference Lender
from three federal funds brokers of recognized standing selected by it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is
not a Domestic Subsidiary.
"Funded Debt": as to any Person, all Indebtedness of such
Person that matures more than one year from the date of its creation or matures
within one year from such date but is renewable or extendible, at the option of
such Person, to a date more than one year from such date or arises under a
revolving credit or similar agreement that obligates the lender or lenders to
extend credit during a period of more than one year from such date, including
all current maturities and current sinking fund payments in respect of such
Indebtedness whether or not required to be paid within one year from the date of
its creation and, in the case of the Borrower, Indebtedness in respect of the
Loans.
"Funding Office": the office of the Administrative Agent
specified in Section 9.2 or such other office as may be specified from time to
time by the Administrative Agent as its funding office by written notice to the
Borrower and the Lenders.
"GAAP": generally accepted accounting principles in the United
States as in effect from time to time, except that for purposes of Section 6.1,
GAAP shall be determined on the basis of such principles in effect on the date
hereof and consistent with those used in the preparation of the most recent
audited financial statements delivered pursuant to Section 3.1(b).
"Governmental Authority": any nation or government, any state
or other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization (including the National Association of Insurance Commissioners).
"Guarantee and Collateral Agreement": the Guarantee and
Collateral Agreement to be executed and delivered by the Borrower and each
Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.
<PAGE>
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including any bank under any letter of credit) to induce the creation of which
the guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Hedge Agreements": all interest rate swaps, caps or collar
agreements or similar arrangements dealing with interest rates or currency
exchange rates or the exchange of nominal interest obligations, either generally
or under specific contingencies.
"Houston Station": Television station KZJL(TV) in Houston,
Texas.
<PAGE>
"Indebtedness": of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services (other than current trade payables incurred in the ordinary course of
such Person's business), (c) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (e) all Capital Lease Obligations of
such Person, (f) all obligations of such Person, contingent or otherwise, as an
account party under acceptances, letters of credit, surety bonds or similar
arrangements, (g) the liquidation value of all redeemable preferred Capital
Stock of such Person, (h) all Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (g) above, (i) all
obligations of the kind referred to in clauses (a) through (h) above secured by
(or for which the holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including accounts and
contract rights) owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligation, and (j) for the purposes of
Sections 6.2 and 7(e) and the definition of "Consolidated Interest Expense"
only, all obligations of such Person in respect of Hedge Agreements. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness expressly provide that such Person is not liable
therefor.
"Indenture": the Indenture dated as of March 27, 1998, between
the Borrower and the Trustee, as successor to PNC Bank, National Association, as
trustee, as amended, supplemented or otherwise modified from time to time.
"Indenture Collateral": so long as the Senior Secured Notes
have not been paid or legally defeased in full, "Collateral" as defined in the
Indenture.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245
of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including copyrights, copyright licenses, patents, patent licenses, trademarks,
trademark licenses, technology, know-how and processes, and all rights to sue at
law or in equity for any infringement or other impairment thereof, including the
right to receive all proceeds and damages therefrom.
"Intercreditor Agreement": the Intercreditor Agreement to be
executed and delivered by the Borrower, SAH-Houston, the Administrative Agent
and the Trustee, substantially in the form of Exhibit H, as the same may be
amended, supplemented or otherwise modified from time to time.
"Interest Payment Date": (a) as to any ABR Loan, the last day
of each March, June, September and December to occur while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the last day of such
Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day that is three months, or a whole multiple thereof,
after the first day of such Interest Period and the last day of such Interest
Period and (d) as to any Loan (other than any Loan that is an ABR Loan), the
date of any repayment or prepayment made in respect thereof.
<PAGE>
"Interest Period": as to any Eurodollar Loan, (a) initially,
the period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) the Borrower may not select an Interest Period
that would extend beyond the date final payment is due on the Loans;
(iii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar
month; and
(iv) the Borrower shall select Interest Periods so as
not to require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"Investments": as defined in Section 6.7.
"Issuing Lender": Union Bank of California, N.A., in its
capacity as issuer of any Letter of Credit.
"Lawrence Station": Television station WMFP(TV) in Lawrence,
Massachusetts.
"L/C Commitment": $2,000,000.
"L/C Fee Payment Date": the last day of each March, June,
September and December and the last day of the Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then outstanding
Letters of Credit and (b) the aggregate amount of drawings under Letters of
Credit that have not then been reimbursed pursuant to Section 2.22.
"L/C Participants": the collective reference to all the
Lenders other than the Issuing Lender.
"Lenders": as defined in the preamble hereto.
"Letter of Credit": as defined in Section 2.18(a).
<PAGE>
"License Subsidiary": collectively, SAH-New York License
Subsidiary, SAH-Boston License Subsidiary, SAH-Houston License Subsidiary and
any license subsidiary created pursuant to Section 5.9(g).
"Licenses": as defined in Section 3.23.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing).
"Loan": as defined in Section 2.1.
"Loan Documents": this Agreement, the Security Documents, the
Intercreditor Agreement and the Notes.
"Loan Parties": the Borrower and each Subsidiary of the
Borrower that is a party to a Loan Document.
"Material Adverse Effect": a material adverse effect on (a)
the business, property, operations, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole or (b) the
validity or enforceability of this Agreement or any of the other Loan Documents
or the rights or remedies of the Administrative Agent or the Lenders hereunder
or thereunder.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including asbestos, polychlorinated
biphenyls and urea-formaldehyde insulation.
"Multiemployer Plan": a Plan that is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
<PAGE>
"Net Cash Proceeds": (a) in connection with any Asset Sale or
any Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received) of such Asset
Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment
banking fees, amounts required to be applied to the repayment of Indebtedness
secured by a Lien expressly permitted hereunder on any asset that is the subject
of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security
Document) and other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and (b) in connection with any
issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash
proceeds received from such issuance or incurrence, net of attorneys' fees,
investment banking fees, accountants' fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.
"Non-Excluded Taxes": as defined in Section 2.14(a).
"Non-U.S. Lender": as defined in Section 2.14(d).
"Notes": the collective reference to any promissory note
evidencing Loans.
"Obligations": the unpaid principal of and interest on
(including interest accruing after the maturity of the Loans and Reimbursement
Obligations and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of the Borrower to the Administrative Agent or to
any Lender (or, in the case of Hedge Agreements, any affiliate of any Lender),
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, any other Loan Document, the Letters of Credit, any Hedge
Agreement entered into with any Lender or any affiliate of any Lender or any
other document made, delivered or given in connection herewith or therewith,
whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including all fees, charges and disbursements of
counsel to the Administrative Agent or to any Lender that are required to be
paid by the Borrower pursuant hereto) or otherwise.
"Other Taxes": any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.
"Participant": as defined in Section 9.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor).
"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Plan": at a particular time, any employee benefit plan that
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
<PAGE>
"Pro Forma Balance Sheet": as defined in Section 3.1(a).
"Pro Forma Consolidated Debt Service Charges": as at the last
day of any period, the sum of (a) the aggregate amount of regularly scheduled
principal payments of Consolidated Total Debt (including payments of Loans
accompanying scheduled reductions of the Commitments) of the Borrower and its
Subsidiaries to be made during the period of four consecutive fiscal quarters
following such day (other than in respect of any revolving credit facility to
the extent there is not an equivalent scheduled permanent reduction of
commitments thereunder) and (b) total projected cash interest expense (including
that attributable to Capital Lease Obligations) of the Borrower and its
Subsidiaries for the period of four consecutive fiscal quarters following such
day with respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries, including any Loans (including, without limitation, any scheduled
commitment fees, fees owed with respect to letters of credit and bankers'
acceptance financing), assuming (i) an interest rate for any such Indebtedness
equal to the interest rate applicable to such Indebtedness in effect on such
day, taking into account any existing Hedge Agreements with respect to such
Indebtedness, and (ii) that all such Indebtedness shall remain outstanding
during the period of four consecutive fiscal quarters following such day, taking
into account, however, reductions in such Indebtedness due to regularly
scheduled principal payments described in clause (a).
"Pro Forma Debt Service Ratio": as at the last day of any
period, the ratio of (a) Consolidated EBITDA for such period to (b) Pro Forma
Consolidated Debt Service Charges on such day.
"Projections": as defined in Section 5.2(c).
"Properties": as defined in Section 3.17(a).
"Recovery Event": any settlement of or payment in respect of
any property or casualty insurance claim or any condemnation proceeding relating
to any asset of the Borrower or any of its Subsidiaries in excess of $250,000.
"Reference Lender": Union Bank of California, N.A.
"Register": as defined in Section 9.6(d).
"Regulation U": Regulation U of the Board as in effect from
time to time.
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 2.22 for amounts drawn under
Letters of Credit.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
<PAGE>
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day notice
period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of
PBGC Reg. ' 4043.
"Required Lenders": at any time, the holders of more than 50%
of (a) until the Closing Date, the Commitments then in effect and (b)
thereafter, the Commitments then in effect or, if the Commitments have been
terminated, the Total Extensions of Credit then outstanding.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer": the chief executive officer, president
or chief financial officer of the Borrower, but in any event, with respect to
financial matters, the chief financial officer of the Borrower.
"Restricted Payments": as defined in Section 6.6.
"SAH II": SAH Acquisition Corporation II, a Tennessee
corporation and a Subsidiary of the Borrower.
"SAH-Houston": SAH-Houston Corporation, a Tennessee
corporation and a Subsidiary of the Borrower.
"SAH-Houston License Subsidiary": SAH-Houston License Corp., a
Tennessee corporation and a Subsidiary of the Borrower.
"SAH-New York License Subsidiary": SAH-New York License Corp.,
a Tennessee corporation and a Subsidiary of the Borrower.
"SAH-Northeast": SAH-Northeast Corporation, a Tennessee
corporation and a Subsidiary of the Borrower.
"SAH-Boston License Subsidiary": SAH-Boston License Corp., a
Tennessee corporation and a Subsidiary of the Borrower.
"San Francisco Station": Television station KCNS(TV) in San
Francisco, California.
"SEC": the Securities and Exchange Commission, any successor
thereto and any analogous Governmental Authority.
<PAGE>
"Security and Pledge Agreement": the Security and Pledge
Agreement dated as of March 27, 1998, made by the Borrower, Broadcast, Cable and
Satellite Technologies, Inc. and SAH II in favor of PNC Bank, National
Association, as trustee, in connection with the Indenture, as amended,
supplemented or otherwise modified from time to time.
"Security Documents": the collective reference to the
Guarantee and Collateral Agreement and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any property of any
Person to secure the obligations and liabilities of any Loan Party under any
Loan Document.
"Sellers": collectively, Paxson Communications of New York-43,
Inc. and Paxson New York License, Inc.
"Senior Secured Notes": the senior secured notes of the
Borrower issued pursuant to the Indenture.
"Series A Preferred Stock": the Capital Stock designated in
the Charter of the Borrower as "Series A Preferred Stock."
"Single Employer Plan": any Plan that is covered by Title IV
of ERISA, but that is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that,
as of any date of determination, (a) the amount of the "present fair saleable
value" of the assets of such Person will, as of such date, exceed the amount of
all "liabilities of such Person, contingent or otherwise", as of such date, as
such quoted terms are determined in accordance with applicable federal and state
laws governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
<PAGE>
"Subsidiary": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Guarantor": each Subsidiary of the Borrower other
than any Excluded Foreign Subsidiary and, prior to the payment or legal
defeasance in full of the Senior Secured Notes and the completion of the actions
described in Section 5.9(g)(x), any Excluded Subsidiary.
"Television Stations": collectively, the Bridgeport Station,
the Canton Station, the Houston Station, the Lawrence Station, the San Francisco
Station and the Wilson Station.
"Termination Date": December 15, 2002.
"Total Commitments": at any time, the aggregate amount of the
Commitments then in effect.
"Total Extensions of Credit": at any time, the aggregate
amount of the Extensions of Credit of the Lenders outstanding at such time.
"Transferee": any Assignee or Participant.
"Trustee": The Chase Manhattan Trust Company, National
Association, as trustee under the Indenture (as successor to PNC Bank, National
Association).
"Type": as to any Loan, its nature as an ABR Loan or a
Eurodollar Loan.
"United States": the United States of America.
"Wholly Owned Subsidiary": as to any Person, any other Person
all of the Capital Stock of which (other than directors' qualifying shares
required by law) is owned by such Person directly and/or through other Wholly
Owned Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor
that is a Wholly Owned Subsidiary of the Borrower.
"Wilson Station": Television station WRAY(TV) in Wilson,
North Carolina.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the other Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto.
<PAGE>
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto, (i)
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP, (ii)
the words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation" and (iii) the words "asset" and "property"
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, Capital
Stock, securities, revenues, accounts, leasehold interests and contract rights.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments. (a) Subject to the terms and conditions
hereof and subject to the provisions of paragraph (c), each Lender severally
agrees to make revolving credit loans ("Loans") to the Borrower from time to
time during the Commitment Period in an aggregate principal amount at any one
time outstanding which, when added to such Lender's Commitment Percentage of the
L/C Obligations then outstanding, does not exceed the amount of such Lender's
Commitment. During the Commitment Period the Borrower may use the Commitments by
borrowing, prepaying the Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof and subject to the provisions of
paragraph (c). The Loans may from time to time be Eurodollar Loans or ABR Loans,
as determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.2 and 2.7.
(b) The Borrower shall repay all outstanding Loans on the
Termination Date.
(c) Upon any Asset Sale permitted by Section 6.5(g), until all
the Net Cash Proceeds of such Asset Sale have been reinvested in assets owned by
the Borrower and its Subsidiaries (other than Excluded Subsidiaries) acceptable
to the Administrative Agent, (i) the Borrower may borrow under the Commitments
only to the extent that after such borrowing the ratio of the Total Extensions
of Credit to Consolidated EBITDA for the then most recently ended period of four
consecutive fiscal quarters for which financial statements shall have been
delivered to the Lenders will be less than or equal to 2.0 to 1.0 and (ii) the
Total Extensions of Credit may not exceed zero for at least 30 consecutive days
during each calendar year.
<PAGE>
2.2 Procedure for Borrowing. The Borrower may borrow under the
Commitments during the Commitment Period on any Business Day, provided that the
Borrower shall give the Administrative Agent irrevocable notice (which notice
must be received by the Administrative Agent prior to 10:00 a.m., Los Angeles
time, (a) three Business Days prior to the requested Borrowing Date, in the case
of Eurodollar Loans, or (b) one Business Day prior to the requested Borrowing
Date, in the case of ABR Loans), specifying (i) the amount and Type of Loans to
be borrowed, (ii) the requested Borrowing Date and (iii) in the case of
Eurodollar Loans, the respective amounts of each such Type of Loan and the
respective lengths of the initial Interest Period therefor. Any Loans made on
the Closing Date shall initially be ABR Loans. Each borrowing under the
Commitments shall be in an amount equal to (x) in the case of ABR Loans,
$100,000 or a whole multiple thereof (or, if the then aggregate Available
Commitments are less than $100,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $100,000 or a whole multiple thereof. Upon receipt of any such
notice from the Borrower, the Administrative Agent shall promptly notify each
Lender thereof. Each Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 10:00 a.m., Los Angeles time, on the Borrowing
Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the Borrower
by the Administrative Agent crediting the account of the Borrower on the books
of such office with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
2.3 Scheduled Commitment Reductions. On each date set forth
below, the Total Commitments shall be reduced by the amount indicated below
opposite such date:
Commitment Commitment
Reduction Date Reduction
September 30, 2000 $1,500,000
December 31, 2000 $1,500,000
March 31, 2001 $1,250,000
June 30, 2001 $1,250,000
September 30, 2001 $1,250,000
December 31, 2001 $1,250,000
March 31, 2002 $3,000,000
June 30, 2002 $3,000,000
September 30, 2002 $3,000,000
Upon the reduction of the Total Commitments on each date indicated above, each
Lender's Commitment shall be reduced by such Lender's Commitment Percentage of
the amount of the reduction of the Total Commitments on such date, and the
Borrower shall be required to comply with the provisions of Section 2.6(f).
<PAGE>
2.4 Commitment Fees, etc. (a) The Borrower agrees to pay to
the Administrative Agent for the account of each Lender a commitment fee for the
period from and including the Closing Date to the last day of the Commitment
Period, computed at the Commitment Fee Rate on the average daily amount of the
Available Commitment of such Lender during the period for which payment is made,
payable quarterly in arrears on the last day of each March, June, September and
December and on the Termination Date, commencing on the first of such dates to
occur after the date hereof.
(b) The Borrower agrees to pay to the Administrative Agent all
fees in the amounts and on the dates previously agreed to in writing by the
Borrower and the Administrative Agent.
2.5 Optional Prepayments; Termination or Reduction of
Commitments. (a) The Borrower may at any time and from time to time prepay the
Loans, in whole or in part, without premium or penalty, upon irrevocable notice
delivered to the Administrative Agent at least three Business Days prior thereto
in the case of Eurodollar Loans and at least one Business Day prior thereto in
the case of ABR Loans, which notice shall specify the date and amount of
prepayment and whether the prepayment is of Eurodollar Loans or ABR Loans;
provided, that if a Eurodollar Loan is prepaid on any day other than the last
day of the Interest Period applicable thereto, the Borrower shall also pay any
amounts owing pursuant to Section 2.15. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with (except in the case of
Loans that are ABR Loans) accrued interest to such date on the amount prepaid.
Partial prepayments of Loans shall be in an aggregate principal amount of
$100,000 or a whole multiple thereof.
(b) The Borrower shall have the right, upon not less than
three Business Days' notice to the Administrative Agent, to terminate the
Commitments or, from time to time, to reduce the amount of the Commitments;
provided that no such termination or reduction of Commitments shall be permitted
if, after giving effect thereto and to any prepayments of the Loans made on the
effective date thereof, the Total Extensions of Credit would exceed the Total
Commitments. Any such reduction shall be in an amount equal to $100,000, or a
whole multiple thereof, and shall reduce permanently the Commitments then in
effect.
2.6 Mandatory Prepayments and Commitment Reductions. (a) If
any Capital Stock shall be issued by the Borrower, an amount equal to 100% of
the Net Cash Proceeds thereof shall be applied on the date of such issuance
toward the prepayment of the Total Extensions of Credit as set forth in Section
2.6(e).
(b) If on any date the Borrower or any of its Subsidiaries
shall receive Net Cash Proceeds from any Asset Sale or Recovery Event (other
than an Asset Sale or a Recovery Event in respect of any Indenture Collateral),
then such Net Cash Proceeds shall be applied on such date toward the prepayment
of the Total Extensions of Credit as set forth in Section 2.6(e).
(c) If any amounts held in escrow under the Escrow Agreement
and the Acquisition Agreement shall be returned to the Borrower, such amounts
shall be applied on the date recovered by the Borrower toward the prepayment of
the Total Extensions of Credit as set forth in Section 2.6(e).
<PAGE>
(d) If, for any fiscal year of the Borrower commencing with
the fiscal year ending June 30, 2000, there shall be Excess Cash Flow, the ECF
Percentage of such Excess Cash Flow shall, on the relevant Excess Cash Flow
Application Date, be automatically applied toward the reduction of the
Commitments as set forth in Section 2.6(f). Each such Commitment reduction shall
be made on a date (an Excess Cash Flow "application Date") no later than five
days after the earlier of (i) the date on which the financial statements of the
Borrower referred to in Section 5.1(a), for the fiscal year with respect to
which such Commitment reduction is made, are required to be delivered to the
Lenders and (ii) the date such financial statements are actually delivered;
provided that the Borrower shall be required to apply only that portion of the
ECF Percentage of such Excess Cash Flow toward the reduction of the Commitments
as set forth in Section 2.6(f) as shall not cause the Borrower to violate the
provisions of Section 6.1(c)(ii) on the date of such application.
(e) The application of any prepayment pursuant to Sections
2.6(a), (b) and (c) shall be made, first, to ABR Loans and, second, to
Eurodollar Loans. If the amount of any prepayment required to be made pursuant
to Sections 2.6(a), (b) and (c) exceeds the aggregate principal amount of Loans
then outstanding (because L/C Obligations constitute a portion of the Total
Extensions of Credit), the Borrower shall, to the extent of such excess, replace
outstanding Letters of Credit and/or deposit an amount in cash in a cash
collateral account established with the Administrative Agent for the benefit of
the Lenders on terms and conditions satisfactory to the Administrative Agent.
Each prepayment of the Loans under Sections 2.6(a), (b) and (c) (except in the
case of Loans that are ABR Loans) shall be accompanied by accrued interest to
the date of such prepayment on the amount prepaid.
(f) Any reduction of the Commitments pursuant to Section 2.3
or 2.6(d) shall be accompanied by prepayment of the Loans to the extent, if any,
that the Total Extensions of Credit exceed the amount of the Total Commitments
as so reduced, provided that if the aggregate principal amount of Loans then
outstanding is less than the amount of such excess (because L/C Obligations
constitute a portion thereof), the Borrower shall, to the extent of the balance
of such excess, replace outstanding Letters of Credit and/or deposit an amount
in cash in a cash collateral account established with the Administrative Agent
for the benefit of the Lenders on terms and conditions satisfactory to the
Administrative Agent. The application of any prepayment pursuant to this Section
2.6(f) shall be made, first, to ABR Loans and, second, to Eurodollar Loans. Each
prepayment of the Loans under this Section 2.6(f) shall be accompanied by
accrued interest to the date of such prepayment on the amount prepaid.
<PAGE>
2.7 Conversion and Continuation Options. (a) The Borrower may
elect from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election (which notice shall specify the length of the initial Interest
Period therefor), provided that no ABR Loan may be converted into a Eurodollar
Loan when any Event of Default has occurred and is continuing and the
Administrative Agent or the Required Lenders have determined in its or their
sole discretion not to permit such conversions. Upon receipt of any such notice
the Administrative Agent shall promptly notify each relevant Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving irrevocable notice to the Administrative Agent, in accordance
with the applicable provisions of the term "Interest Period" set forth in
Section 1.1, of the length of the next Interest Period to be applicable to such
Loans, provided that no Eurodollar Loan may be continued as such when any Event
of Default has occurred and is continuing and the Administrative Agent has or
the Required Lenders have determined in its or their sole discretion not to
permit such continuations, and provided, further, that if the Borrower shall
fail to give any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Loans shall
be automatically converted to ABR Loans on the last day of such then expiring
Interest Period. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof.
2.8 Limitations on Eurodollar Tranches. Notwithstanding
anything to the contrary in this Agreement, all borrowings, conversions and
continuations of Eurodollar Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, (a) after giving effect thereto, the aggregate principal
amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal
to $3,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no
more than five Eurodollar Tranches shall be outstanding at any one time.
2.9 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum
equal to the ABR plus the Applicable Margin.
(c) (i) So long as any Default or Event of Default shall have
occurred and be continuing, all outstanding Loans and Reimbursement Obligations
(whether or not overdue) shall bear interest at a rate per annum equal to (x) in
the case of the Loans, the rate that would otherwise be applicable thereto
pursuant to the foregoing provisions of this Section plus 2% or (y) in the case
of Reimbursement Obligations, the rate applicable to ABR Loans plus 2%, and (ii)
if all or a portion of any interest payable on any Loan or Reimbursement
Obligation or on any commitment fee or other amount payable hereunder shall not
be paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate per annum equal to the rate
then applicable to ABR Loans plus 2%, in each case, with respect to clauses (i)
and (ii) above, from the date of such non-payment until such amount is paid in
full (as well after as before judgment).
<PAGE>
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
Section shall be payable from time to time on demand.
2.10 Computation of Interest and Fees. (a) Interest and fees
(including, without limitation, fees on any outstanding Letters of Credit
pursuant to Section 2.20) payable pursuant hereto shall be calculated on the
basis of a 360-day year for the actual days elapsed, except that, with respect
to ABR Loans the rate of interest on which is calculated on the basis of the
Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Borrower and the
relevant Lenders of each determination of a Eurodollar Rate. Any change in the
interest rate on a Loan resulting from a change in the ABR or the Eurocurrency
Reserve Requirements shall become effective as of the opening of business on the
day on which such change becomes effective. The Administrative Agent shall as
soon as practicable notify the Borrower and the relevant Lenders of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrower,
deliver to the Borrower a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to Section
2.9(a).
2.11 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from
the Required Lenders that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans during such
Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given, (x) any Eurodollar Loans requested to be made on the first day
of such Interest Period shall be made as ABR Loans, (y) any Loans that were to
have been converted on the first day of such Interest Period to Eurodollar Loans
shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall
be converted, on the last day of the then-current Interest Period, to ABR Loans.
Until such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Loans to Eurodollar Loans.
<PAGE>
2.12 Pro Rata Treatment and Payments. (a) Each borrowing by
the Borrower from the Lenders hereunder, each payment by the Borrower on account
of any commitment fee and any reduction of the Commitments of the Lenders shall
be made pro rata according to the Commitment Percentages of the relevant
Lenders.
(b) Each payment (including each prepayment) by the Borrower
on account of principal of and interest on the Loans shall be made pro rata
according to the respective outstanding principal amounts of the Loans then held
by the Lenders.
(c) All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 10:00 a.m., Los Angeles time, on the due date thereof to the Administrative
Agent, for the account of the Lenders, at the Funding Office, in Dollars and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If any
payment hereunder (other than payments on the Eurodollar Loans) becomes due and
payable on a day other than a Business Day, such payment shall be extended to
the next succeeding Business Day. If any payment on a Eurodollar Loan becomes
due and payable on a day other than a Business Day, the maturity thereof shall
be extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Business Day. In
the case of any extension of any payment of principal pursuant to the preceding
two sentences, interest thereon shall be payable at the then applicable rate
during such extension.
(d) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make
the amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this paragraph shall be conclusive in the
absence of manifest error. If such Lender's share of such borrowing is not made
available to the Administrative Agent by such Lender within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
ABR Loans, on demand, from the Borrower.
<PAGE>
(e) Unless the Administrative Agent shall have been notified
in writing by the Borrower prior to the date of any payment being made hereunder
that the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective pro rata shares
of a corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date, the
Administrative Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding sentence,
such amount with interest thereon at the rate per annum equal to the daily
average Federal Funds Effective Rate. Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.
2.13 Requirements of Law. (a) If the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by Section 2.14 and changes in the rate of
tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender that is not
otherwise included in the determination of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount that such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes entitled
to claim any additional amounts pursuant to this paragraph, it shall promptly
notify the Borrower (with a copy to the Administrative Agent) of the event by
reason of which it has become so entitled.
<PAGE>
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrower (with a copy to the Administrative
Agent) of a written request therefor, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction;
provided that the Borrower shall not be required to compensate a Lender pursuant
to this paragraph for any amounts incurred more than six months prior to the
date that such Lender notifies the Borrower of such Lender's intention to claim
compensation therefor; and provided further that, if the circumstances giving
rise to such claim have a retroactive effect, then such six-month period shall
be extended to include the period of such retroactive effect.
(c) A certificate as to any additional amounts payable
pursuant to this Section submitted by any Lender to the Borrower (with a
copy to the Administrative Agent) shall be conclusive in the absence of
manifest error. The obligations of the Borrower pursuant to this Section
shall survive the termination of this Agreement and the payment of the Loans
and all other amounts payable hereunder.
2.14 Taxes. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Administrative Agent or any Lender as a result
of a present or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Lender with respect to any Non-Excluded
Taxes (i) that are attributable to such Lender's failure to comply with the
requirements of paragraph (d) or (e) of this Section or (ii) that are United
States withholding taxes imposed on amounts payable to such Lender at the time
the Lender becomes a party to this Agreement, except to the extent that such
Lender's assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from the Borrower with respect to such Non-Excluded Taxes
pursuant to this paragraph.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
<PAGE>
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable
by the Borrower, as promptly as possible thereafter the Borrower shall send to
the Administrative Agent for its own account or for the account of the relevant
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts or
other required documentary evidence, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure.
(d) Each Lender (or Transferee) that is not a "U.S. Person" as
defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver
to the Borrower and the Administrative Agent (or, in the case of a Participant,
to the Lender from which the related participation shall have been purchased)
two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI,
or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a statement substantially in the form of
Exhibit G and a Form W-8BEN, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this paragraph, a Non-U.S. Lender shall not be required to
deliver any form pursuant to this paragraph that such Non-U.S. Lender is not
legally able to deliver.
(e) A Lender that is entitled to an exemption from or
reduction of non-U.S. withholding tax under the law of the jurisdiction in which
the Borrower is located, or any treaty to which such jurisdiction is a party,
with respect to payments under this Agreement shall deliver to the Borrower
(with a copy to the Administrative Agent), at the time or times prescribed by
applicable law or reasonably requested by the Borrower, such properly completed
and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate, provided that such
Lender is legally entitled to complete, execute and deliver such documentation
and in such Lender's judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.
(f) The agreements in this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
<PAGE>
2.15 Indemnity. The Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss or expense that such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment of or conversion from Eurodollar Loans after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment of Eurodollar Loans on a day that is not the last day of
an Interest Period with respect thereto. Such indemnification may include an
amount equal to the excess, if any, of (i) the amount of interest that would
have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of such Interest Period (or, in the
case of a failure to borrow, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each case at the applicable rate
of interest for such Loans provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) that would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. A certificate as to any
amounts payable pursuant to this Section submitted to the Borrower by any Lender
shall be conclusive in the absence of manifest error. This covenant shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
2.16 Change of Lending Office. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of Section 2.13 or
2.14(a) with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section shall affect
or postpone any of the obligations of any Borrower or the rights of any Lender
pursuant to Section 2.13 or 2.14(a).
<PAGE>
2.17 Replacement of Lenders. The Borrower shall be permitted
to replace any Lender that requests reimbursement for amounts owing pursuant to
Section 2.13 or 2.14(a) with a replacement financial institution; provided that
(i) such replacement does not conflict with any Requirement of Law, (ii) no
Event of Default shall have occurred and be continuing at the time of such
replacement, (iii) prior to any such replacement, such Lender shall have taken
no action under Section 2.16 so as to eliminate the continued need for payment
of amounts owing pursuant to Section 2.13 or 2.14(a), (iv) the replacement
financial institution shall purchase, at par, all Loans and other amounts owing
to such replaced Lender on or prior to the date of replacement, (v) the Borrower
shall be liable to such replaced Lender under Section 2.15 if any Eurodollar
Loan owing to such replaced Lender shall be purchased other than on the last day
of the Interest Period relating thereto, (vi) the replacement financial
institution, if not already a Lender, shall be reasonably satisfactory to the
Administrative Agent, (vii) the replaced Lender shall be obligated to make such
replacement in accordance with the provisions of Section 9.6 (provided that the
Borrower shall be obligated to pay the registration and processing fee referred
to therein), (viii) until such time as such replacement shall be consummated,
the Borrower shall pay all additional amounts (if any) required pursuant to
Section 2.13 or 2.14(a), as the case may be, and (ix) any such replacement shall
not be deemed to be a waiver of any rights that the Borrower, the Administrative
Agent or any other Lender shall have against the replaced Lender.
2.18 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Lender, in reliance on the agreements of the other Lenders
set forth in Section 2.21(a), agrees to issue letters of credit ("Letters of
Credit") for the account of the Borrower on any Business Day during the
Commitment Period in such form as may be approved from time to time by the
Issuing Lender; provided that the Issuing Lender shall have no obligation to
issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the
Available Commitments would be less than zero. Each Letter of Credit shall (i)
be denominated in Dollars, (ii) have a face amount of at least $200,000 (unless
otherwise agreed by the Issuing Lender) and (iii) expire no later than the
earlier of (x) the first anniversary of its date of issuance and (y) the date
that is five Business Days prior to the Termination Date, provided that any
Letter of Credit with a one-year term may provide for the renewal thereof for
additional one-year periods (which shall in no event extend beyond the date
referred to in clause (y) above).
(b) The Issuing Lender shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Lender or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
2.19 Procedure for Issuance of Letter of Credit. The Borrower
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender at its address for notices specified herein
an Application therefor, completed to the satisfaction of the Issuing Lender,
and such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing Lender
will process such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed to by the
Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such
Letter of Credit to the Borrower promptly following the issuance thereof. The
Issuing Lender shall promptly furnish to the Administrative Agent, which shall
in turn promptly furnish to the Lenders, notice of the issuance of each Letter
of Credit (including the amount thereof).
2.20 Fees and Other Charges. (a) The Borrower will pay a fee
on all outstanding Letters of Credit at a per annum rate equal to the Applicable
Margin then in effect with respect to Eurodollar Loans, shared ratably among the
Lenders and payable quarterly in arrears on each L/C Fee Payment Date after the
issuance date. In addition, the Borrower shall pay to the Issuing Lender for its
own account a fronting fee of 0.25% per annum on the undrawn and unexpired
amount of each Letter of Credit, payable quarterly in arrears on each L/C Fee
Payment Date after the Issuance Date.
<PAGE>
(b) In addition to the foregoing fees, the Borrower shall pay
or reimburse the Issuing Lender for such normal and customary costs and expenses
as are incurred or charged by the Issuing Lender in issuing, negotiating,
effecting payment under, amending or otherwise administering any Letter of
Credit.
2.21 L/C Participations. (a) The Issuing Lender irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce the
Issuing Lender to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Lender, on the terms and conditions set forth below, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Commitment Percentage in the Issuing Lender's obligations and
rights under and in respect of each Letter of Credit issued hereunder and the
amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Commitment Percentage of the amount of such draft, or any
part thereof, that is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to the Issuing Lender pursuant to Section 2.21(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on demand
an amount equal to the product of such amount, times the daily average Federal
Funds Effective Rate during the period from and including the date such payment
is required to the date on which such payment is immediately available to the
Issuing Lender, times a fraction the numerator of which is the number of days
that elapse during such period and the denominator of which is 360. If any such
amount required to be paid by any L/C Participant pursuant to Section 2.21(a) is
not made available to the Issuing Lender by such L/C Participant within three
Business Days after the date such payment is due, the Issuing Lender shall be
entitled to recover from such L/C Participant, on demand, such amount with
interest thereon calculated from such due date at the rate per annum applicable
to ABR Loans. A certificate of the Issuing Lender submitted to any L/C
Participant with respect to any amounts owing under this Section shall be
conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with Section 2.21(a), the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Lender), or any payment of interest on account thereof, the
Issuing Lender will distribute to such L/C Participant its pro rata share
thereof; provided, however, that in the event that any such payment received by
the Issuing Lender shall be required to be returned by the Issuing Lender, such
L/C Participant shall return to the Issuing Lender the portion thereof
previously distributed by the Issuing Lender to it.
<PAGE>
2.22 Reimbursement Obligation of the Borrower. The Borrower
agrees to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Lender for the amount of (a) such draft
so paid and (b) any taxes, fees, charges or other costs or expenses incurred by
the Issuing Lender in connection with such payment. Each such payment shall be
made to the Issuing Lender at its address for notices specified herein in lawful
money of the United States and in immediately available funds. Interest shall be
payable on any and all amounts remaining unpaid by the Borrower under this
Section from the date such amounts become payable (whether at stated maturity,
by acceleration or otherwise) until payment in full at the rate set forth in (i)
until the second Business Day following the date of the applicable drawing,
Section 2.9(b) and (ii) thereafter, Section 2.9(c).
2.23 Obligations Absolute. The Borrower's obligations under
Sections 2.20, 2.22 and 2.23 shall be absolute and unconditional under any and
all circumstances and irrespective of any setoff, counterclaim or defense to
payment that the Borrower may have or have had against the Issuing Lender, any
beneficiary of a Letter of Credit or any other Person. The Borrower also agrees
with the Issuing Lender that the Issuing Lender shall not be responsible for,
and the Borrower's Reimbursement Obligations under Section 2.22 shall not be
affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee. The Issuing
Lender shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the Issuing Lender. The Borrower agrees that any action taken or omitted by the
Issuing Lender under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of the Issuing Lender to the Borrower.
2.24 Letter of Credit Payments. If any draft shall be
presented for payment under any Letter of Credit, the Issuing Lender shall
promptly notify the Borrower of the date and amount thereof. The responsibility
of the Issuing Lender to the Borrower in connection with any draft presented for
payment under any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are substantially in conformity with such
Letter of Credit.
2.25 Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of Sections 2.18, 2.19, 2.20, 2.21, 2.22, 2.23 or 2.24, the provisions of such
Sections shall apply.
<PAGE>
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter
into this Agreement and to make the Loans and issue and participate in the
Letters of Credit, the Borrower hereby represents and warrants to the
Administrative Agent and each Lender that:
3.1 Financial Condition. (a) The unaudited pro forma
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at September 30, 1999 (including the notes thereto) (the "Pro Forma Balance
Sheet"), copies of which have heretofore been furnished to each Lender, has been
prepared giving effect (as if such events had occurred on such date) to (i) the
Loans to be made on the Closing Date and the use of proceeds thereof and (ii)
the payment of fees and expenses in connection with the foregoing. The Pro Forma
Balance Sheet has been prepared based on the best information available to the
Borrower as of the date of delivery thereof, and presents fairly on a pro forma
basis the estimated financial position of Borrower and its consolidated
Subsidiaries as at September 30, 1999, assuming that the events specified in the
preceding sentence had actually occurred at such date.
(b) The audited consolidated balance sheets of the Borrower as
at June 30, 1996, June 30, 1997, June 30, 1998 and June 30, 1999 and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
PricewaterhouseCoopers LLP, present fairly the consolidated financial condition
of the Borrower as at such date, and the consolidated results of its operations
and its consolidated cash flows for the respective fiscal years then ended. The
unaudited consolidated balance sheet of the Borrower as at September 30, 1999,
and the related unaudited consolidated statements of income and cash flows for
the three-month period ended on such date, present fairly the consolidated
financial condition of the Borrower as at such date, and the consolidated
results of its operations and its consolidated cash flows for the three-month
period then ended (subject to normal year-end audit adjustments). All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by the aforementioned firm of accountants
and disclosed therein). The Borrower and its Subsidiaries do not have any
material Guarantee Obligations, contingent liabilities and liabilities for
taxes, or any long-term leases or unusual forward or long-term commitments,
including any interest rate or foreign currency swap or exchange transaction or
other obligation in respect of derivatives, that are not reflected in the most
recent financial statements referred to in this paragraph. During the period
from September 30, 1999 to and including the date hereof, there has been no
Disposition by the Borrower of any material part of its business or property.
3.2 No Change. Since September 30, 1999, there has been no
development or event that has had or could reasonably be expected to have a
Material Adverse Effect.
<PAGE>
3.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and, in the
case of the Borrower, to obtain extensions of credit hereunder. Each Loan Party
has taken all necessary corporate action to authorize the execution, delivery
and performance of the Loan Documents to which it is a party and, in the case of
the Borrower, to authorize the extensions of credit on the terms and conditions
of this Agreement. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other Person is
required in connection with the extensions of credit hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents, authorizations, filings and
notices described in Schedule 3.4, which consents, authorizations, filings and
notices have been obtained or made and are in full force and effect and (ii) the
filings referred to in Section 3.19. Each Loan Document has been duly executed
and delivered on behalf of each Loan Party party thereto. This Agreement
constitutes, and each other Loan Document upon execution will constitute, a
legal, valid and binding obligation of each Loan Party party thereto,
enforceable against each such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. The execution, delivery and performance of
this Agreement and the other Loan Documents, the issuance of Letters of Credit,
the borrowings hereunder and the use of the proceeds thereof will not violate
any Requirement of Law or any Contractual Obligation of the Borrower or any of
its Subsidiaries and will not result in, or require, the creation or imposition
of any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or any such Contractual Obligation (other than the Liens
created by the Security Documents, and except to the extent that the execution
of the Liens on the Pledged Stock (as defined therein) pursuant to the Guarantee
and Collateral Agreement could be understood to result in the creation of a
second Lien thereon pursuant to the Security and Pledge Agreement). No
Requirement of Law or Contractual Obligation applicable to the Borrower or any
of its Subsidiaries could reasonably be expected to have a Material Adverse
Effect.
3.6 Litigation. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or against any of their respective properties or revenues (a) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby or (b) that could reasonably be expected to have a Material
Adverse Effect.
<PAGE>
3.7 No Default. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect that could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
3.8 Ownership of Property; Liens. Each of the Borrower and its
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its real property, and good title to, or a valid leasehold interest in, all its
other property, and none of such property is subject to any Lien except as
permitted by Section 6.3.
3.9 Intellectual Property. The Borrower and each of its
Subsidiaries owns, or is licensed to use, all Intellectual Property necessary
for the conduct of its business as currently conducted. No material claim has
been asserted and is pending by any Person challenging or questioning the use of
any Intellectual Property or the validity or effectiveness of any Intellectual
Property, nor does the Borrower know of any valid basis for any such claim. The
use of Intellectual Property by the Borrower and its Subsidiaries does not
infringe on the rights of any Person in any material respect.
3.10 Taxes. Each of the Borrower and each of its Subsidiaries
has filed or caused to be filed all federal, state and other material tax
returns that are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity of
that are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has
been filed, and, to the knowledge of the Borrower, no claim is being asserted,
with respect to any such tax, fee or other charge.
3.11 Federal Regulations. No part of the proceeds of any
Loans, and no other extensions of credit hereunder, will be used for "buying" or
"carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation U as now and from time to time hereafter in effect
or for any purpose that violates the provisions of the Regulations of the Board.
3.12 Labor Matters. Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect: (a) there are no
strikes or other labor disputes against the Borrower or any of its Subsidiaries
pending or, to the knowledge of the Borrower, threatened; (b) hours worked by
and payment made to employees of the Borrower and its Subsidiaries have not been
in violation of the Fair Labor Standards Act or any other applicable Requirement
of Law dealing with such matters; and (c) all payments due from the Borrower or
any of its Subsidiaries on account of employee health and welfare insurance have
been paid or accrued as a liability on the books of the Borrower or the relevant
Subsidiary.
<PAGE>
3.13 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred,
and no Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits by a material amount. Neither the Borrower nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan that has resulted or could reasonably be expected to result
in a material liability under ERISA, and neither the Borrower nor any Commonly
Controlled Entity would become subject to any material liability under ERISA if
the Borrower or any such Commonly Controlled Entity were to withdraw completely
from all Multiemployer Plans as of the valuation date most closely preceding the
date on which this representation is made or deemed made. No such Multiemployer
Plan is in Reorganization or Insolvent.
3.14 Investment Company Act; Other Regulations. No Loan Party
is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
No Loan Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) that limits its ability to incur Indebtedness.
3.15 Subsidiaries. Except as disclosed to the Administrative
Agent by the Borrower in writing from time to time after the Closing Date, (i)
Schedule 3.15 sets forth the name and jurisdiction of incorporation of each
Subsidiary and, as to each such Subsidiary, the percentage of each class of
Capital Stock owned by any Loan Party and (ii) there are no outstanding
subscriptions, options, warrants, calls, rights or other agreements or
commitments (other than stock options granted to employees or directors, the
warrants described in Note 11 to the Borrower's audited consolidated financial
statements for the fiscal year ended June 30, 1999 and the Series A Preferred
Stock) of any nature relating to any Capital Stock of the Borrower or any
Subsidiary, except as created by the Loan Documents.
3.16 Use of Proceeds. The proceeds of the Loans shall be used
for (i) the acquisition of television stations and assets relating thereto and
(ii) for working capital and general corporate purposes. The Letters of Credit
shall be used for general corporate purposes.
3.17 Environmental Matters. Except as, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by
the Borrower or any of its Subsidiaries (the "Properties") do not
contain, and have not previously contained, any Materials of
Environmental Concern in amounts or concentrations or under circumstances that
constitute or constituted a violation of, or could give rise to liability under,
any Environmental Law;
<PAGE>
(b) neither the Borrower nor any of its Subsidiaries has
received or is aware of any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental matters
or compliance with Environmental Laws with regard to any of the Properties or
the business operated by the Borrower or any of its Subsidiaries
(the "Business"), nor does the Borrower have knowledge or reason to believe
that any such notice will be received or is being threatened;
(c) Materials of Environmental Concern have not been
transported or disposed of from the Properties in violation of, or in a manner
or to a location that could give rise to liability under, any Environmental
Law, nor have any Materials of Environmental Concern been generated, treated,
stored or disposed of at, on or under any of the Properties in violation of,
or in a manner that could give rise to liability under, any applicable
Environmental Law;
(d) no judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be named as
a party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business;
(e) there has been no release or threat of release of
Materials of Environmental Concern at or from the Properties, or arising
from or related to the operations of the Borrower or any Subsidiary in
connection with the Properties or otherwise in connection with the Business,
in violation of or in amounts or in a manner that could give rise to liability
under Environmental Laws;
(f) the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, with all
applicable Environmental Laws, and there is no contamination at, under or
about the Properties or violation of any Environmental Law with respect to
the Properties or the Business; and
(g) neither the Borrower nor any of its Subsidiaries has
assumed any liability of any other Person under Environmental Laws.
<PAGE>
3.18 Accuracy of Information, etc. No statement or information
contained in this Agreement, any other Loan Document or any other document,
certificate or statement furnished by or on behalf of any Loan Party to the
Administrative Agent or the Lenders, or any of them, for use in connection with
the transactions contemplated by this Agreement or the other Loan Documents,
contained as of the date such statement, information, document or certificate
was so furnished any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements contained herein or therein not
misleading. The projections and pro forma financial information contained in the
materials referenced above are based upon good faith estimates and assumptions
believed by management of the Borrower to be reasonable at the time made, it
being recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount. There is no fact known
to any Loan Party that could reasonably be expected to have a Material Adverse
Effect that has not been expressly disclosed herein, in the other Loan Documents
or in any other documents, certificates and statements furnished to the
Administrative Agent and the Lenders for use in connection with the transactions
contemplated hereby and by the other Loan Documents.
3.19 Security Documents. The Guarantee and Collateral
Agreement is effective to create in favor of the Administrative Agent, for the
benefit of the Lenders, a legal, valid and enforceable security interest in the
Collateral described therein and proceeds thereof. In the case of the Pledged
Stock described in the Guarantee and Collateral Agreement, when stock
certificates representing such Pledged Stock are delivered to the Administrative
Agent, and in the case of the other Collateral described in the Guarantee and
Collateral Agreement, when financing statements and other filings specified on
Schedule 3.19 in appropriate form are filed in the offices specified on Schedule
3.19, the Guarantee and Collateral Agreement shall constitute a fully perfected
Lien on, and security interest in, all right, title and interest of the Loan
Parties in such Collateral and the proceeds thereof, as security for the
Obligations (as defined in the Guarantee and Collateral Agreement), in each case
prior and superior in right to any other Person (except, in the case of
Collateral other than Pledged Stock, Liens permitted by Section 6.3).
3.20 Solvency. Each Loan Party is, and after giving effect to
the incurrence of all Indebtedness and obligations being incurred in connection
herewith and therewith will be and will continue to be, Solvent.
3.21 Year 2000 Matters. Reprogramming required to permit the
proper functioning (but only to the extent that such proper functioning would
otherwise be impaired by the occurrence of the year 2000) in and following the
year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by the Borrower or any of its
Subsidiaries or used or relied upon in the conduct of their business (including
any such systems and other equipment supplied by others or with which the
computer systems of the Borrower or any of its Subsidiaries interface), and the
testing of all such systems and other equipment as so reprogrammed, have been
substantially completed. The costs to the Borrower and its Subsidiaries for such
reprogramming and testing and for the other reasonably foreseeable consequences
to them of any improper functioning of other computer systems and equipment
containing embedded microchips due to the occurrence of the year 2000 could not
reasonably be expected to result in a Default or Event of Default or to have a
Material Adverse Effect. The computer systems of the Borrower and its
Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, sufficient for the conduct of
their business as currently conducted.
3.22 Certain Documents. The Borrower has delivered to each
Lender a complete and correct copy of the Indenture and the Security and Pledge
Agreement, including any amendments, supplements or modifications with respect
thereto.
<PAGE>
3.23 FCC Matters. The Borrower and each of its Subsidiaries
has duly and timely filed all material filings which are required to be filed by
it under the Communications Act, and is in all material respects in compliance
with the Communications Act, including, without limitation, Section 310 thereof,
and the rules and regulations of the FCC relating thereto (the "FCC Rules").
Each of the Borrower, SAH-Northeast and SAH-Houston is qualified to control, and
each of SAH-New York License Subsidiary, SAH-Boston License Subsidiary,
SAH-Houston License Subsidiary and SAH II is qualified to be, a broadcast
licensee under the Communications Act and the FCC Rules. Schedule 3.23 lists all
of the material FCC Licenses and all other material permits, authorizations and
licenses of any Governmental Authorities granted or assigned, or to be granted
or assigned, to the Borrower and its Subsidiaries in connection with the
operation of the television stations owned by the Borrower and its Subsidiaries
(collectively, the "Licenses"), and such Licenses are the only material
authorizations, licenses and permits necessary for the conduct of the businesses
of the Borrower and its Subsidiaries as of the Closing Date. All of such
Licenses are issued in the name of, or have been validly assigned to, SAH-New
York License Subsidiary, SAH-Boston License Subsidiary, SAH-Houston License
Subsidiary or SAH II, as the case may be, and are validly issued and in full
force and effect, and the Borrower and its Subsidiaries have fulfilled and
performed all of their material obligations with respect thereto and have full
power and authority to operate thereunder, and all consents to the assignment of
the Licenses or the transfer of control of the television stations which are
owned by the Borrower and its Subsidiaries on the Closing Date, have been
approved by the FCC.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Extension of Credit. The agreement
of each Lender to make the initial extension of credit requested to be made by
it is subject to the satisfaction, prior to or concurrently with the making of
such extension of credit on the Closing Date (but in any event no later than
December 15, 1999), of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have
received (i)this Agreement, executed and delivered by the Administrative
Agent, the Borrower and each Person listed on Schedule 1.1, (ii) if requested
by any Lender, a Note payable to such Lender, substantially in the form of
Exhibit E, (iii) the Guarantee and Collateral Agreement, executed and
delivered by the Borrower and each Subsidiary Guarantor, (iv) an Acknowledgment
and Consent in the form attached to the Guarantee and Collateral Agreement,
executed and delivered by each Issuer (as defined therein), if any, that is
not a Loan Party and (v) the Intercreditor Agreement, executed and delivered
by the Administrative Agent, the Trustee, the Borrower, SAH-Houston, as
successor to Broadcast, Cable and Satellite Technologies, Inc., and
SAH-Northeast.
<PAGE>
(b) Pro Forma Balance Sheet; Financial Statements. The Lenders
shall have received (i) the Pro Forma Balance Sheet, (ii) audited
consolidated financial statements of the Borrower for the 1996, 1997, 1998 and
1999 fiscal years and (iii) unaudited interim consolidated financial statements
of the Borrower for the fiscal quarter ended September 30, 1999 and, to the
extent available, the fiscal month ended October 31, 1999, and such financial
statements shall not, in the reasonable judgment of the Lenders, reflect any
material adverse change in the consolidated financial condition of the Borrower,
as reflected in the financial statements or projections delivered to the
Lenders prior to their execution and delivery of this Agreement.
(c) Projections. The Lenders shall have received a detailed
consolidated budget of the Borrower for the 2000, 2001 and 2002 fiscal years in
form acceptable to the Administrative Agent (including projected consolidated
balance sheets and related statements of projected operations and cash flow,
projected capital expenditures and a description of the underlying assumptions
applicable thereto).
(d) Approvals. All governmental and third party approvals
(including landlords' and other consents) necessary in connection with the
continuing operations of the Borrower and its Subsidiaries and the transactions
contemplated hereby shall have been obtained and be in full force and effect,
and all applicable waiting periods shall have expired without any action being
taken or threatened by any competent authority that would restrain, prevent or
otherwise impose adverse conditions on the financing contemplated hereby.
(e) Lien Searches. The Administrative Agent shall have
received the results of a recent lien search in each of the jurisdictions where
assets of the Loan Parties are located, and such search shall reveal no liens
on any of the assets of the Borrower or its Subsidiaries except for liens
permitted by Section 6.3 or discharged on or prior to the Closing Date
pursuant to documentation satisfactory to the Administrative Agent.
(f) Fees. The Lenders and the Administrative Agent shall have
received all fees required to be paid, and all expenses for which invoices
have been presented (including the reasonable fees and expenses of legal
counsel), on or before the Closing Date. All such amounts will be paid with
proceeds of Loans made on the Closing Date and will be reflected in the funding
instructions given by the Borrower to the Administrative Agent on or before the
Closing Date.
(g) Closing Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of each Loan Party,
dated the Closing Date, substantially in the form of Exhibit C, with
appropriate insertions and attachments.
(h) Legal Opinions. The Administrative Agent shall have
received the following executed legal opinions:
(i) the legal opinion of Wyatt, Tarrant & Combs,
counsel to the Borrower and its Subsidiaries, substantially in the form of
Exhibit F-1; and
(ii) the legal opinion of Wiley, Rein & Fielding,
special FCC counsel to the Borrower and its Subsidiaries, substantially in
the form of Exhibit F-2.
<PAGE>
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent
may reasonably require.
(i) Pledged Stock; Stock Powers; Pledged Notes. The
Administrative Agent shall have received (i) the certificates representing the
shares of Capital Stock pledged pursuant to the Guarantee and Collateral
Agreement, together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the pledgor thereof and (ii)
each promissory note (if any) pledged to the Administrative Agent pursuant to
the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or
accompanied by an executed transfer form in blank) by the pledgor thereof.
(j) Filings, Registrations and Recordings. Each document
(including any Uniform Commercial Code financing statement) required by the
Security Documents or under law or reasonably requested by the Administrative
Agent to be filed, registered or recorded in order to create in favor of the
Administrative Agent, for the benefit of the Lenders, a perfected Lien on the
Collateral described therein, prior and superior in right to any other Person
(other than with respect to Liens expressly permitted by Section 6.3), shall be
in proper form for filing, registration or recordation.
(k) Insurance. The Administrative Agent shall have received
insurance certificates satisfying the requirements of Section 5.2 of the
Guarantee and Collateral Agreement.
(l) License Subsidiaries. The Administrative Agent shall have
received copies of such documentation as it may reasonably request evidencing
the matters set forth in Section 3.23.
(m) Representations and Warranties. Each of the
representations and warranties made by any Loan Party in or pursuant to the Loan
Documents shall be true and correct on and as of the Closing Date as if made on
and as of such Date.
(n) No Default. No Default or Event of Default shall have
occurred and be continuing on the Closing Date or after giving effect to the
extensions of credit requested to be made on such Date.
4.2 Conditions to Each Extension of Credit. The agreement of
each Lender to make any extension of credit requested to be made by it on any
date (including its initial extension of credit) is subject to the satisfaction
of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by any Loan Party in or pursuant to the Loan
Documents shall be true and correct on and as of such date as if made on and as
of such date.
<PAGE>
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the extensions
of credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 4.2 have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender or the Administrative Agent hereunder, the
Borrower shall and shall cause each of its Subsidiaries to:
5.1 Financial Statements. Furnish to the Administrative Agent
and each Lender:
(a) as soon as available, but in any event within 120 days
after the end of each fiscal year of the Borrower, a copy of the audited
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at the end of such year and the related audited consolidated statements of
income and of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification arising out of the
scope of the audit, by PricewaterhouseCoopers LLP or other independent certified
public accountants of nationally recognized standing acceptable to the
Administrative Agent;
(b) as soon as available, but in any event not later than 45
days after the end of each of the quarterly periods of each fiscal year of the
Borrower, the unaudited consolidated balance sheet of the Borrower and it
consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and of cash flows for such quarter
and the portion of the fiscal year through the end of such quarter, setting
forth in each case in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than 30
days after the end of each month occurring during each fiscal year of the
Borrower, the unaudited consolidated balance sheets of the Borrower and its
Subsidiaries as at the end of such month and the related unaudited consolidated
statements of income for such month and the portion of the fiscal year through
the end of such month, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end audit
adjustments).
<PAGE>
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
5.2 Certificates; Other Information. Furnish to the
Administrative Agent and each Lender (or, in the case of clause (h), to the
relevant Lender):
(a) concurrently with the delivery of the financial statements
referred to in Section 5.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 5.1, (i) a certificate of a Responsible Officer stating
that, to each such Responsible Officer's knowledge, each Loan Party during such
period has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and the other Loan
Documents to which it is a party to be observed, performed or satisfied by it,
and that such Responsible Officer has obtained no knowledge of any Default or
Event of Default except as specified in such certificate and (ii) in the case of
quarterly or annual financial statements, (x) a Compliance Certificate
containing all information and calculations necessary for determining compliance
by the Borrower and its Subsidiaries with the provisions of this Agreement
referred to therein as of the last day of the fiscal quarter or fiscal year of
the Borrower, as the case may be, and (y) to the extent not previously disclosed
to the Administrative Agent, a listing of any county or state within the United
States where any Loan Party keeps inventory or equipment and of any Intellectual
Property acquired by any Loan Party since the date of the most recent list
delivered pursuant to this clause (y) (or, in the case of the first such list so
delivered, since the Closing Date);
(c) as soon as available, and in any event no later than 45
days after the end of each fiscal year of the Borrower, a detailed consolidated
budget for the following fiscal year in form acceptable to the Administrative
Agent (including a projected consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of the following fiscal year, the related
consolidated statements of projected cash flow, projected changes in financial
position and projected income and a description of the underlying assumptions
applicable thereto) and a summary statement of projected cash flow, projected
changes in financial position and projected income through the Termination Date,
and, as soon as available, significant revisions, if any, of such budget and
projections with respect to such fiscal year or such period through the
Termination Date, as the case may be (collectively, the "Projections"), which
Projections shall in each case be accompanied by a certificate of a Responsible
Officer stating that such Projections are based on reasonable estimates,
information and assumptions and that such Responsible Officer has no reason to
believe that such Projections are incorrect or misleading in any material
respect;
<PAGE>
(d) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a), 5.1(b) and 5.1(c), an analysis of the Borrower's
financial condition and results of operations in comparison to the budget for
such period, certified by a Responsible Officer as being fairly stated in all
material respects (subject to normal year-end audit adjustments);
(e) within 45 days after the end of each fiscal quarter of the
Borrower, a narrative discussion and analysis of the financial condition and
results of operations of the Borrower and its Subsidiaries for such fiscal
quarter and for the period from the beginning of the then current fiscal year to
the end of such fiscal quarter, as compared to the portion of the Projections
covering such periods and to the comparable periods of the previous year;
(f) no later than 10 Business Days prior to the effectiveness
thereof, copies of substantially final drafts of any proposed amendment,
supplement, waiver or other modification with respect to the Indenture or the
Security and Pledge Agreement;
(g) within five days after the same are sent, copies of all
financial statements and reports that the Borrower sends to the holders of any
class of its debt securities or public equity securities and, within five days
after the same are filed, copies of all financial statements and reports that
the Borrower may make to, or file with, the SEC; and
(h) promptly, such additional financial and other information
as the Administrative Agent or any Lender may from time to time reasonably
request.
5.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its material obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Borrower or its Subsidiaries, as the case may be.
5.4 Maintenance of Existence; Compliance. (a)(i) Preserve,
renew and keep in full force and effect its corporate existence and (ii) take
all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business, except, in each
case, as otherwise permitted by Section 6.4 and except, in the case of clause
(ii) above, to the extent that failure to do so could not reasonably be expected
to have a Material Adverse Effect; and (b) comply with all Contractual
Obligations and Requirements of Law (including obligations under any License)
except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
<PAGE>
5.5 Maintenance of Property; Insurance. (a) Keep all property
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted and (b) maintain with financially sound and
reputable insurance companies insurance on all its property in at least such
amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business.
5.6 Inspection of Property; Books and Records; Discussions.
(a) Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities and (b)
permit representatives of any Lender to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Borrower and its Subsidiaries with officers and employees of the Borrower and
its Subsidiaries and with its independent certified public accountants.
5.7 Notices. Promptly give notice to the Administrative Agent
and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding that may exist at any time between the Borrower or
any of its Subsidiaries and any Governmental Authority, that in either case, if
not cured or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any
of its Subsidiaries (i) in which the amount involved is $250,000 or more and not
covered by insurance, (ii) in which injunctive or similar relief is sought or
(iii) which relates to any Loan Document;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to make
any required contribution to a Plan, the creation of any Lien in favor of the
PBGC or a Plan or any withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or
the taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of, any Plan; and
(e) any development or event that has had or could reasonably
be expected to have a Material Adverse Effect.
Each notice pursuant to this Section 5.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower or the relevant Subsidiary proposes
to take with respect thereto.
<PAGE>
5.8 Environmental Laws; Environmental Audits. (a) Comply in
all material respects with, and ensure compliance in all material respects by
all tenants and subtenants, if any, with, all applicable Environmental Laws, and
obtain and comply in all material respects with and maintain, and ensure that
all tenants and subtenants obtain and comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws.
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.
(c) At the request of the Administrative Agent, as soon as
practicable, but in any event not later than 60 days after any such request,
deliver to the Administrative Agent an environmental audit with respect to the
real properties of the Borrower and its Subsidiaries specified by the
Administrative Agent.
5.9 Additional Collateral, etc. (a) With respect to any
property acquired after the Closing Date by the Borrower or any of its
Subsidiaries (other than (i) any property described in paragraph (b), (c) or (d)
below, (ii) any property subject to a Lien expressly permitted by Section 6.3(g)
and (iii) property acquired by any Excluded Foreign Subsidiary) as to which the
Administrative Agent, for the benefit of the Lenders, does not have a perfected
Lien, promptly (x) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement or such other documents as
the Administrative Agent deems necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a security interest in
such property and (y) take all actions necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected first priority
security interest in such property, including the filing of Uniform Commercial
Code financing statements in such jurisdictions as may be required by the
Guarantee and Collateral Agreement or by law or as may be requested by the
Administrative Agent; provided that until the Senior Secured Notes have been
paid or legally defeased in full, neither the Borrower nor any of its
Subsidiaries shall be required to take the actions described in this Section
5.9(a) with respect to (x) any property acquired by an Excluded Subsidiary or
(y) with respect to the Borrower, any property not of the type pledged by the
Borrower pursuant to the Guarantee and Collateral Agreement.
<PAGE>
(b) With respect to any fee interest in any real property
having a value (together with improvements thereof) of at least $500,000
acquired after the Closing Date by the Borrower or any of its Subsidiaries
(other than (i) any such real property subject to a Lien expressly permitted by
Section 6.3(g) and (ii) real property acquired by any Excluded Foreign
Subsidiary), promptly notify the Lenders of such acquisition and, if requested
by the Administrative Agent, promptly following such request (x) execute and
deliver a first priority mortgage, in favor of the Administrative Agent, for the
benefit of the Lenders, covering such real property, (y) provide the Lenders
with (A) title and extended coverage insurance covering such real property in an
amount at least equal to the purchase price of such real property (or such other
amount as shall be reasonably specified by the Administrative Agent) as well as
a current ALTA survey thereof, together with a surveyor's certificate and (B)
any consents or estoppels reasonably deemed necessary or advisable by the
Administrative Agent in connection with such mortgage or deed of trust, each of
the foregoing in form and substance reasonably satisfactory to the
Administrative Agent and (z) deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent; provided that until the Senior Secured Notes have been paid or legally
defeased in full, neither the Borrower nor any of its Subsidiaries shall be
required to take the actions described in this Section 5.9(b) with respect to
any such real property acquired by the Borrower or an Excluded Subsidiary.
(c) With respect to any new Subsidiary (other than an Excluded
Foreign Subsidiary) created or acquired after the Closing Date by the Borrower
or any of its Subsidiaries (which, for the purposes of this paragraph (c), shall
include any existing Subsidiary that ceases to be an Excluded Foreign
Subsidiary), promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative Agent
deems necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary that is owned by the Borrower or any of its
Subsidiaries, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers, in blank,
executed and delivered by a duly authorized officer of the Borrower or such
Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a
party to the Guarantee and Collateral Agreement, (B) to take such actions
necessary or advisable to grant to the Administrative Agent for the benefit of
the Lenders a perfected first priority security interest in the Collateral
described in the Guarantee and Collateral Agreement with respect to such new
Subsidiary, including the filing of Uniform Commercial Code financing statements
in such jurisdictions as may be required by the Guarantee and Collateral
Agreement or by law or as may be requested by the Administrative Agent and (C)
to deliver to the Administrative Agent a certificate of such Subsidiary,
substantially in the form of Exhibit C, with appropriate insertions and
attachments, and (iv) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent; provided that until the Senior Secured
Notes have been paid or legally defeased in full, neither the Borrower nor any
of its Subsidiaries shall be required to take the actions described in this
Section 5.9(c) with respect to any such new Subsidiary that is an Excluded
Subsidiary.
<PAGE>
(d) With respect to any new Excluded Foreign Subsidiary
created or acquired after the Closing Date by the Borrower or any of its
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative Agent
deems necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary that is owned by the Borrower or any of its
Subsidiaries (provided that in no event shall more than 66% of the total
outstanding Capital Stock of any such new Subsidiary be required to be so
pledged), (ii) deliver to the Administrative Agent the certificates representing
such Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Borrower or such Subsidiary, as
the case may be, and take such other action as may be necessary or, in the
opinion of the Administrative Agent, desirable to perfect the Administrative
Agent's security interest therein, and (iii) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent; provided that
until the Senior Secured Notes have been paid or legally defeased in full,
neither the Borrower nor any of its Subsidiaries shall be required to take the
actions described in this Section 5.9(d) with respect to any such new Excluded
Foreign Subsidiary that is an Excluded Subsidiary.
(e) Upon the payment or legal defeasance in full of the Senior
Secured Notes, with respect to any property of the Borrower (other than (i) any
property described in paragraph (f) or (g) below and (ii) any property subject
to a Lien expressly permitted by Section 6.3(g)) as to which the Administrative
Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly
(x) execute and deliver to the Administrative Agent such amendments to the
Guarantee and Collateral Agreement or such other documents as the Administrative
Agent deems necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a security interest in such property and (y) take all
actions necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in such
property, including the filing of Uniform Commercial Code financing statements
in such jurisdictions as may be required by the Guarantee and Collateral
Agreement or by law or as may be requested by the Administrative Agent.
(f) Upon the payment or legal defeasance in full of the Senior
Secured Notes, with respect to any real property having a value (together with
improvements thereof) of at least $500,000 of the Borrower or any Excluded
Subsidiary (other than (i) any such real property subject to a Lien expressly
permitted by Section 6.3(g) and (ii) real property of any Excluded Foreign
Subsidiary), if requested by the Administrative Agent, promptly following such
request (x) execute and deliver a first priority mortgage, in favor of the
Administrative Agent, for the benefit of the Lenders, covering such real
property, (y) provide the Lenders with (A) title and extended coverage insurance
covering such real property in an amount at least equal to the purchase price of
such real property (or such other amount as shall be reasonably specified by the
Administrative Agent) as well as a current ALTA survey thereof, together with a
surveyor's certificate and (B) any consents or estoppels reasonably deemed
necessary or advisable by the Administrative Agent in connection with such
mortgage or deed of trust, each of the foregoing in form and substance
reasonably satisfactory to the Administrative Agent and (z) deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
<PAGE>
(g) Upon the payment or legal defeasance in full of the Senior
Secured Notes, with respect to each Excluded Subsidiary (other than an Excluded
Foreign Subsidiary), (x) promptly (i) execute and deliver to the Administrative
Agent such amendments to the Guarantee and Collateral Agreement as the
Administrative Agent deems necessary or advisable to grant to the Administrative
Agent, for the benefit of the Lenders, a perfected first priority security
interest in the Capital Stock of such Excluded Subsidiary, (ii) deliver to the
Administrative Agent the certificates representing such Capital Stock, together
with undated stock powers, in blank, executed and delivered by a duly authorized
officer of the Borrower or of any Subsidiary of the Borrower that is the owner
of such Capital Stock, as the case may be, (iii) cause such Excluded Subsidiary
(A) to become a party to the Guarantee and Collateral Agreement, (B) to take
such actions necessary or advisable to grant to the Administrative Agent for the
benefit of the Lenders a perfected first priority security interest in the
Collateral described in the Guarantee and Collateral Agreement with respect to
such Excluded Subsidiary, including the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be required by the Guarantee
and Collateral Agreement or by law or as may be requested by the Administrative
Agent, (C) to deliver to the Administrative Agent a certificate of such Excluded
Subsidiary, substantially in the form of Exhibit C, with appropriate insertions
and attachments, and (D) create a license subsidiary and file with the FCC an
application to permit the transfer to such license subsidiary of the FCC
Licenses for all television stations owned directly or indirectly by such
Excluded Subsidiary, and (iv) if requested by the Administrative Agent, deliver
to the Administrative Agent legal opinions relating to the matters described
above, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent and (y) use its best efforts
to cause any license subsidiary created pursuant to clause (x)(iii)(D) to be
qualified to be a broadcast licensee under the Communications Act and the FCC
Rules and to cause each applicable License to be validly issued in the name of,
or be validly assigned to, such license subsidiary, and take all steps necessary
such that such license subsidiary shall have full power and authority to operate
under such licenses.
5.10 FCC Licenses. (a) With respect to any FCC License
acquired after the Closing Date by the Borrower or any Subsidiary Guarantor
(other than a License Subsidiary), promptly transfer such FCC License to a
License Subsidiary.
<PAGE>
(b) Notwithstanding anything herein to the contrary, to the
extent this Agreement or any other Loan Document purports to require any Loan
Party to grant to the Administrative Agent, on behalf of the Lenders, a security
interest in the FCC Licenses of any Loan Party now owned or hereafter acquired,
as the case may be, the Administrative Agent, on behalf of the Lenders, shall
only have a security interest in such FCC Licenses at such times and to the
extent that a security interest in such licenses is permitted under applicable
law. Notwithstanding anything to the contrary contained herein or in the other
Loan Documents, the Administrative Agent will not take any action pursuant to
this Agreement or any other Loan Document that would constitute or result in any
assignment of any FCC License or any change of control of any Loan Party without
first obtaining the prior approval of the FCC or any other Governmental
Authority, if, under the then existing law, such assignment of any FCC License
or change of control would require the prior approval of the FCC or such other
Governmental Authority. Prior to the exercise by the Administrative Agent of any
power, right, privilege or remedy pursuant to this Agreement which requires any
consent, approval, recording, qualification or authorization of the FCC or any
other Governmental Authority, the Borrower will execute and deliver, or will
cause the execution and delivery of, all applications, certificates, instruments
and other documents and papers that the Administrative Agent reasonably
determines may be required to obtain for such consent, approval, recording,
qualification or authorization. Without limiting the generality of the
foregoing, the Borrower will use its good faith efforts upon the reasonable
request of the Administrative Agent to assist in obtaining from the FCC or such
other Governmental Authority the necessary consents and approvals, if any, for
the assignment or transfer of such authorizations, licenses and permits to the
Administrative Agent or its designee upon or following acceleration of the
payment of the Loans in accordance with the provisions hereof.
5.11 Release of Filings. Promptly, and in any event prior to
January 31, 2000, cause each Uniform Commercial Code financing statement filed
with respect to the Borrower or any Subsidiary Guarantor and outstanding on the
Closing Date (other than any such financing statement relating to Liens
permitted by Section 6.3) to be released and deliver copies of the applicable
termination statements to the Administrative Agent.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender or the Administrative Agent hereunder, the
Borrower shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly:
6.1 Financial Condition Covenants.
(a) Covenants Prior to Achievement of Positive Consolidated
Internet EBITDA. Unless Consolidated Internet EBITDA for at least one fiscal
quarter of the Borrower ending on or prior to March 31, 2001 is greater than
zero:
(i) (A) (x) Permit Consolidated Core EBITDA as at the last day
of any period of four consecutive fiscal quarters of the Borrower ending
with any fiscal quarter set forth below to be less than the amount set
forth below opposite such fiscal quarter or (y) permit Consolidated Internet
EBITDA as at the last day of any period of four consecutive fiscal quarters of
the Borrower ending with any fiscal quarter set forth below to be less than
the amount set forth below opposite such fiscal quarter and (B) permit
Consolidated EBITDA as at the last day of any four consecutive fiscal quarters
of the Borrower ending with any fiscal quarter set forth below to be less
than the amount set forth below opposite such fiscal quarter:
<TABLE>
<CAPTION>
Maximum Consolidated
Minimum Consolidated Internet Minimum Consolidated
Core EBITDA EBITDA Losses EBITDA
<S> <C> <C> <C> <C>
Fiscal Quarter
December 31, 1999 $8,350,000 ($2,350,000) $6,675,000
March 31, 2000 $10,400,000 ($10,100,000) $2,100,000
June 30, 2000 $15,500,000 ($15,100,000) $3,715,000
Maximum Consolidated
Minimum Consolidated Internet Minimum Consolidated
Core EBITDA EBITDA Losses EBITDA
Fiscal Quarter
September 30, 2000 $20,650,000 ($17,900,000) $6,850,000
December 31, 2000 $25,000,000 ($17,400,000) $11,850,000
March 31, 2001 $29,500,000 ($8,900,000) $23,300,000
</TABLE>
(ii) Permit the ratio of Consolidated Core EBITDA to
Consolidated Interest Expense for any period of four consecutive fiscal quarters
of the Borrower ending with any fiscal quarter set forth below to be less than
the ratio set forth opposite such fiscal quarter:
Minimum Core
EBITDA to
Fiscal Quarter Interest Expense
December 31, 1999 1.00 to 1.0
March 31, 2000 1.20 to 1.0
June 30, 2000 1.50 to 1.0
September 30, 2000 1.75 to 1.0
December 31, 2000 1.75 to 1.0
March 31, 2001 1.75 to 1.0
(b) Covenants After Achievement of Positive Consolidated
Internet EBITDA. If Consolidated Internet EBITDA for any fiscal quarter of the
Borrower ending on or prior to March 31, 2001 shall be greater than zero:
(i) Permit the Consolidated Leverage Ratio as at the last day
of any period of four consecutive fiscal quarters of the Borrower ending with
any fiscal quarter set forth below to exceed the ratio set forth below opposite
such fiscal quarter:
Consolidated
Fiscal Quarter Leverage Ratio
June 30, 2001 6.00 to 1.0
September 30, 2001 5.00 to 1.0
Consolidated
Fiscal Quarter Leverage Ratio
December 31, 2001 4.00 to 1.0
March 31, 2002 3.50 to 1.0
June 30, 2002 3.00 to 1.0
and thereafter
(ii) Permit the Consolidated Interest Coverage Ratio for any
period of four consecutive fiscal quarters of the Borrower ending with any
fiscal quarter set forth below to be less than the ratio set forth opposite such
fiscal quarter:
Consolidated Interest
Fiscal Quarter Coverage Ratio
June 30, 2001 2.00 to 1.0
September 30, 2001 2.00 to 1.0
December 31, 2001 2.50 to 1.0
and thereafter
(iii) Permit the Pro Forma Debt Service Ratio as at the last
day of any period of four consecutive fiscal quarters of the Borrower ending
June 30, 2001 or thereafter to be less than 1.50 to 1.0.
(iv) Permit the Consolidated Fixed Charge Coverage Ratio for
any period of four consecutive fiscal quarters of the Borrower ending with the
fiscal quarter ending June 30, 2001 or any fiscal quarter thereafter to be less
than 1.10 to 1.0.
(c) Covenants Applicable Throughout the Commitment Period.
(i) Make or commit to make any Capital Expenditure, except
Capital Expenditures of the Borrower and its Subsidiaries (A) in the amount of
$10,500,000 in the nine-month period ending June 30, 2000, (B) in the amount of
$6,200,000 in the fiscal year ending June 30, 2001 and (C) in the amount of
$3,000,000 thereafter through the Termination Date.
(ii) Permit unrestricted cash balances to be less than
$5,000,000 at any time.
6.2 Indebtedness. Create, issue, incur, assume, become
liable in respect of or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan
Document;
(b) Indebtedness of the Borrower to any Subsidiary and of any
Wholly Owned Subsidiary Guarantor (and, so long as the Senior Secured Notes have
not been paid or legally defeased in full, any other Restricted Subsidiary (as
defined in the Indenture)) to the Borrower or any other Subsidiary;
(c) Guarantee Obligations incurred in the ordinary course of
business by the Borrower or any of its Subsidiaries of obligations of any Wholly
Owned Subsidiary Guarantor;
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 6.2(d) and any refinancings, refundings, renewals or extensions thereof
(without increasing, or shortening the maturity of, the principal amount
thereof);
(e) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted by Section 6.3(g) in an aggregate
principal amount not to exceed $3,000,000 at any one time outstanding;
(f) (i) Indebtedness of the Borrower in respect of the Senior
Secured Notes in an aggregate principal amount not to exceed $75,000,000 and
(ii) Guarantee Obligations of any Subsidiary in respect of such Indebtedness if
such Guarantee Obligations are required by the Indenture; and
(g) Hedge Agreements in respect of Indebtedness otherwise
permitted hereby that bears interest at a floating rate, so long as such
agreements are not entered into for speculative purposes.
6.3 Liens. Create, incur, assume or suffer to exist any Lien
upon any of its property, whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or that are being contested in
good faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower or its Subsidiaries,
as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business that
are not overdue for a period of more than 30 days or that are being contested in
good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
<PAGE>
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the aggregate,
are not substantial in amount and that do not in any case materially detract
from the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof listed on Schedule
6.3(f), securing Indebtedness permitted by Section 6.2(d), provided that no such
Lien is spread to cover any additional property after the Closing Date and that
the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower or any other
Subsidiary incurred pursuant to Section 6.2(e) to finance the acquisition of
fixed or capital assets, provided that (i) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any property other than the
property financed by such Indebtedness and (iii) the amount of Indebtedness
secured thereby is not increased;
(h) Liens created pursuant to the Security Documents;
(i) Liens existing on the date hereof securing Indebtedness
permitted by Section 6.2(f); and
(j) any interest or title of a lessor under any lease entered
into by the Borrower or any other Subsidiary in the ordinary course of its
business and covering only the assets so leased.
6.4 Fundamental Changes. Enter into any merger, consolidation
or amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of, all or substantially all of its
property or business, except that:
(a) any Subsidiary of the Borrower (other than a License
Subsidiary) may be merged or consolidated with or into the Borrower (provided
that the Borrower shall be the continuing or surviving corporation) or with or
into any Wholly Owned Subsidiary Guarantor other than a License Subsidiary
(provided that the Wholly Owned Subsidiary Guarantor shall be the continuing or
surviving corporation); and
(b) any Subsidiary of the Borrower (other than a License
Subsidiary) may Dispose of any or all of its assets (upon voluntary liquidation
or otherwise) to the Borrower or any Wholly Owned Subsidiary Guarantor (and, so
long as the Senior Secured Notes have not been paid or legally defeased in full,
any other Subsidiary, provided that any Disposition of assets from the Borrower
or any Subsidiary Guarantor to any Excluded Subsidiary must be for cash at the
fair market value of such assets).
<PAGE>
6.5 Disposition of Property. Dispose of any of its property,
whether now owned or hereafter acquired, or, in the case of any Subsidiary,
issue or sell any shares of such Subsidiary's Capital Stock to any Person,
except:
(a) the Disposition of obsolete or worn out property in the
ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 6.4(b);
(d) to the extent not covered by Section 6.4(b), Dispositions
of assets of the Borrower or any Subsidiary (other than any assets of any
License Subsidiary or any shares of Capital Stock of a License Subsidiary) to
the Borrower or any Wholly Owned Subsidiary Guarantor (and, so long as the
Senior Secured Notes have not been paid or legally defeased in full, any other
Subsidiary; provided that any Disposition of assets from the Borrower or any
Subsidiary Guarantor to any Excluded Subsidiary must be for cash at the fair
market value of such assets);
(e) the issuance of the Capital Stock of any Wholly Owned
Subsidiary Guarantor to the Borrower or any Wholly Owned Subsidiary Guarantor;
(f) Dispositions of the Capital Stock or assets of Collector's
Edge of Tennessee, Inc.; and
(g) so long as no Default or Event of Default has occurred and
is continuing, Dispositions of any Collateral consisting of assets relating to
any of the Television Stations; provided that the Net Cash Proceeds of any such
Disposition shall be, first, applied to the prepayment of the Loans pursuant to
Section 2.6(b) and, second, at the option of the Borrower, either (x) held by
the Administrative Agent as collateral security for the Obligations in a cash
collateral account established with the Administrative Agent and reinvested not
later than 365 days after such Disposition in similar assets acceptable to the
Administrative Agent or (y) applied to the redemption or legal defeasance of all
(but not less than all) of the outstanding Senior Secured Notes.
(h) so long as no Default or Event of Default has occurred and
is continuing, Dispositions of Indenture Collateral consisting of assets
relating to any of the Television Stations; provided that so long as the Senior
Secured Notes have not been paid or legally defeased in full, the Net Cash
Proceeds of any such Disposition shall be applied in accordance with the
Indenture; provided, further, that any Net Cash Proceeds remaining after the
Senior Secured Notes have been paid or legally defeased in full shall be applied
in accordance with paragraph (g).
(i) the Disposition of other property having a fair market
value not to exceed $250,000 in the aggregate for any fiscal year of the
Borrower.
<PAGE>
6.6 Restricted Payments. Declare or pay any dividend (other
than dividends payable solely in common stock of the Person making such
dividend) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any Capital Stock of the Borrower or any
Subsidiary, whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of the Borrower or any Subsidiary (collectively, "Restricted
Payments"), except that (i) any Subsidiary may make Restricted Payments to the
Borrower or any Wholly Owned Subsidiary Guarantor, (ii) so long as the Senior
Secured Notes have not been paid or legally defeased in full, any Excluded
Subsidiary may make Restricted Payments to any other Excluded Subsidiary and
(iii) so long as no Default or Event of Default has occurred and is continuing,
the Borrower may (A) pay dividends on the Series A Preferred Stock in an
aggregate amount not to exceed $25,000 in any fiscal year and (B) to the extent
required by the terms of the Series A Preferred Stock, make payments on account
of the redemption of the Series A Preferred Stock in an aggregate amount not to
exceed $1,200,000.
6.7 Investments. Make any advance, loan, extension of credit
(by way of guaranty or otherwise) or capital contribution to, or purchase any
Capital Stock, bonds, notes, debentures or other debt securities of, or any
assets constituting a business unit of, or make any other investment in, any
Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 6.2;
(d) loans and advances to employees of the Borrower or any
Subsidiary of the Borrower in the ordinary course of business (including for
travel, entertainment and relocation expenses) in an aggregate amount for the
Borrower or any Subsidiary of the Borrower not to exceed $200,000 at any one
time outstanding;
(e) loans and advances made by the Borrower or any of its
Subsidiaries to the Borrower or any Wholly Owned Subsidiary Guarantor (or, so
long as the Senior Secured Notes have not been paid or legally defeased in full,
any Excluded Subsidiary); and
(f) intercompany Investments (other than loans and advances)
made by the Borrower or any of its Subsidiaries in the Borrower or any Person
that, prior to such investment, is a Wholly Owned Subsidiary Guarantor.
<PAGE>
6.8 Optional Payments and Modifications of Certain Debt
Instruments. (a) Make or offer to make any optional or voluntary payment,
prepayment, repurchase or redemption of or otherwise optionally or voluntarily
defease or segregate funds with respect to the Senior Secured Notes, other than
as permitted by Sections 6.5(g) and (h), (b) amend, modify, waive or otherwise
change, or consent or agree to any amendment, modification, waiver or other
change to, any of the terms of the Senior Secured Notes (other than any such
amendment, modification, waiver or other change that (i) would extend the
maturity or reduce the amount of any payment of principal thereof or reduce the
rate or extend any date for payment of interest thereon and (ii) does not
involve the payment of a consent fee) or (c) amend, modify, waive or otherwise
change, or consent to agree to any amendment, modification, waiver or other
change to, any of the terms of the Series A Preferred Stock (other than any such
amendment, modification, waiver or other change that (i) would extend the
scheduled redemption date or reduce the amount of any scheduled redemption
payment or reduce the rate or extend any date for payment of dividends thereon
and (ii) does not involve the payment of a consent fee).
6.9 Transactions with Affiliates. Enter into any transaction,
including any purchase, sale, lease or exchange of property, the rendering of
any service or the payment of any management, advisory or similar fees, with any
Affiliate (other than the Borrower or any Wholly Owned Subsidiary Guarantor)
unless such transaction is (a) otherwise permitted under this Agreement, (b) in
the ordinary course of business of the Borrower or such Subsidiary, as the case
may be, and (c) upon fair and reasonable terms no less favorable to the Borrower
or such Subsidiary, as the case may be, than it would obtain in a comparable
arm's length transaction with a Person that is not an Affiliate.
6.10 Sales and Leasebacks. Enter into any arrangement with any
Person providing for the leasing by the Borrower or any Subsidiary of real or
personal property that has been or is to be sold or transferred by the Borrower
or such Subsidiary to such Person or to any other Person to whom funds have been
or are to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such Subsidiary.
6.11 Changes in Fiscal Periods. Permit the fiscal year of the
Borrower to end on a day other than June 30 or change the Borrower's method of
determining fiscal quarters.
6.12 Negative Pledge Clauses. Enter into or suffer to exist or
become effective any agreement (other than the Indenture and the Security and
Pledge Agreement) that prohibits or limits the ability of the Borrower or any of
its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any
of its property or revenues, whether now owned or hereafter acquired, to secure
its obligations under the Loan Documents to which it is a party other than (a)
this Agreement and the other Loan Documents and (b) any agreements governing any
purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in
which case, any prohibition or limitation shall only be effective against the
assets financed thereby).
<PAGE>
6.13 Clauses Restricting Subsidiary Distributions. Enter into
or suffer to exist or become effective any consensual encumbrance or restriction
(other than any such encumbrance or restriction contained in the Indenture or
the Security and Pledge Agreement) on the ability of any Subsidiary of the
Borrower to (a) make Restricted Payments in respect of any Capital Stock of such
Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other
Subsidiary of the Borrower, (b) make loans or advances to, or other Investments
in, the Borrower or any other Subsidiary of the Borrower or (c) transfer any of
its assets to the Borrower or any other Subsidiary of the Borrower, except for
(i) such encumbrances or restrictions existing under or by reason of the Loan
Documents and (ii) any restrictions with respect to a Subsidiary imposed
pursuant to an agreement that has been entered into in connection with the
Disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary.
6.14 Lines of Business. (a) Enter into any business, either
directly or through any Subsidiary, except for those businesses in which the
Borrower and its Subsidiaries are engaged on the date of this Agreement or that
are reasonably related thereto.
(b) With respect to any License Subsidiary, incur any
Indebtedness or material obligation or liability or engage in any business or
activity other than owning the FCC Licenses owned or to be owned by such License
Subsidiary and executing and delivering the Guarantee and Collateral Agreement.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan
or Reimbursement Obligation when due in accordance with the terms hereof; or the
Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation
or any other amount payable hereunder or under any other Loan Document, within
five days after any such interest or other amount becomes due in accordance with
the terms hereof; or
(b) any representation or warranty made or deemed made by any
Loan Party herein or in any other Loan Document or that is contained in any
certificate, document or financial or other statement furnished by it at any
time under or in connection with this Agreement or any such other Loan Document
shall prove to have been inaccurate in any material respect on or as of the date
made or deemed made; or
(c) any Loan Party shall default in the observance or
performance of any agreement contained in clause (i) or (ii) of Section 5.4(a)
(with respect to the Borrower only), Section 5.7(a) or Section 6 of this
Agreement or Sections 5.5 and 5.7(b) of the Guarantee and Collateral Agreement;
or
(d) any Loan Party shall default in the observance or
performance of any other agreement contained in this Agreement or any other Loan
Document (other than as provided in paragraphs (a) through (c) of this Section),
and such default shall continue unremedied for a period of 30 days after notice
to the Borrower from the Administrative Agent or any Lender; or
<PAGE>
(e) the Borrower or any of its Subsidiaries shall (i) default
in making any payment of any principal of any Indebtedness (including any
Guarantee Obligation, but excluding the Loans) on the scheduled or original due
date with respect thereto; or (ii) default in making any payment of any interest
on any such Indebtedness beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created; or (iii)
default in the observance or performance of any other agreement or condition
relating to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee
or agent on behalf of such holder or beneficiary) to cause, with the giving of
notice if required, such Indebtedness to become due prior to its stated maturity
or (in the case of any such Indebtedness constituting a Guarantee Obligation) to
become payable; or
(f) (i) the Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or the
Borrower or any of its Subsidiaries shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against the Borrower
or any of its Subsidiaries any case, proceeding or other action of a nature
referred to in clause (i) above that (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against the Borrower or any of its Subsidiaries any case, proceeding
or other action seeking issuance of a warrant of attachment, execution
distraint or similar process against all or any substantial part of its assets
that results in the entry of an order for any such relief that shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or (iv) the Borrower or any of its Subsidiaries shall
take any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above;
or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
<PAGE>
(g) (i) any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required Lenders, likely to result
in the termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion
of the Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could, in the sole
judgment of the Required Lenders, reasonably be expected to have a Material
Adverse Effect; or
(h) one or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance as to which the relevant insurance
company has acknowledged coverage) of $500,000 or more, and all such judgments
or decrees shall not have been vacated, discharged, stayed or bonded pending
appeal within 30 days from the entry thereof; or
(i) any Loan Party shall lose, fail to keep in force, suffer
the termination or revocation or nonrenewal of, or terminate, forfeit or suffer
a material adverse amendment to, any material FCC License owned by it and used
in connection with a television station, and such loss, termination, revocation,
forfeiture, nonrenewal or material adverse amendment shall continue for 30 days;
provided, however, that no Default shall be deemed to exist under this Section
7(i) due to the nonrenewal of an FCC License if on or prior to such expiration,
such FCC License shall have been or be in the process of being renewed or
replaced by another FCC License authorizing substantially the same operations as
the expired FCC License; or
(j) any of the Security Documents or the Intercreditor
Agreement shall cease, for any reason, to be in full force and effect, or any
Loan Party, any Affiliate of any Loan Party or the Trustee shall so assert, or
any Lien created by any of the Security Documents shall cease to be enforceable
and of the same effect and priority purported to be created thereby; or
(k) the guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and effect
or any Loan Party or any Affiliate of any Loan Party shall so assert; or
(l) a Change of Control shall occur;
<PAGE>
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken: (i) with the consent of
the Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the consent of the Required Lenders,
the Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) to be due and
payable forthwith, whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which presentment for
honor shall not have occurred at the time of an acceleration pursuant to this
paragraph, the Borrower shall at such time deposit in a cash collateral account
opened by the Administrative Agent an amount equal to the aggregate then undrawn
and unexpired amount of such Letters of Credit. Amounts held in such cash
collateral account shall be applied by the Administrative Agent to the payment
of drafts drawn under such Letters of Credit, and the unused portion thereof
after all such Letters of Credit shall have expired or been fully drawn upon, if
any, shall be applied to repay other obligations of the Borrower hereunder and
under the other Loan Documents. After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of the Borrower hereunder and under the
other Loan Documents shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrower (or such other Person
as may be lawfully entitled thereto). Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived by the Borrower.
SECTION 8. THE ADMINISTRATIVE AGENT
8.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
8.2 Delegation of Duties. The Administrative Agent may execute
any of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
<PAGE>
8.3 Exculpatory Provisions. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Loan Party a party thereto to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.
8.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to the Borrower), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders (or, if so specified
by this Agreement, all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, if so
specified by this Agreement, all Lenders), and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
<PAGE>
8.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so specified by this
Agreement, all Lenders); provided that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
8.6 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of a
Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party or any affiliate of
a Loan Party that may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
<PAGE>
8.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Aggregate Exposure Percentages in effect
on the date on which indemnification is sought under this Section (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with such Aggregate Exposure Percentages immediately prior to such date), from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever that may at any time (whether before or after the payment of the
Loans) be imposed on, incurred by or asserted against the Administrative Agent
in any way relating to or arising out of, the Commitments, this Agreement, any
of the other Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Administrative Agent under or in connection with
any of the foregoing; provided that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements that are found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from the Administrative Agent's gross negligence or willful misconduct.
The agreements in this Section shall survive the payment of the Loans and all
other amounts payable hereunder.
8.8 Administrative Agent in Its Individual Capacity. The
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with any Loan Party as though it
were not the Administrative Agent. With respect to its Loans made or renewed by
it and with respect to any Letter of Credit issued or participated in by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
8.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 10 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this Agreement and the other Loan Documents, then the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall (unless an Event of Default under Section 7(a) or Section
7(f) with respect to the Borrower shall have occurred and be continuing) be
subject to approval by the Borrower (which approval shall not be unreasonably
withheld or delayed), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. If no successor agent
has accepted appointment as Administrative Agent by the date that is 10 days
following a retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall assume and perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor agent as provided for above. After any retiring Administrative Agent's
resignation as Administrative Agent, the provisions of this Section 8 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement and the other Loan Documents.
SECTION 9. MISCELLANEOUS
<PAGE>
9.1 Amendments and Waivers. Neither this Agreement, any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 9.1. The
Required Lenders and each Loan Party party to the relevant Loan Document
(together with, in the case of the Intercreditor Agreement, any other party
required pursuant to the terms thereof to agree thereto) may, or, with the
written consent of the Required Lenders, the Administrative Agent and each Loan
Party party to the relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and to the other Loan
Documents for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or of
the Loan Parties hereunder or thereunder or (b) waive, on such terms and
conditions as the Required Lenders or the Administrative Agent, as the case may
be, may specify in such instrument, any of the requirements of this Agreement or
the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) eliminate or reduce any voting rights under
this Section 9.1, forgive the principal amount or extend the final scheduled
date of maturity of any Loan, extend the scheduled date of any reduction of the
Commitments, reduce the stated rate of any interest or fee payable hereunder or
extend the scheduled date of any payment thereof, or increase the amount or
extend the expiration date of any Lender's Commitment, in each case without the
written consent of each Lender directly affected thereby; (ii) reduce any
percentage specified in the definition of Required Lenders, consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents, release all or substantially
all of the Collateral or release all or substantially all of the Subsidiary
Guarantors from their obligations under the Guarantee and Collateral Agreement,
in each case without the consent of all Lenders; (iii) reduce the percentage
specified in the definition of Required Lenders without the consent of all
Lenders, (iv) amend, modify or waive any provision of Section 8 without the
consent of the Administrative Agent or (v) amend, modify or waive any provision
of Section 2.18, 2.19, 2.20, 2.21, 2.22, 2.23, 2.24 or 2.25 without the written
consent of the Issuing Lender. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and shall
be binding upon the Loan Parties, the Lenders, the Administrative Agent and all
future holders of the Loans. In the case of any waiver, the Loan Parties, the
Lenders and the Administrative Agent shall be restored to their former position
and rights hereunder and under the other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Default or Event of Default,
or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in an administrative questionnaire
delivered to the Administrative Agent in the case of the Lenders, or to such
other address as may be hereafter notified by the respective parties hereto:
The Borrower: Shop At Home, Inc.
5388 Hickory Hollow Parkway
Antioch, TN 37013
Attention: Chief Financial Officer
Telecopy: (615) 263-8911
Telephone: (615) 263-8095
<PAGE>
The Administrative Agent: Union Bank of California, N.A.
445 S. Figueroa St., 16th Floor
Los Angeles, CA 90071
Attention: Craig Cappai
Telecopy: (213) 236-5747
Telephone: (213) 236-7517
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Administrative Agent or any Lender,
any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans and other extensions of credit hereunder.
<PAGE>
9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to
pay or reimburse the Administrative Agent for all its reasonable out-of-pocket
costs and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including the reasonable fees and
disbursements of counsel to the Administrative Agent and filing and recording
fees and expenses, with statements with respect to the foregoing to be submitted
to the Borrower prior to the Closing Date (in the case of amounts to be paid on
the Closing Date) and from time to time thereafter on a quarterly basis or such
other periodic basis as the Administrative Agent shall deem appropriate, (b) to
pay or reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents, including the fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) to each Lender and of counsel
to the Administrative Agent, (c) to pay, indemnify, and hold each Lender and the
Administrative Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, that may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold each Lender and the Administrative Agent and their
respective officers, directors, employees, affiliates, agents and controlling
persons (each, an "Indemnitee") harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents and any such other documents, including any
of the foregoing relating to the use of proceeds of the Loans or the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Borrower any of its Subsidiaries or any of the Properties
and the reasonable fees and expenses of legal counsel in connection with claims,
actions or proceedings by any Indemnitee against any Loan Party under any Loan
Document (all the foregoing in this clause (d), collectively, the "Indemnified
Liabilities"), provided, that the Borrower shall have no obligation hereunder to
any Indemnitee with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Indemnitee. Without limiting the foregoing, and to
the extent permitted by applicable law, the Borrower agrees not to assert and to
cause its Subsidiaries not to assert, and hereby waives and agrees to cause its
Subsidiaries to so waive, all rights for contribution or any other rights of
recovery with respect to all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, under or
related to Environmental Laws, that any of them might have by statute or
otherwise against any Indemnitee. All amounts due under this Section 9.5 shall
be payable promptly after written demand therefor. Statements payable by the
Borrower pursuant to this Section 9.5 shall be submitted to the Chief Financial
Officer (Telephone No. (615) 263-8095) (Telecopy No. (615) 263-8911), at the
address of the Borrower set forth in Section 9.2, or to such other Person or
address as may be hereafter designated by the Borrower in a written notice to
the Administrative Agent. The agreements in this Section 9.5 shall survive
repayment of the Loans and all other amounts payable hereunder.
9.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Administrative Agent, all future holders of the Loans
and their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of each Lender.
<PAGE>
(b) Any Lender may, without the consent of the Borrower, in
accordance with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a Participant,
such Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrower and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement and the other Loan Documents. In no event shall any Participant
under any such participation have any right to approve any amendment or waiver
of any provision of any Loan Document, or any consent to any departure by any
Loan Party therefrom, except to the extent that such amendment, waiver or
consent would reduce the principal of, or interest on, the Loans or any fees
payable hereunder, or postpone the date of the final maturity of the Loans, in
each case to the extent subject to such participation. The Borrower agrees that
if amounts outstanding under this Agreement and the Loans are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect of
its participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement, provided that, in purchasing such
participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in Section 9.7(a) as fully as
if it were a Lender hereunder. The Borrower also agrees that each Participant
shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 with respect
to its participation in the Commitments and the Loans outstanding from time to
time as if it was a Lender; provided that, in the case of Section 2.14, such
Participant shall have complied with the requirements of said Section and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with
applicable law, at any time and from time to time assign to any Lender, any
affiliate of any Lender or any Approved Fund or, with the consent of the
Borrower and the Administrative Agent (which, in each case, shall not be
unreasonably withheld or delayed), to an additional bank, financial institution
or other entity (an "Assignee") all or any part of its rights and obligations
under this Agreement and the other Loan Documents pursuant to an Assignment and
Acceptance, executed by such Assignee, such Assignor and any other Person whose
consent is required pursuant to this paragraph, and delivered to the
Administrative Agent for its acceptance and recording in the Register; provided
that no such assignment to an Assignee (other than any Lender, any affiliate of
any Lender or any Approved Fund) shall be in an aggregate principal amount of
less than $5,000,000 (other than in the case of an assignment of all of a
Lender's interests under this Agreement), unless otherwise agreed by the
Borrower and the Administrative Agent. For purposes of the proviso contained in
the preceding sentence, the amount described therein shall be aggregated in
respect of each Lender and its related Approved Funds, if any. Upon such
execution, delivery, acceptance and recording, from and after the effective date
determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Commitment and Loans as set forth therein, and (y) the Assignor
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of an Assignor's rights and obligations
under this Agreement, such Assignor shall cease to be a party hereto).
Notwithstanding any provision of this Section 9.6, the consent of the Borrower
shall not be required for any assignment that occurs when an Event of Default
pursuant to Section 7(f) shall have occurred and be continuing with respect to
the Borrower.
<PAGE>
(d) The Administrative Agent shall, on behalf of the Borrower,
maintain at its address referred to in Section 9.2 a copy of each Assignment and
Acceptance delivered to it and a register (the "Register") for the recordation
of the names and addresses of the Lenders and the Commitment of, and the
principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, each other Loan Party, the Administrative Agent and the
Lenders shall treat each Person whose name is recorded in the Register as the
owner of the Loans and any Notes evidencing the Loans recorded therein for all
purposes of this Agreement. Any assignment of any Loan, whether or not evidenced
by a Note, shall be effective only upon appropriate entries with respect thereto
being made in the Register (and each Note shall expressly so provide). Any
assignment or transfer of all or part of a Loan evidenced by a Note shall be
registered on the Register only upon surrender for registration of assignment or
transfer of the Note evidencing such Loan, accompanied by a duly executed
Assignment and Acceptance, and thereupon one or more new Notes shall be issued
to the designated Assignee.
(e) Upon its receipt of an Assignment and Acceptance executed
by an Assignor, an Assignee and any other Person whose consent is required by
Section 9.6(c), together with payment to the Administrative Agent of a
registration and processing fee of $4,000, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) record the information
contained therein in the Register on the effective date determined pursuant
thereto.
(f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section 9.6 concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including any pledge or
assignment by a Lender of any Loan or Note to any Federal Reserve Bank in
accordance with applicable law.
(g) The Borrower, upon receipt of written notice from the
relevant Lender, agrees to issue Notes to any Lender requiring Notes to
facilitate transactions of the type described in paragraph (f) above.
9.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement expressly provides for payments to be allocated to a particular
Lender, if any Lender (a "Benefitted Lender") shall, at any time after the Loans
and other amounts payable hereunder shall immediately become due and payable
pursuant to Section 7, receive any payment of all or part of the Obligations
owing to it, or receive any collateral in respect thereof (whether voluntarily
or involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 7(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of the Obligations owing to such other Lender, such Benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of the Obligations owing to each such other Lender, or shall provide
such other Lenders with the benefits of any such collateral, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such Benefitted Lender, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such recovery, but
without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise), to set off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower, as the case may be.
Each Lender agrees promptly to notify the Borrower and the Administrative Agent
after any such setoff and application made by such Lender, provided that the
failure to give such notice shall not affect the validity of such setoff and
application.
9.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. Delivery of an executed signature page of this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof. A set of the copies of this Agreement signed by all
the parties shall be lodged with the Borrower and the Administrative Agent.
9.9 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
9.11 FCC Compliance. (a) Nothing in this Agreement is intended
to give the Administrative Agent or any Lender control over the FCC Licenses or
over the Borrower or any of its Subsidiaries, within the meaning of Section 310
of the Communications Act.
<PAGE>
(b) Notwithstanding any other provision of this Agreement, no
party hereto shall take any action pursuant to this Agreement which would
constitute or result in an assignment of any FCC License, construction permit or
other authorization or a change of control of any broadcast licensee if such
assignment of FCC License, construction permit or other authorization or change
of control would require under then existing law (including the written rules
and regulations promulgated by the FCC) the prior approval of the FCC, without
first obtaining such approval of the FCC.
9.12 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.13 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States for the Southern District of New York,
and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower, as the case may be at its address set forth in Section 9.2 or at such
other address of which the Administrative Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this Section any special, exemplary, punitive or consequential damages.
9.14 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
<PAGE>
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely that
of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Borrower and the Lenders.
9.15 Releases of Guarantees and Liens. (a) Notwithstanding
anything to the contrary contained herein or in any other Loan Document, the
Administrative Agent is hereby irrevocably authorized by each Lender (without
requirement of notice to or consent of any Lender except as expressly required
by Section 9.1) to take any action requested by the Borrower having the effect
of releasing any Collateral or Guarantee Obligations (i) to the extent necessary
to permit consummation of any transaction not prohibited by any Loan Document or
that has been consented to in accordance with Section 9.1 or (ii) under the
circumstances described in paragraph (b) below.
(b) At such time as the Loans, the Reimbursement Obligations
and the other obligations under the Loan Documents (other than obligations under
or in respect of Hedge Agreements) shall have been paid in full, the Commitments
have been terminated and no Letter of Credit shall be outstanding, the
Collateral shall be released from the Liens created by the Security Documents,
and the Security Documents and all obligations (other than those expressly
stated to survive such termination) of the Administrative Agent and each Loan
Party under the Security Documents shall terminate, all without delivery of any
instrument or performance of any act by any Person.
9.16 Confidentiality. Each of the Administrative Agent and
each Lender agrees to keep confidential all non-public information provided to
it by any Loan Party pursuant to this Agreement that is designated by such Loan
Party as confidential; provided that nothing herein shall prevent the
Administrative Agent or any Lender from disclosing any such information (a) to
the Administrative Agent, any other Lender, any affiliate of any Lender or any
Approved Fund, (b) to any Transferee or prospective Transferee that agrees to
comply with the provisions of this Section, (c) to its employees, directors,
agents, attorneys, accountants and other professional advisors or those of any
of its affiliates, (d) upon the request or demand of any Governmental Authority,
(e) in response to any order of any court or other Governmental Authority or as
may otherwise be required pursuant to any Requirement of Law, (f) if requested
or required to do so in connection with any litigation or similar proceeding,
(g) that has been publicly disclosed, (h) to the National Association of
Insurance Commissioners or any similar organization or any nationally recognized
rating agency that requires access to information about a Lender's investment
portfolio in connection with ratings issued with respect to such Lender, or (i)
in connection with the exercise of any remedy hereunder or under any other Loan
Document.
<PAGE>
9.17 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
SHOP AT HOME, INC.
By: /s/ Arthur D. Tek
Name: Arthur D. Tek
Title: EVP and Chief Financial Officer
UNION BANK OF CALIFORNIA, N.A., as Administrative Agent and as a Lender
By: /s/ Craig R. Cappal
Name: Craig R. Cappal
Title: Assistant Vice President
<PAGE>
Exhibit 99.1
Contact: Arthur D. Tek
Chief Financial Officer
(615) 263-8095
Shop At Home Closes $20 Million Private Placement of Preferred Stock
Nashville, Tennessee (July 3, 2000) - Shop At Home, Inc. (Nasdaq: SATH), an
electronic commerce leader in both the broadcast and Internet channels, today
announced it has concluded a private placement of $20 million of convertible
preferred stock and warrants with institutional investors led by Promethean
Asset Management.
The preferred stock is convertible into Shop At Home common stock beginning six
months from the closing date at conversion rates that increase monthly to a
maximum of 88% of the lowest closing bid price of the Company's common stock for
the four days prior to conversion. Such conversion price, however, will never
exceed $12.00 per share. After 20 days following the effective registration of
the underlying common stock, the Company can elect to redeem the preferred stock
for either cash or common stock at any time on or prior to its maturity date of
June 30, 2003. The warrants provide for the investors to purchase two million
shares of common stock at a price of $5.00 per share, which if exercised, would
generate additional proceeds of $10 million to the Company. The preferred stock
carries a 6% dividend yield, payable in cash or common stock, at the Company's
option. The conversion rate may adjust, subject to certain limits and
conditions, upon certain events. The terms and conditions of the preferred stock
and warrants are more fully described in the documents to be filed by the
Company on Form 8-K.
Kent Lillie, Shop At Home's CEO, said that the Company has "numerous strategic
opportunities in development" which will benefit from this financing.
Management expects the proceeds from this transaction will be used primarily to
fund working capital, acquisitions of additional television stations, expansion
of cable and satellite distribution and other general corporate needs, including
supporting the development of collectibles.com and the anticipated convergence
of the network and Internet operating units to achieve further efficiencies and
cost savings.
"After reviewing our options, we believe that this financing offers us an
excellent opportunity to strengthen our balance sheet," said Arthur D. Tek,
Chief Financial Officer of Shop At Home. "It will allow us to continue to grow
our business, pursue acquisition opportunities more aggressively, complete the
full development of collectibles.com and promote our core brand, Shop At Home.
In addition, we have attempted to structure the transaction to minimize the
dilution to existing shareholders while protecting the market in our common
stock through limitations on the new investors' ability to execute trading
strategies that might have a negative impact on the Company's stock price."
The preferred stock will not be registered for sale under the Securities Act of
1933, as amended, and may not be offered or sold in the United States absent
registration under such Act or an applicable exemption from the registration
requirements of such Act.
Shop At Home, Inc., a leader in converged technology, is a leading retailer of
specialty consumer products, primarily collectibles, through interactive
electronic media including broadcast, cable and satellite television and over
the Internet. Shop At Home Network reaches over 59 million unique cable and
satellite households and is the Nation's 15th largest television broadcaster,
through its ownership of full power television stations in San Francisco,
Boston, Houston, Cleveland, Raleigh and Bridgeport, which is licensed to the New
York market.
Shop At Home also operates collectibles.com, a leading online site for the
retail sale of collectibles products that features state-of-the-art technology
from Oracle Corp. (Nasdaq: ORCL), BroadVision (Nasdaq: BVSN), iXL, Inc.
(Nasdaq: IIXL) and others to offer collectors a unique online shopping
experience. collectibles.com has completed exclusive-to-the-Internet
distribution agreements with more than 80 leading manufacturers and licensees
of collectibles products.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995 - This release contains forward-looking statements within the meaning of
Section 27A of Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Actual results may differ materially from those identified for a
number of reasons as are discussed from time to time in Shop At Home's SEC
reports, including but not limited to the registration statement on Form S-3 as
amended on July 1, 1999, the report on Form 10-K for the year ended June 30,
1999 (Business and Management's Discussion and Analysis of Financial Condition
and Results of Operations), the Form 10-Q filed for the Quarter ending March 31,
2000 and the current report on Form 8-K.
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