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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO ________.
COMMISSION FILE NUMBER 0-21986
ABLE TELCOM HOLDING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 65-0013218
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1601 FORUM PLACE
SUITE 1110
WEST PALM BEACH, FLORIDA 33401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(561) 688-0400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ___
As of September 17, 1998, there were 10,519,650 shares, par value $.001
per share, of the Registrant's Common Stock outstanding.
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<PAGE>
<TABLE>
<CAPTION>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
NUMBER
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of July 31, 1998 (Unaudited)
and October 31, 1997...................................................... 3
Condensed Consolidated Statements of Operations (Unaudited)
for the three months and nine months ended July 31, 1998 and 1997.......... 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the nine months ended July 31, 1998 and 1997........................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)............. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 13
Item 3. -Not Applicable
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................ 16
Item 2. Changes in Securities........................................................ 16
Item 3. Default Upon Senior Securities............................................... 16
Items 4 and 5 - Not Applicable
Item 6. Exhibits and Reports on Form 8-K............................................. 17
SIGNATURES........................................................................................... 20
</TABLE>
2
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
JULY 31, OCTOBER 31,
1998 1997(1)
--------- ----------
<S> <C> <C>
ASSETS
Currents Assets:
Cash and cash equivalents........................................ $ 5,078,750 $ 6,229,602
Accounts receivable, net......................................... 59,696,806 13,399,327
Inventories...................................................... 22,016,046 1,257,218
Costs and profits in excess of billings on uncompleted contracts 100,216,707 5,614,813
Prepaid expenses and other current assets........................ 2,281,426 508,591
------------ -----------
Total current assets......................................... 189,289,735 27,009,551
Property and equipment, net........................................ 27,885,038 13,113,638
Other assets:
Goodwill, net.................................................... 14,156,511 8,341,064
Other non-current assets......................................... 3,265,463 1,881,741
------------ -----------
Total other assets........................................... 17,421,974 10,222,805
------------ -----------
Total assets................................................. $234,596,747 $50,345,994
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term-debt................................ $ 6,340,229 $ 3,154,428
Accounts payable................................................. 29,197,037 5,392,871
Billings in excess of costs and profits on uncompleted contracts. 42,084,937 291,165
Accrued and other current liabilities............................ 22,693,872 4,130,173
------------ -----------
Total current liabilities.................................... 100,316,075 12,968,637
Long-term debt, non-current portion.............................. 55,932,136 14,139,567
Other non-current liabilities.................................... 28,582,100 1,277,866
------------ -----------
Total liabilities............................................ 184,830,311 28,386,070
Contingencies...................................................... _____ _____
Convertible redeemable Series A preferred stock, $.10 par value,
authorized, 1,000,000 shares; 995 shares issued and outstanding
at October 31, 1997............................................. _____ 6,713,314
Convertible redeemable Series B preferred stock, $.10 par value,
authorized 1,000,000 shares, 4,000 shares issued and outstanding
at July 31, 1998................................................ 14,690,000 _____
Shareholders' Equity:
Common stock, $.001 par value, authorized 25,000,000 shares;
10,057,743 and 8,580,422 shares issued and outstanding at
July 31, 1998 and October 31, 1997, respectively................ 10,058 8,579
Additional paid-in capital...................................... 33,686,277 15,095,863
Dividends on preferred stock.................................... (203,846) _____
Retained earnings............................................... 1,583,947 142,168
------------ -----------
Total shareholders' equity................................... 35,076,436 15,246,610
------------ -----------
Total liabilities and shareholders' equity................... $234,596,747 $50,345,994
============ ===========
<FN>
- -----------------
(1) The balance sheet at October 31, 1997 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
</FN>
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues.................................. $57,704,843 $21,984,127 $114,524,482 $61,181,275
Costs and expenses:
Costs of revenues....................... 46,421,401 17,618,429 89,640,694 47,652,773
General and administrative.............. 4,637,348 2,143,050 12,703,229 6,366,327
Depreciation and amortization........... 1,883,374 1,197,826 4,468,311 3,237,199
----------- ----------- ------------ -----------
Total costs and expenses.............. 52,942,123 20,959,305 106,812,234 57,256,299
----------- ----------- ------------ -----------
Income from operations.................... 4,762,720 1,024,822 7,712,248 3,924,976
Other expense, net........................ 2,222,315 83,355 2,656,780 654,602
----------- ----------- ------------ -----------
Income before income taxes and
minority interest....................... 2,540,405 941,467 5,055,468 3,270,374
Provision (benefit) for income taxes...... 712,963 (33,778) 1,669,721 850,432
----------- ----------- ------------ -----------
Income before minority interest........... 1,827,442 975,245 3,385,747 2,419,942
Minority Interest......................... 363,214 42,668 756,495 130,148
----------- ----------- ------------ -----------
Net income................................ 1,464,228 932,577 2,629,252 2,289,794
Preferred stock dividends................. 21,267 75,000 203,846 185,000
Discount attributable to beneficial
conversion privilege of preferred
stock.................................. 618,557 366,231 723,330 938,831
----------- ----------- ------------ -----------
Income applicable to common stock......... $ 824,404 $ 491,346 $ 1,702,076 $ 1,165,963
=========== =========== ============ ===========
Income per common share (See Note 6):
Basic................................... $ 0.08 $ 0.06 $ 0.18 $ 0.14
=========== =========== ============ ===========
Diluted................................. $ 0.07 $ 0.06 $ 0.18 $ 0.14
=========== =========== ============ ===========
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
<TABLE>
<CAPTION>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS
ENDED JULY 31,
--------------------------
1998 1997
------------ -----------
<S> <C> <C>
Cash provided by operating activities............................. $ 5,882,784 $ 3,761,221
Investing Activities:
Capital expenditures, net....................................... (8,743,600) (2,375,226)
Acquisitions of businesses (net of cash acquired of $4,704,829
in 1998 and $403,617 in 1997)................................. (1,209,462) (2,596,383)
Sale of investments, net.......................................... 0 625,000
------------ -----------
Net cash used in investing activities........................... (9,953,062) (4,346,609)
------------ -----------
Financing Activities:
Repayments of long-term debt and other borrowings............... (91,074,992) (7,526,293)
Proceeds from the issuance of long-term debt
and other borrowings.......................................... 71,413,238 6,131,459
Net proceeds from preferred stock offering...................... 20,000,000 5,664,148
Proceeds from the exercise of stock options..................... 2,784,367 21,312
Dividends paid on preferred stock............................... (203,846) (150,000)
Other........................................................... 659 (440,731)
------------ -----------
Net cash provided by financing activities..................... 2,919,426 3,699,895
------------ -----------
(Decrease) increase in cash and cash equivalents.................. (1,150,852) $ 3,114,507
Cash and cash equivalents, beginning of period.................... 6,229,602 $ 3,267,161
------------ -----------
Cash and cash equivalents, end of period.......................... $ 5,078,750 $ 6,381,668
============ ===========
Supplemental Disclosure:
Valuation of detachable warrants................................ $ 6,644,284 $ --
============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. OPERATION AND BASIS OF PRESENTATION
Able Telcom Holding Corp. and subsidiaries ("Able" or the "Company")
specializes in the design, installation, maintenance and system
integration of advanced communication networks for voice, data and video
systems. These services are provided for an array of complimentary
applications, including telecommunications infrastructure, traffic
management systems, automated manufacturing systems and utility networks.
In the opinion of management, the unaudited condensed consolidated
financial statements furnished herein include all adjustments, consisting
of only recurring adjustments necessary for a fair presentation of the
results of operations for the interim periods presented. These interim
results of operations are not necessarily indicative of results for the
entire year. The condensed consolidated financial statements contained
herein should be read in conjunction with the consolidated financial
statements and related notes contained in the Company's 1997 Annual Report
on Form 10-K ("Form 10-K").
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions on
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required for complete
financial statements.
Certain items in the condensed consolidated financial statements as of
July 31, 1997 and October 31, 1997 have been reclassified to conform with
the current presentation.
2. ACQUISITIONS
On December 2, 1996, the Company, through a wholly owned subsidiary,
acquired all of the outstanding common stock of Dial Communications, Inc.
("Dial"). As consideration, the Company paid $3.0 million in cash, issued
108,489 shares of common stock and issued an $0.9 million promissory note.
The acquisition was accounted for using the purchase method of accounting
in accordance with Accounting Principles Board Opinion No. 16, BUSINESS
COMBINATIONS ("APB No. 16"), and approximately $1.5 million of goodwill
was recorded which is being amortized on a straight line basis over 20
years. The results of operations of Dial have been included since the date
of acquisition. The cash component of the purchase was funded in part from
the Company's line of credit and the remainder through a $1.9 million term
loan from a bank. On July 15, 1997, this initial debt was repaid with an
approximately $3.0 million term note.
On February 25, 1998, the Company, through its wholly owned subsidiary,
Georgia Electric Company ("GEC") acquired substantially all of the assets
and assumed certain liabilities of COMSAT RSI Acquisition, Inc. (d/b/a/
COMSAT RSI JEFA Wireless Systems) ("COMSAT"), a subsidiary of COMSAT
Corporation. As part of the transaction, GEC assumed certain construction
contracts with the Texas Department of Transportation and various other
telecommunications customers. GEC acquired the accounts receivable and
fixed assets of the seller, assumed its trade payables, and received a
cash payment from the seller at closing of approximately $4.7 million. In
addition, the Company recorded significant accruals related to the
contracts assumed of approximately $12.5 million, of which approximately
$4.9 million remains outstanding at July 31, 1998 and is reflected as
accrued and other current liabilities in the consolidated balance sheet.
The acquisition was accounted for using the purchase method of accounting
in accordance with APB No. 16.
On April 1, 1998, the Company purchased all of the outstanding common
stock of Patton Management Corporation ("Patton") for a total purchase
price of approximately $4.0 million, of which approximately $1.7 million
was
6
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ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
funded by the Company's revolving credit facility (See Note 3). The
acquisition was accounted for using the purchase method of accounting in
accordance with APB No. 16. Approximately $2.8 million in goodwill was
recorded, which is being amortized on a straight line basis over 20 years.
The results of operations of Patton have been included since the date of
acquisition. In connection with the acquisition, approximately $3.6
million in long-term debt outstanding at Patton, excluding that related to
capital lease obligations, was repaid in April 1998 from the Company's
revolving credit facility.
On July 2, 1998, Able acquired all of the outstanding common stock of MFS
Network Technologies, Inc. ("MFSNT") from MFS Communications Company, Inc.
("MFSCC"), a subsidiary of Worldcom, Inc. ("WorldCom") pursuant to a
merger agreement dated April 26, 1998. The purchase price was originally
equal to the shareholders' equity of MFSNT as of March 31, 1998, subject
to certain adjustments, including adding back the cumulative advance by
MFSCC or its affiliates to MFSNT, plus $10.0 million. The purchase price
at that time was projected to be $101.4 million, as well as additional
consideration in the form of options as described below. On September 9,
1998, the Company and WorldCom Network Services, Inc. ("WorldCom
Network"), a wholly owned subsidiary of WorldCom, as assignee from MFSCC,
entered into an agreement amending various terms of the transaction (the
"September Agreement").
The September Agreement, among other things, finalizes the purchase price
at approximately $58.8 million (which was determined by negotiation
without reference to the original purchase formula), subject to additional
amounts payable as contingent consideration which relate to the resolution
of certain preacquisition contingencies for pending litigation, claims and
assessments and losses on certain projects, as well as additional
consideration in the form of both options and a phantom stock award or
other equity participation award as described below. Any additional
amounts payable will be due and payable on December 29, 2000.
As of July 31, 1998 the Company paid $33.6 million of the consideration in
cash, and temporarily financed the remainder, a seller note originally
issued for $86.4 million, with a 12% note ("MFSNT Note") delivered to
MFSCC. As security for the MFSNT Note and an indemnity agreement, the
Company has pledged to Worldcom and MFSCC all of the shares of MFSNT.
Pursuant to the September Agreement, the MFSNT Note was replaced with a
new note in the principal amount of $30.0 million on September 9, 1998 at
an interest rate of 11.5% (the "New Note"). The New Note represents $20.0
million associated with the purchase price of MFSNT and $10.0 million
related to an estimated advance for receivables at MFSNT, subject to
certain adjustments. The New Note matures December 15, 2000, may be
prepaid without penalty, and will be reduced by the proceeds from the sale
of certain assets which were acquired in the transaction.
The cash portion of the purchase price was obtained in part from
operations, the Company's line of credit and in part through the private
placement on June 30, 1998 of $20.0 million of the Company's Series B
Convertible Preferred Stock ("Series B Preferred Stock") See Note 4.
The Company's senior lender and the holder of the Company's $10.0 million
12% Senior Subordinated Notes, (the "12% Notes") have consented to the
MFSNT Note and the stock pledge agreement. In connection with the consent
of the 12% Notes holders, the Company agreed to prepay the 12% Notes,
together with a prepayment penalty, on August 31, 1998, which was extended
until October 2, 1998. See Note 3.
Pursuant to the merger agreement, the Company agreed with WorldCom, MFSCC
and its affiliates to assume (a) their obligations under a certain
Guaranty Agreement in favor of Credit Lyonnais' New York branch, as
Administrative Agent for lenders, under a Credit Agreement dated November
1, 1996 between the lenders and Kanas Telcom, Inc., a partially-owned
affiliate of MFSNT, and (b) their obligations under surety indemnity
agreements relating to various surety bonds issued in favor of MFSNT.
In addition, MFSNT entered into a five-year Master Services Agreement with
WorldCom Network to provide telecommunications infrastructure services to
WorldCom affiliates for a minimum of $40.0 million per year, provided that
the aggregate sum payable to MFSNT shall be not less than $325.0 million,
including a fee of 12% of reimbursable costs under the agreement
("Aggregate Sum"). To achieve these established minimums, WorldCom Network
has agreed to award MFSNT at least 75% of all of WorldCom Network's
outside plant work related to its local network projects. If MFSNT
declines any of the first $130.0 million of contract work in any year of
the agreement, the value of the declined work reduces the Aggregate Sum.
MFSNT has agreed that WorldCom Network will have met all of its
obligations to MFSNT to the extent that payments to MFSNT reach an
aggregate of $500.0 million at any time during the five-year term.
7
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ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
If the MFSNT Note is in default, WorldCom Network's obligations under the
Master Services Agreement are reduced in certain respects, and it would
not be obligated to order further work under the Master Services Agreement
during the period the MFSNT Note remains not paid in full. In addition,
upon a default under the MFSNT Note, WorldCom and MFSCC have the right to
retain the shares of MFSNT as well as all payments made by the Company
under the MFSNT Note, and in certain circumstances WorldCom may have a
claim against the Company for any balance due under the MFSNT Note in
excess of the deemed value of MFSNT as calculated under the stock pledge
agreement.
Under the merger agreement, the Company is entitled to use the name
"MFSNT" during the 18-month transition period commencing July 2, 1998, and
will not be entitled to use it after such 18-month period.
The Company also granted to MFSCC an option to purchase up to 2,000,000
shares of the Company's common stock, during the period commencing July 2,
1998 ending six months after payment of the MFSNT Note, as amended by the
September Agreement to extend the exercise period. The exercise price is
$7.00 per share, except that MFSCC may elect to exercise the option, in
whole or in part, on a "cashless" basis under which it will receive shares
of common stock with a market value equal to the difference between the
common stock's then market price and $7.00, subject to a 1,817,941 share
limitation. Should the options be exercised, MFSCC will be entitled to
designate a representative to serve on the Company's Board of Directors as
long as MFSCC retains these shares aggregating at least 5.0% of the then
outstanding shares. In addition, the Company agreed to issue a phantom
stock award or other equity participation award which covers an amount
equivalent to 600,000 shares of the Company's common stock, payable in
cash, stock or a combination thereof at the Company's option, and is
exercisable only on the anniversary date of the acquisition for the next
three years at a price not to be less than 5 3/32 per share nor more than
30 3/32 per share. The final terms and conditions described in the
September Agreement are expected to be more fully set forth in certain
additional agreements between the Company and WorldCom Network expected to
be finalized in the near future. The consummation of the terms and
conditions set forth in the September agreement will require certain
consents and waivers by the New Credit Facility lender as described below.
The acquisition of MFSNT was accounted for using the purchase method of
accounting, in accordance with APB No. 16, whereby all assets acquired and
liabilities assumed were fair-valued, which resulted in negative goodwill
totaling approximately $50.7 million which was first allocated to fixed
assets, reducing them to zero, with the remainder reducing the value of
certain ongoing projects. The results of operations of MFSNT have been
included since the date of acquisition.
The following summarizes the fair value of the assets acquired and the
liabilities assumed in connection with the acquisition of MFSNT on July 2,
1998 (in millions):
<TABLE>
<CAPTION>
ALLOCATION OF
NEGATIVE FAIR VALUE
FAIR VALUE GOODWILL RECORDED
---------- -------- --------
<S> <C> <C> <C>
Cash and cash equivalents............................................. $ 0.5 $ 0.5
Accounts receivable................................................... 46.3 46.3
Costs and profits in excess of billings on uncompleted contracts...... 82.6 82.6
Resalable conduit inventory........................................... 65.7 ($45.0) 20.7
Prepaid expenses and other current assets............................. 0.5 0.5
Property, plant and equipment......................................... 5.7 (5.7) --
Accounts payable...................................................... (13.7) (13.7)
Billings in excess of costs and profits on uncompleted contracts...... (42.3) (42.3)
Accrued liabilities................................................... (35.8) (35.8)
Note payable.......................................................... (58.8) (58.8)
Negative Goodwill................................................ (50.7) 50.7 --
</TABLE>
The pro forma unaudited results of operations for the three and nine
months ended July 31, 1998 and 1997, assuming consummation of the
purchases for Dial, COMSAT, Patton, and MFSNT at the beginning of the
respective periods are as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
--------------------------- ---------------------------
1998 1997 1998 1997
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues.................................. $91,401,281 $108,773,491 $297,350,870 $325,662,942
Basic loss per share:
Loss applicable to common stock........ $(3,478,554) $ (3,248,049) $(15,752,820) $ (9,026,577)
Loss per common share.................. $ (0.35) $ (0.39) $ (1.63) $ (1.09)
Diluted loss per share:
Loss applicable to common stock........ $(3,457,287) $ (3,173,049) $(15,548,974) $ (8,841,577)
Loss per common share.................. $ (0.30) $ (0.34) $ (1.50) $ (1.00)
</TABLE>
The unaudited pro forma information does not purport to be indicative of
the results of operations which would have resulted had the acquisitions
been consummated at the date assumed.
3. BORROWINGS
On June 1, 1997, the Company entered into a $6.0 million Line of Credit
Facility (the "Line of Credit"). The Line of Credit was due March 1, 1998
with interest payable monthly and contained covenants which required among
other conditions, that the Company maintain certain tangible net worth,
working capital and debt service coverage. The Line of Credit was
collateralized by all real and personal property of the Company. The
proceeds of the Line of Credit were used to repay existing debt, purchase
assets and for working capital requirements. This amount was repaid with
proceeds from the Company's new revolving credit agreement described
below.
8
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ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
Effective January 6, 1998, the Company issued $10.0 million of unsecured
12% Senior Subordinated Notes due January 6, 2005 (the "12% Notes") with
detachable warrants to purchase 409,505 shares of common stock at a price
of $8.25 per share. The warrants were fair valued at approximately $1.2
million and are reflected as debt discount on the consolidated balance
sheet at July 31, 1998. Amortization of debt discount for the nine months
ended July 31, 1998 totaled $0.1 million. Interest under the 12% Notes is
payable semi-annually in arrears. Equal principal payments are due in
January 2004 and 2005 giving the 12% Notes an average life of six and
one-half years. The agreement, pursuant to when the 12% Notes were issued,
contains covenants which require, among other conditions, that the Company
maintain certain tangible net worth, minimum fixed charge coverage and
limitations on total debt and which limit the Company's ability to pay
dividends and make certain other payments, make investments and sell
assets or subsidiaries. The proceeds from the issuance of the 12% Notes
were used for current working capital needs, to pay off existing debts and
to provide liquidity to finance growth and certain expenditures, including
acquisitions, associated with the Company's overall strategic plan.
Between May 29, 1998 and September 17, 1998, the Company received either
waivers and/or consents, or letters of forbearance relating to the
acquisition of MFSNT and the related financing of the acquisition. These
letters also accelerated the expiration date of the 12% Notes to August
31, 1998, which has been extended through October 16, 1998 by the last
letter dated September 17, 1998. At July 31, 1998, this amount has been
reflected as long-term debt as it is expected to be refinanced with long
term debt. The Company believes that it will be able to refinance or
further extend the time for payment of the Subordinated Notes due October
16, 1998. However, there can be no assurance that the Company will be able
to so satisfy the Subordinated Notes by such date, or if satisfied, that
the terms and conditions of such refinancing or extension will not be
adverse to the Company. Failure to timely satisfy the Subordinated Notes
would constitute a default under the New Credit Facility (described below)
and could have a material adverse effect on the Company.
On April 6, 1998, the Company obtained a $25.0 million three year senior
secured revolving credit facility (the "Credit Facility") with a $2.0
million sub-limit for the issuance of standby letter(s) of credit. The
Credit Facility allowed the Company to select an interest rate based upon
the prime rate or on a short-term LIBOR, in each case, plus an applicable
margin, with respect to each draw the Company made thereunder. Interest
was payable monthly in arrears on base rate advances and at the expiration
of each interest period for LIBOR advances. The Credit Facility contained
certain covenants which required, among other conditions, that the Company
maintain certain net worth, minimum fixed charge coverage and limitations
on total debt, and was secured by a perfected first priority security
interest on all tangible assets of the Company. The proceeds of the Credit
Facility were used to finance working capital requirements and for other
general corporate purposes, including acquisitions and capital
expenditures, not to exceed $15.0 million, associated with the Company's
overall strategic plan. On June 11, 1998, this amount was repaid with
proceeds from the Company's New Credit Facility defined below.
On June 11, 1998, the Company replaced the Credit Facility with a new
$35.0 million three year senior secured revolving credit facility ("New
Credit Facility") with a $5.0 million sub-limit for the issuance of
standby letter(s) of credit. The New Credit Facility allows the Company to
select an interest rate based upon the prime rate or on a short-term
LIBOR, in each case plus an applicable margin, with respect to each draw
the Company makes thereunder. Interest is payable monthly in arrears on
base rate advances and at the expiration of each interest period for LIBOR
advances. The New Credit Facility contains certain financial covenants
which require, among other conditions, that the Company maintain certain
minimum ratios, including current and debt leverage, minimum fixed charge
coverage, interest coverage, as well as limitations on total debt. The New
Credit Facility is secured by a perfected first priority security interest
on all tangible assets of the Company and a pledge of the shares of stock
of each of the Company's subsidiaries operating in the United States. On
June 30, 1998, the New Credit Facility was amended to include (i) the
Company's acquisition of MFSNT and the related financing of such
transaction, (ii) changes in financial covenants related thereto, and
(iii) other amendments relating to investments, pledging and intercompany
matters. The Company is currently engaged in discussions with its senior
lenders under the New Credit Facility with respect to the waiver or
consent of various provisions of such Facility (of which it may be in
violation) arising out of the MFSNT transaction, including the September
Agreement. The Company also intends to seek additional financing. There
can be no assurance, however, that the Company will be able to obtain
appropriate waivers or consents, or additional financing on commercially
reasonable terms. The failure to obtain appropriate waivers or consents
could have a material adverse effect on the Company. The New Credit
Facility matures in June 2001.
On July 2, 1998 the Company entered into the MFSNT Note with MFSCC for
$86.4 million, at an interest rate of 12%, due on August 31, 1998. As
security for the MFSNT Note and an indemnity agreement, the Company has
pledged to WorldCom and MFSCC all of the shares of MFSNT. On September 9,
1998, the MFSNT Note was replaced with a New Note in the principal amount
of $30.0 million bearing interest at 11.5%. The New Note represents $20.0
million associated with the purchase price of MFSNT and $10.0 million
related to an estimated advance for receivables at MFSNT, subject to
certain adjustments. The New Note matures on December 15, 2000, may be
prepaid without penalty, and will be reduced by the proceeds from the sale
of certain assets which were acquired in the transaction.
4. PREFERRED STOCK
SERIES A PREFERRED STOCK
Effective December 20, 1996, the Company completed a private placement
transaction of 1,000 shares of $.10 par value, Series A Convertible
Preferred Stock (the "Series A Preferred Stock") and warrants to purchase
200,000 shares of the Company's common stock at $9.82 per share. Proceeds
from the offering totaled $6.0 million. Each share of Series A Preferred
Stock was convertible into shares of the Company's common stock after
April 30, 1997 at the lesser of $9.82 per share or at a discount
(increased to a maximum of 20% for conversions after
9
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
December 20, 1997) of the average closing bid price of a share of common
stock for three days preceding the date of conversion. This accretion
adjustment, which also represents the amount needed to accrete to the
redemption value of the Series A Preferred Stock for the nine months ended
July 31, 1998, was recorded as a charge to equity and accompanying credit
to the Series A Preferred Stock. The Series A Preferred Stock accrued
dividends at an annual rate of 5% and was payable quarterly in arrears in
cash or through a dividend of additional shares of Series A Preferred
Stock. The warrants are exercisable during the four year period commencing
on the first anniversary of the private placement, provided that for each
share of Series A Preferred Stock which is converted prior to the one year
anniversary of the placement, warrants to purchase 200 shares of common
stock were forfeited.
During the nine months ended July 31, 1998, 995 shares of Series A
Preferred Stock were converted into an aggregate of 920,946 shares of
common stock. As of July 31, 1998, all of the shares of Series A Preferred
Stock have been converted to common stock.
During the nine months ended July 31, 1998, 106,800 warrants were
forfeited and 62,200 warrants remain outstanding.
SERIES B PREFERRED STOCK
Effective June 30, 1998, the Company completed a private placement
transaction of 4,000 shares of $0.10 par value, Series B Convertible
Preferred Stock (the "Series B Preferred Stock") and warrants to purchase
1,000,000 shares of the Company's common stock at $19.80 per share.
Proceeds from the offering totaled $20.0 million which were used to pay a
portion of the MFSNT purchase price as well as other costs associated with
the acquisition. In general, each share of Series B Preferred Stock is
convertible into shares of the Company's common stock commencing on June
30, 1998 at 97% at the lesser of the (i) average of the low trading prices
for any three days during the twenty-two (22) trading days immediately
preceding the conversion date, or (ii) the low trading price on the day
immediately preceding the conversion date, subject to a minimum equal to
95% of such conversion price, unless waived by a holder on not less than
61 days prior written notice, no holder may convert an amount which would
result in such holders beneficial ownership exceeding 4.99% of the
Company's common stock. The accretion adjustment attributable to the
beneficial conversion feature of $0.6 million has been recorded as a
charge to equity and an accompanying credit to the Series B Preferred
Stock. The Series B Preferred Stock accrues dividends at an annual rate of
4% and is payable quarterly in arrears, in cash, or through a dividend of
shares of the Company's common stock. The warrants are exercisable over a
five year period commencing June 30, 1998 and are fair valued at $5.4
million in accordance with Statement of Financial Accounting Standards No.
123 ("SFAS No. 123"), "ACCOUNTING FOR STOCK BASED COMPENSATION," and will
be amortized as a dividend over five years.
During the three months ended July 31, 1998, dividends of $0.2 million
were recorded consisting of $0.1 million as the cumulative dividend and
$0.1 million for the amortization of the valuation of the warrants. None
of the Series B Preferred Stock had been converted nor had any warrants
been exercised as of July 31, 1998. Costs incurred in connection with the
offering of approximately $1.0 million will be expensed over the five year
conversion period commencing June 30, 1998.
On September 14, 1998, 200 shares of the Series B Preferred Stock were
converted into 461,907 shares of common stock at a price of $2.18 per
share.
5. STOCK OPTION PLAN
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123, which requires expanded disclosures of stock based
compensation arrangements with employees and encourages compensation cost
to be measured based on the fair value of the equity instrument. Under
SFAS No. 123, companies are permitted to continue to apply Accounting
Principles Board ("APB") Opinion No. 25 "Accounting for Stock Issued to
Employees," which recognizes compensation cost based on the intrinsic
value of the equity instrument awarded. The Company has elected to
continue to apply APB Opinion No. 25, and related Interpretations in
accounting for its employee stock options because the alternative fair
value accounting provided for under SFAS No. 123 requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, to the extent the exercise price of the Company's
employee stock options equals the market price of the underlying stock on
the date of grant, no compensation expense is recognized. The following is
the pro forma effect on net income an earnings per share as if the Company
had adopted the expense recognition requirement of SFAS No. 123:
10
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
---------------------------- ------------------------
1998 1997 1998 1997
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Pro forma income (loss) available to common
stockholders:
Basic..................................... $ (336,786) $438,848 $238,876 $788,836
Diluted................................... $ (315,519) $513,848 $442,722 $973,836
Pro forma income (loss):
Per share:
Basic..................................... $(0.03) $0.05 $0.02 $0.09
Diluted................................... $(0.03) $0.05 $0.04 $0.11
</TABLE>
Under the Company's 1995 Stock Option Plan, as amended, up to 1.3 million
shares of the Company's common stock are available for issuance pursuant
to the grant of stock options.
6. EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "EARNINGS PER SHARE",
which changes the method of calculating earnings per share and was
effective for the Company beginning with the quarter ended January 31,
1998. All periods presented have been restated in accordance with the
provisions of SFAS No. 128.
The following is a reconciliation of the numerators and denominators of
the basic and diluted per share computation as required by SFAS No. 128:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
------------------------ -------------------------
1998 1997 1998 1997
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Basic:
Net income available to common stockholders
(numerator).................................. $ 824,404 $ 491,346 $ 1,702,076 $1,165,963
Weighted-average number of common shares
(denominator)................................. 9,918,292 8,321,534 9,660,921 8,304,036
Earnings per common share-basic................. $ 0.08 $ 0.06 $ 0.18 $ 0.14
Diluted:
Net income available to common stockholders
(numerator).................................. $ 845,671 $ 566,346 $ 1,905,922 $1,241,457
Weighted-average number of common shares
(denominator)................................. 9,916,404 8,321,534 9,642,253 8,304,036
Common stock equivalents arising from stock
options, warrants and convertible preferred
stock......................................... 1,683,266 1,108,514 706,234 517,412
Total shares (denominator)...................... 11,601,558 9,430,048 10,367,155 8,821,448
Earnings per common share-diluted............... $ 0.07 $ 0.06 $ 0.18 $ 0.14
</TABLE>
11
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
7. LITIGATION
On May 21, 1998, SIRIT Technologies, Inc. ("SIRIT") filed a lawsuit in the
United States District Court for the Southern District of Florida, against
the company and Thomas M. Davidson, who has since become a member of the
Company's Board of Directors. SIRIT asserts claims against the Company for
tortious interference, fraudulent inducement, negligent misrepresentation
and breach of contract in connection with the Company's agreement to
purchase the shares of MFSNT (See Note 7) and seeks injunctive relief and
compensatory damages in excess of $100.0 million. In the opinion of
management, the lawsuit will not have a material adverse effect upon the
consolidated financial position or results of operations of the Company.
The Company intends to vigorously defend this matter.
On September 10, 1998, Shipping Financial Services Corp. ("SFSC") filed a
lawsuit in the United States District Court for the Southern District of
Florida against the Company, Chairman of the Board Gideon Taylor, Chief
Executive Officer Frazier L. Gaines, Chief Accounting Officer Jesus
Dominguez, and Chief Financial Officer Mark A. Shain. SFSC asserts claims
under the federal securities laws against the Company and four of its
officers that the defendants allegedly caused the Company to falsely
represent and mislead the public with respect to two acquisitions, COMSAT
and MFSNT, and the ongoing financial condition of the Company as a result
of the acquisitions and the related financing of those acquisitions. SFSC
seeks certification as a class action on behalf of itself and all others
similarly situated and seeks unspecified damages and attorneys' fees.
Management is currently assessing the allegations set forth in the
lawsuits and the Company intends to vigorously defend this matter.
Although the Company has not yet been served, it is aware of the filing of
additional shareholder lawsuits. The allegations of these lawsuits appear
to be based on allegations similar to those set forth in the SFSC lawsuit.
The Company intends to vigorously defend these similar lawsuits as well.
The Company is party, from time to time, to other various legal
proceedings. In the opinion of management, none of these other proceedings
are expected to have a material adverse effect on the Company's
consolidated financial position or results of operations.
12
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis relates to the financial condition
and results of operations of the Company for the three and nine months
ended July 31, 1998 and 1997. This information should be read in
conjunction with the Company's condensed consolidated financial statements
appearing elsewhere in this document. Except for historical information
contained herein, the matters discussed below contain forward looking
statements that involve risk and uncertainties, including but not limited
to economic, governmental and technological factors affecting the
Company's operations, markets and profitability.
As a result of three acquisitions during the nine month period ended July
31, 1998, primarily the acquisition of MFS Network Technologies Inc.
("MFSNT"), material changes exist in substantially all balance sheet and
statements of operations categories.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
elements of the Company's condensed statements of operations as a
percentage of its revenues.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues 100.00% 100.00% 100.00% 100.00%
Cost of Revenues 80.45 80.14 78.27 77.89
General and Administrative 8.04 9.75 11.09 10.41
Depreciation and amortization 3.26 5.45 3.90 5.29
Income from Operations 8.25 4.66 6.73 6.42
Other expense, net 3.85 0.38 2.32 1.07
Net income 2.54 4.24 2.30 3.74
</TABLE>
The following table sets forth the selected elements of the Company's
condensed statement of operations for MFSNT as a percentage of
revenues for the period July 3 through July 31, 1998.
<TABLE>
<S> <C>
Revenues 100.00%
Cost of Revenues 80.62
General and Administrative 9.47
Depreciation and amortization 0.00
Income from Operations 9.94
Net income 4.36
</TABLE>
For the quarter ended July 31, 1998 revenues increased $35.7 million over
the same period in the prior year from $22.0 million to $57.7 million. For
the nine months ended July 31, 1998 revenues increased $53.3 million from
$61.2 million through July 31, 1997 to $114.5 for the nine months ended
July 31, 1998. These increases in revenue are due primarily to growth of
the Company's Operations through the acquisition of MFSNT in the third
quarter and the acquisition of COMSAT RSI JEFA Wireless Systems ("COMSAT")
and Patton Management Corporation ("Patton") in the second quarter of
fiscal 1998, as well as increased demands for services in the traffic
management and telecommunications industry. For the quarter ended July 31,
1998 revenues increased by approximately $18.6 million, $5.1 million and
$7.5 million related to the acquisitions of MFSNT, COMSAT, and Patton,
respectively. For the nine months ended July 31, 1998 the revenue growth
associated with the acquisitions was $18.6 million, $15.5 million and
$10.3 million, respectively.
As a percentage of revenues, cost of revenues increased from 80.14% to
80.45% for the three months ended compared to the same period in the prior
year. For the nine month period ended July 31, 1998 and 1997 cost of
revenues as a percentage of revenues increased slightly from 77.89% to
78.27%. The increases are due to increased cost related to the
telecommunications service group resulting from tighter margins and
competition in the telecommunications industry, as well as inclement
weather which restricted some work during the winter months and extended
completion dates into later periods, offset by decreased cost related to
the traffic management group acquisition of COMSAT's operations.
General and administrative expenses increased $2.5 million from $2.1
million to $4.6 million for the three months ended July 31, 1998 compared
to the same period in the previous year. For the nine month ended July 31,
1998 general and administrative expenses were $12.7 million, an increase
of $6.4 over the same period in the prior year. These increases are due to
the overall increase in the management structure, at the corporate level
as well as the division offices, necessary to support the Company's
increased revenue in accordance with the Company's strategic objective of
growth through acquisition and an increase in cost resulting from the
acquisition of MFSNT. For the three and nine month period ended July 31,
1998 general and administrative expense relating to the operations of
MFSNT were approximately $1.7 million.
As a percentage of revenues, depreciation and amortization expense
decreased from 5.45% to 3.26% for the three months ended July 31, 1998 as
compared to the same period in the prior year. For the nine month period
ended July 31, 1998 the depreciation and amortization expense as a
percentage of revenue decreased from 5.29% to 3.90% as compared to the
same period in 1997. This decrease, as a percentage of revenue, is due to
the significant increase in revenues which did not require the same
percentage increase in capital assets to support the operations of the
Company. The MFSNT acquisition resulted in negative goodwill which
resulted in the reduction in the depreciable base of the fixed assets to
zero. Therefore no depreciation is recorded for the MFSNT operations.
For the quarter ended July 31, 1998 income from operations for the
Company was $4.7 million compared to income of $1.0 million in the
quarter ended July 31, 1998. For the nine months ended July 31, 1998
income from operations was $7.7 million compared to $3.9 million for the
same period in the prior year as discussed above.
Other expense, net increased by $2.1 million to $2.2 for the three month
period ended July 31, 1998 as compared to $0.1 million for the comparable
period in 1997. This increase is due to increased interest cost relating
to the acquisition of MFSNT, the write-off of loan cost on the Bank Of
America credit facility of approximately $0.2 million, and a noncash
expense of approximately $0.1 million relating to the earnout agreement
associated with the acquisition of GEC. Other expense, net was also
impacted by noncash charges associated with stock option granted at below
market prices, the amortization of the cost basis of the warrants issued
in conjunction with the Series B preferred stock and amortization of loan
cost associated with the Nations Bank revolver. Other expense, net
increased by $1.9 million to $2.6 million for the nine month period ended
July 31, 1998 from the same period in 1997 for the same reasons discussed
above.
The Company has provided income taxes at a rate which approximates the
rate used when applying federal and state statutory rates to pre-tax
income, after adjusting for the amortization of nondeductible goodwill.
Net income before the discount attributable to beneficial conversion
privilege of preferred stock and preferred dividends for the three months
ended July 31, 1998 increased $.6 million from $.9 million in 1997 to $1.5
million in 1998 for the reasons described above. For the nine months ended
July 31, 1998 net income before the discount attributable to beneficial
conversion privilege of preferred stock and preferred dividends was $2.6
million compared to $2.3 million for the comparable period in 1997 for the
reasons described above.
Income applicable to common stock was $.8 million and $1.7 million for the
three and nine months ending July 31, 1998 as compared to $.5 million and
$1.2 million for the three and nine months ended July 31, 1997,
respectively. On a diluted basis, income per share was $.07 per share
for the three months ended July 31, 1998 as compared to $.06 per share for
the same period in 1997. For the nine month period ended July 31, 1998
income per share on a diluted basis was $.18 compared to $.14 for the
nine months ended July 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash resources were $5.1 million at July 31, 1998 compared to
$6.2 million at October 31, 1997.
Cash provided from operating activities of $5.9 million is a result of net
income generated by the Company of $2.6 million for the nine month period,
increased by depreciation and amortization charges of $4.5 million, $0.8
million for contingent consideration for a non-cash charge related to the
acquisition of GEC, and $0.8 million for a non-cash charge for the
accretive dividend on the Series B Preferred Stock, and offset by
increases in accounts receivable balances due to increased revenues as a
result of the Company's significant growth in operations.
Cash used in investing activities of $10.0 million is due to net capital
expenditures required to support increased operations and replacement of
existing equipment and net expenditures for acquisitions of businesses.
Cash provided from financing activities of approximately $2.9 million is
due primarily to net increases in long term debt and other borrowings in
order to fund the acquisitions of MESNT and Patton, general corporate
needs, and working capital requirements.
13
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
Effective January 6, 1998, the Company issued $10.0 million of 12%
unsecured Senior Subordinated Notes due January 6, 2005 (the "12% Notes")
with detachable warrants to purchase 409,505 shares of common stock at a
price of $8.25 per share. The warrants were valued at approximately $1.2
million and are reflected as debt discount on the consolidated balance
sheet at July 31, 1998. Amortization of debt discount for the nine months
ended July 31, 1998 totaled $0.1 million. Interest under the Notes is
payable semi-annually in arrears. Equal principal payments are due in
January 2004 and 2005 giving the Notes an average life of 6.5 years. The
agreement pursuant to which the Notes were issued contains covenants which
require, among other conditions, that the Company maintain certain
tangible net worth, minimum fixed charge coverage and limitations on total
debt and which limit the Company's ability to pay dividends and make
certain other payments, make investments and sell assets or subsidiaries.
The proceeds from issuance of the Notes were used for current working
capital needs, to pay off existing debt and to provide liquidity to
finance growth and certain expenditures, including acquisitions,
associated with the Company's overall strategic plan. Between May 29, 1998
and September 17, 1998, the Company received either waivers and/or
consents, or letters of forbearance relating to the acquisition of MFSNT
and the related financing of the acquisition. These letters also
accelerated the expiration date of the 12% Notes to August 31, 1998, which
has been extended through October 16, 1998 by the last letter dated
September 17, 1998. At July 31, 1998, this amount has been reflected as
long-term debt as it is expected to be refinanced with long-term debt. The
Company believes that it will be able to refinance or further extend the
time for payment of the Subordinated Notes due October 16, 1998. However,
there can be no assurance that the Company will be able to so satisfy the
Subordinated Notes by such date, or if satisfied, that the terms and
conditions of such refinancing or extension will not be adverse to the
Company. Failure to timely satisfy the Subordinated Notes would constitute
a default under the New Credit Facility (described below) and could have a
material adverse effect on the Company.
In addition to the 12% Notes, on April 6, 1998, the Company obtained a
$25.0 million three year senior secured revolving credit facility (the
"Credit Facility") with a $2.0 million sub-limit for the issuance of
standby letter(s) of credit. The Credit Facility allows the Company to
select an interest rate based upon the prime rate or on a short-term
LIBOR, in each case, plus an applicable margin, with respect to each draw
the Company makes thereunder. Interest was payable monthly in arrears on
base rate advances and at the expiration of each period for LIBOR
advances. The Credit Facility contained certain covenants which require,
among other conditions, that the Company maintain certain net worth,
minimum fixed charge coverage and limitations on total debt, and was
secured by a perfected first priority security interest on all tangible
assets of the Company. The proceeds of the Credit Facility were used to
finance working capital requirements and for other general corporate
purposes, including acquisitions and equipment capital expenditures, not
to exceed $15.0 million, associated with the Company's overall strategic
plan. On June 11, 1998 this amount was repaid with proceeds from the
Company's New Credit Facility defined below.
On June 11, 1998, the Company replaced the Credit Facility with a new
$35.0 million three year senior secured revolving credit facility ("New
Credit Facility") with a $5.0 million sub-limit for the issuance of
standby letter(s) of credit. The Credit Facility allows the Company to
select an interest rate based upon the prime rate or on a short-term
LIBOR, in each case plus an applicable margin, with respect to each draw
it makes thereunder. Interest will be payable monthly in arrears on base
rate advances and at the expiration of each interest period for LIBOR
advances. The New Credit Facility contains certain financial covenants
which require, among other conditions, that the Company maintain certain
minimum ratios, including current and debt leverage, minimum fixed charge
coverage, interest coverage, as well as limitations on total debt. The New
Credit Facility will be secured by a perfected first priority security
interest on all tangible assets of the Company and a pledge of the shares
of stock of each of the Company's subsidiaries operating in the United
States. The Company is currently engaged in discussions with its senior
lenders under the New Credit Facility with respect to the waiver or
consent of various provisions of such Facility (of which it may be in
violation) arising out of the MFSNT transaction, including the September
Agreement. The Company also intends to seek additional financing. There
can be no assurance, however, that the Company will be able to obtain
appropriate waivers or consents, or additional financing on commercially
reasonable terms. The failure to obtain appropriate waivers or consents
could have a material adverse effect on the Company. The New Credit
Facility matures in June 2001.
On July 2, 1998 the Company entered into the MFSNT Note with MFSCC for
$86.4 million, at an interest rate of 12%, due on August 31, 1998. As
security for the MFSNT Note and an indemnity agreement, the Company has
pledged to WorldCom and MFSCC all of the shares of MFSNT. On September 9,
1998, the MFSNT Note was replaced with a New Note in the principal amount
of $30.0 million bearing interest at 11.5%. The New Note represents $20.0
million associated with the purchase price of MFSNT and $10.0 million
related to an estimated advance for receivables at MFSNT, subject to
certain adjustments. The New Note matures on December 15, 2000, may be
prepaid without penalty, and will be reduced by the proceeds from the sale
of certain assets which were acquired in the transaction.
The amount available under the New Credit Facility was used to repay
existing secured indebtedness, and will be used to finance working capital
requirements of existing and acquired businesses, to fund acquisitions and
capital expenditures and for other general corporate purposes. The Company
expects that its cash on hand, cash flow from operations and available
borrowing capacity under the New Credit Facility will be sufficient to
fund its capital requirements for the next twelve months. There can be no
assurance, however, that the Company will not experience adverse operating
results, including the inability to refinance the 12% Notes, or other
factors which could materially increase its cash requirements.
CAUTIONARY STATEMENTS
Certain of the information contained herein may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995, as the same may be amended from time to time ("the Act") and
in releases made by the Securities and Exchange Commission ("SEC") from
time to time. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance, or achievements expressed or implied by such forward-looking
statements. The words "estimate," "believes,"
14
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
"project," "intend," "expect" and similar expressions when used in
connection with the Company, are intended to identify forward-looking
statements. Any such forward-looking statements are based on various
factors and derived utilizing numerous important assumptions and other
important factors that could cause actual results to differ materially
from those on the forward-looking statements. These cautionary statements
are being made pursuant to the Act, with the intention of obtaining
benefits of the "Safe Harbor" provisions of the Act. The Company cautions
investors that any forward-looking statements made by the Company are not
guarantees of future performance and that actual results may differ
materially from those in the forward-looking statements as a result of
various factors, including but not limited to those set forth below.
Important assumptions and other important factors that could cause actual
results to differ materially from those in the forward-looking statements
include, but are not limited to: (i) risks associated with leverage,
including cost increases due to rising interest rates: (ii) risks
associated with Able's ability to continue its strategy of growth through
acquisitions; (iii) risks associated with Able's ability to successfully
integrate all of its recent acquisitions: (iv) Able's ability to make
effective acquisitions in the future and to successfully integrate newly
acquired businesses into existing operations and the risks associated with
such newly acquired businesses; (v)) changes in laws and regulations,
including changes in tax rates, accounting standards, environmental laws,
occupational, health and safety laws: (vi) access to foreign markets
together with foreign economic conditions, including currency
fluctuations; (vii) the effect of, or changes in, general economic
conditions; (viii) economic uncertainty in Venezuela; (ix) weather
conditions that are adverse to the specific businesses of the Company, and
(x) the outcome of litigation, claims and assessments involving the
Company. Other factors and assumptions not identified above may also be
involved in the derivation of forward-looking statements, and the failure
of such other assumptions to be realized as well as other factors may also
cause actual results to differ materially from those projected. The
Company assumes no obligation to update these forward-looking statements
to reflect actual results, changes in assumptions or changes in other
factors affecting such forward-looking statements.
YEAR 2000
In 1996, the Company initiated a conversion from existing accounting
software to programs that are Year 2000 compliant. Management has
determined that the Year 2000 issue will not pose significant operational
problems for its computer systems. As a result, all costs associated with
this conversion, excluding those related to the purchase of new software
which will be capitalized, are being expensed as incurred. The Company
plans to utilize both internal and external resources to reprogram or
replace, and test the software for Year 2000 modifications and anticipates
completing its conversions prior to October 31, 1999 at a total projected
cost of $0.3 million.
The Company has also initiated formal communications with all of its
significant suppliers and large customers to determine the extent to which
the Company's interface systems are vulnerable to those third parties'
failures to remediate their own Year 2000 issue.
15
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 21, 1998, SIRIT Technologies, Inc. ("SIRIT") filed a lawsuit in the
United States District Court for the Southern District of Florida, against
the company and Thomas M. Davidson, who has since become a member of the
Company's Board of Directors. SIRIT asserts claims against the Company for
tortious interference, fraudulent inducement, negligent misrepresentation
and breach of contract in connection with the Company's agreement to
purchase the shares of MFSNT (See Note 7) and seeks injunctive relief and
compensatory damages in excess of $100.0 million. In the opinion of
management, the lawsuit will not have a material adverse effect upon the
consolidated financial position or results of operations of the Company.
The Company intends to vigorously defend this matter.
On September 10, 1998, Shipping Financial Services Corp. ("SFSC"), filed a
lawsuit in the United States District Court for the Southern District of
Florida against the Company, Chairman of the Board Gideon Taylor, Chief
Executive Officer Frazier L. Gaines, Chief Accounting Officer Jesus
Dominguez, and Chief Financial Officer Mark A. Shain. SFSC asserts claims
under the federal securities laws against the Company and four of its
officers that the defendants allegedly caused the Company to falsely
represent and mislead the public with respect to two acquisitions, COMSAT
and MFSNT, and the ongoing financial condition of the Company as a result
of the acquisitions and the related financing of those acquisitions. SFSC
seeks certification as a class action on behalf of itself and all others
similarly situated and seeks unspecified damages and attorneys' fees.
Management is currently assessing the allegations set forth in the
lawsuits and the Company intends to vigorously defend this matter.
Although the Company has not yet been served, it is aware of the filing of
additional shareholder lawsuits. The allegations of these lawsuits appear
to be based on allegations similar to those set forth in the SFSC lawsuit.
The Company intends to vigorously defend these similar lawsuits as well.
The Company is party, from time to time, to other various legal
proceedings. In the opinion of management, none of these other proceedings
are expected to have a material adverse effect on the Company's
consolidated financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 24, 1998, the Company granted to each of its Directors, options
to purchase 10,000 shares of the Company's common stock, (an aggregate of
60,000 shares) par value $.001 per share. The options were granted under
the Company's 1995 Stock Option Plan, as amended, as compensation for
prior service and are non-qualified, vest immediately and are exercisable
at $6.20 per share, which represents 80% of the stock price on the date of
grant, through April 24, 2005.
On April 24, 1998, the Company also granted to each of its Directors,
additional options to purchase 20,000 shares of the Company's common stock
(aggregate of 120,000 shares), par value $.001 per share, at an exercise
price equal to the fair market value on the day immediately following the
announcement of the acquisition of MFSNT. The options were granted under
the Company's 1995 Stock Option Plan, as amended, as compensation for each
Director's efforts in connection with the acquisition of MFSNT (see Note 2
to Consolidated Financial Statements), are non-qualified, vested on July
3, 1998, and are exercisable at $11.9375 per share through July 3, 2004.
On April 24, 1998, the Company accelerated the vesting of 35,000 options
which were granted in 1997 for an employee and a consultant for the
Company.
On June 23, 1998, the Company issued 30,000 shares of common stock to
Silverton International Fund, Ltd. upon exercising warrants previously
granted in connection with the Company's Series A Preferred Stock. Such
shares were issued pursuant to Section 3(a)(9) of the Securities Act of
1933, as amended, as an exchange with existing security holders
exclusively.
Effective June 30, 1998 (the "Closing"), the Company completed a private
placement offering ("Offering") of its securities to seven accredited
investors pursuant to Rule 506 of Regulation D and Section 4(2) of the
Securities Act of 1933, as amended (the "Act"). Each investor was provided
with, or otherwise has access to, information, including financial
information, concerning the Company. The proceeds from the Offering to the
Company of $20 million was used in connection with the Company's
acquisition of MFS Network Technologies, Inc.
The Offering consisted of (i) four thousand (4,000) shares of non-voting,
five-year Series B Convertible Preferred Stock ("Series B Preferred
Stock"), which pay a 4% dividend per annum, payable quarterly in common
stock or cash, at the Company's option, and (ii) warrants ("Warrants") to
purchase an aggregate of 1 million shares of common stock of the Company.
At any time following the Closing, a holder may convert any or all of the
Series B Preferred Stock into shares of common stock, par value $.001, of
the Company. At maturity, June 25, 2003 ("Maturity"), an remaining
outstanding shares of Series B Preferred Stock will automatically convert
into common stock. The conversion price of each share of Series B
Preferred Stock into a share of common stock is equal to a 3% discount of
the lesser of (a) the average of the low stock price of the common stock
during any three trading days in the last 22 trading days immediately
preceding the date of conversion, or (b) the low stock price on the
trading day immediately preceding the date of conversion, provided that
any conversions pursuant to (b) are subject to a minimum equal to 95% of
such conversion price, unless waived by a holder on not less than 61 days
prior written notice, no holder may convert an amount which would result
in such holders beneficial ownership interest exceeding 4.99% of the
Company's common stock. The conversion price may be further reduced upon
the occurrence of certain dilutive issuances of the Company's securities.
The Warrants are exercisable for a period of five years commencing as of
the Closing through Maturity, at $19.80 per share, which represents 110%
of the market price of the common stock as of Closing. The Warrants may be
exercised on a cashless basis by surrendering the appropriate number of
Warrants. The Warrants may be called by the Company at $35.00 per share.
The holders of the Series B Preferred Stock and the Warrants are entitled
to certain registration rights to register the common stock underlying the
Series B Preferred Stock and the Warrants pursuant to the Act. In the
event that such underlying common stock is not registered with the
Securities and Exchange Commission by late October 1998, is not listed
with the securities exchanges and/or markets on which the common stock is
then listed, within a definitive period of time, or various other
covenants are not complied with, then certain penalties may be incurred to
certain or all of the holders of the Series B Preferred Stock and/or
Warrants, including, among other things, a reduction in the conversion
and/or exercise price of the applicable securities and/or additional
monetary payments. Unless waived, the Company expects to have difficulty
in timely complying with the foregoing registration rights and various
other covenants. Additionally, so long as any Series B Preferred Stock or
Warrants are outstanding, the Company is prohibited from declaring or
paying any dividends or purchasing any equity security of the Company's
common stock.
On July 8, 1998, the Company granted options to purchase 230,000 shares of
the Company's common stock, par value $.001 to various officers,
directors, and an outside consultant, all of which were granted as
compensation for certain additional contributions to the MFSNT acquisition
(see Note 2 to Consolidated Financial Statements). These options were
granted outside of the 1995 Stock Option Plan, as amended, and are
non-qualified. The subject options vest immediately or over a period of
two years and are exercisable at $14.00 through July 8, 2000.
On July 8, 1998, the Company granted 150,000 shares to two employees of
the Company at the fair market value of $14.00 per share, pursuant to
employment agreements. These options are exercisable after one year of
employment and vest ratably over three years.
On September 14, 1998, 200 shares of Series B Preferred Stock were
converted into 461,907 shares of common stock of the Company at an
exercise price of $2.18 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On June 11, 1998, the Company replaced the Credit Facility with a new
$35.0 million three year senior secured revolving credit facility ("New
Credit Facility") with a $5.0 million sub-limit for the issuance of
standby letter(s) of credit. The Credit Facility allows the Company to
select an interest rate based upon the prime rate or on a short-term
LIBOR, in each case plus an applicable margin, with respect to each draw
it makes thereunder. Interest will be payable monthly in arrears on base
rate advances and at the expiration of each interest period for LIBOR
advances. The New Credit Facility contains certain financial covenants
which require, among other conditions, that the Company maintain certain
minimum ratios, including current and debt leverage, minimum fixed charge
coverage, interest coverage, as well as limitations on total debt. The New
Credit Facility will be secured by a perfected first priority security
interest on all tangible assets of the Company and a pledge of the shares
of stock of each of the Company's subsidiaries operating in the United
States. The Company is currently engaged in discussions with its senior
lenders under the New Credit Facility with respect to the waiver or
consent of various provisions of such Facility (of which it may be in
violation) arising out of the MFSNT transaction, including the September
Agreement. The Company also intends to seek additional financing. There
can be no assurance, however, that the Company will be able to obtain
appropriate waivers or consents, or additional financing on commercially
reasonable terms. The failure to obtain appropriate waivers or consents
could have a material adverse effect on the Company. The New Credit
Facility matures in June 2001.
16
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
2.1 Asset Purchase Agreement, dated November 26, 1997, among Able Telcom
Holding Corp., Georgia Electric Company, Transportation Safety
Contractors, Inc., COMSAT RSI Acquisitions, Inc. and COMSAT
Corporation (1)
2.2 Indemnification Agreement, dated February 25, 1998, among Able Telcom
Holding Corp., Georgia Electric Company, Transportation Safety
Contractors, Inc., COMSAT RSI Acquisitions, Inc. and COMSAT
Corporation (1)
2.3 Stock Purchase Agreement, dated as of April 1, 1998, among Able Telcom
Holding Corp., James P. Patton, Rick Boyle and Claiborne K.
McLemore III (2)
2.4 Closing Memorandum and Schedule, dated April 1, 1998, among Able
Telcom Holding Corp., James P. Patton, Rick Boyle and Claiborne K.
McLemore III (2)
2.5 Agreement and Plan of Merger by and among MFS Acquisition Corp., Able
Telcom Holding Corp., MFS Network Technologies, Inc. and MFS
Communications Company, Inc. dated as of April 22, 1998 (9)
2.5.1 Amendment to Agreement and Plan of Merger among MFS Acquisition,
Corp., Registrant, MFS Network Technologies, Inc. and MFS
Communications Company, Inc. dated as of July 2, 1998 (10)
2.5.1.1 Amendment No. 2 dated as of July 21, 1998 to Agreement and Plan of
Merger among MFS Acquisition Corp., Registrant, MFS Network
Technologies, Inc. and MFS Communications Company, Inc.(11)
2.5.1.2 Agreement between WorldCom Network Services, Inc. and Able Telcom
Holding Corp. dated as of September 9, 1998
2.5.2 Promissory Note of Registrant dated July 2, 1998 to MFS Communications
Company, Inc. (10)
2.5.3 Stock Pledge Agreement dated as of July 2, 1998 by Registrant in favor
of WorldCom, Inc.(10)
2.5.4 Master Services Agreement between WorldCom Network Services, Inc. and
MFS Network Technologies, Inc. dated as of July 2, 1998 (exhibits
omitted)(11)
2.5.5 Assumption and Indemnity Agreement dated as of July 2, 1998 among
Registrant, WorldCom, Inc., MFS Communications Company, Inc., MFS
Intelenet, Inc., MFS Datanet, Inc., MFS Telcom, Inc. and MFS
Communications, Ltd. (schedule omitted) (10)
2.5.6 License Agreement between MFS Communications Company, Inc. and
Registrant dated as of July 2, 1998 (10)
3.1 Articles of Incorporation of the Registrant, as amended (3)(4)
3.1.1 Articles of Amendment to the Articles of Incorporation of Able Telcom
Holding Corp.
3.2 Bylaws of the Registrant, as amended (3)
4.2 Specimen Common Stock Certificate (3)
4.3 Specimen Series A Preferred Stock Certificate (6)
4.4 Form of Warrant issued to Credit Suisse, First Boston and Silverton
International Fund Limited (4)
4.6 Able Telcom Holding Corp. 1995 Stock Option Plan (3)
4.7 Amendment to Able Telcom Holding Corp. 1995 Stock Option Plan, dated
April 24, 1998
4.8 Series B Convertible Preferred Stock Purchase Agreement
4.9 Registration Rights Agreement for Series B Convertible Preferred Stock
Purchase Agreement and 350,000 Warrants
4.10 Registration Rights Agreement for 650,000 Warrants associated with
Series B Convertible Preferred Stock Purchase Agreement
4.11 Form of Common Stock Purchase Warrants for 350,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement
4.12 Form of Common Stock Purchase Warrants for 650,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement
10.8 Employment Agreement with Gerry W. Hall (5)
10.9 Master Agreement with AT&T (3)
17
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
10.10 Master Agreement with GTE (3)
10.15 Stock Purchase Agreement between Able Telcom Holding Corp., Traffic
Management Group, Inc., Georgia Electric Company, Gerry W. Hall and J.
Barry Hall (5)
10.16 Stock Purchase Agreement between Able Telcom Holding Corp.,
Telecommunications Services Group, Inc.,
Dial Communications, Inc., William E. Newton and Sybil C. Newton (8)
10.17 Promissory Note of Able Telcom Holding Corp. Payable to William E.
Newton and Sybil C. Newton (8)
10.23 Stock Purchase Agreement (5)
10.25 Securities Purchase Agreements, dated as of January 6, 1998, between
Able Telcom Holding Corp. and each of the Purchasers named therein (6)
10.25.1 Letter Agreement dated July 2, 1998 related to Securities Purchase
Agreements dated as of January 6, 1998
10.26 Senior Secured Revolving Credit Agreement dated as of April 6, 1998,
between Able Telcom Holding Corp. and Suntrust Bank, South Florida,
N.A. and Bank of America, FSB (9)
10.27 Credit Agreement among Able Telcom Holding Corp., NationsBank, N.A.
and The Several Lenders from Time to Time Parties Hereto dated as of
June 11, 1998 (exhibits and schedules omitted)
10.28 Employment Agreement with Mark A. Shain, dated April 27, 1998
10.29 Employment Agreement with Jesus G. Dominguez, dated April 27, 1998
10.30 Employment Agreement with Stacy Jenkins, dated July 16, 1998
10.31 Employment Agreement with Mike Breslin, dated July 28, 1998
10.32 Amendment to June 11, 1998 Credit Agreement among Able Telcom Holding
Corp., NationsBank N.A., and the Several Lenders from Time to Time
Parties thereto, dated as of June 30, 1998
11 Computation of Per Share Earnings (7)
21 Subsidiaries of Able Telcom Holding Corp.
27 Financial Data Schedule
- ----------------------
(1) Incorporated by reference from an exhibit to the Company's Current Report
on Form 8-K (File No. 0-21986), dated February 25, 1998, as filed with the
Commission on March 12, 1998, as amended by Form 8-K/A-1, dated May 11,
1998, as filed with the Commission on May 11,1998.
(2) Incorporated by reference from an exhibit to the Company's Current Report
on Form 8-K (File No. 0-21986), dated April 1, 1998, as filed with the
Commission on April 14, 1998.
(3) Incorporated by reference from an exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-65854), as declared effective by the
Commission on February 26, 1994.
(4) Incorporated by reference from an exhibit to the Company's Current Report
on Form 8-K (File No. 0-21986), dated December 20, 1996, as filed with the
Commission on December 31, 1996.
(5) Incorporated by reference from an exhibit to the Company's Current Report
on Form 8-K (File No. 0-21986), dated October 12, 1996, as filed with the
Commission on October 25, 1996.
(6) Incorporated by reference from an exhibit to the Company's Annual Report
on Form 10-K (File No. 0-21986) for the fiscal year ended October 31,
1997, as filed with the Commission on February 13, 1998, as amended by
Form 10-K/A, as filed with the Commission on March 20, 1998.
(7) Incorporated by reference from Note 6 to the Condensed Consolidated
Financial Statements (unaudited), filed herewith. (8) Incorporated by
reference from an exhibit to the Company's Current Report on Form 8-K
(File No. 0-21986), dated December 2, 1996, as filed with the Commission
on December 13, 1996, as amended by Form 8-K/A-1, dated February 11, 1997,
as filed with the Commission on February 11, 1997.
(9) Incorporated by reference from an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended April 30,
1998, as filed with the Commission on June 14, 1998.
(10) Incorporated by reference from an exhibit to the Company's Current Report
on Form 8-K (File No. 0-21986), dated July 2, 1998, as filed with the
Commission on July 16, 1998.
(11) Incorporated by reference from an exhibit to the Company's Current Report
on Form 8-K/A (File No. 0-21986), dated July 2, 1998, as filed with the
Commission on August 3, 1998.
(b) Reports on Form 8-K
On May 11, 1998, the Company filed a Current Report on Form 8-K, amending
Form 8-K filed February 25, 1998 announcing the acquisition of
substantially all of the assets and the assumption of certain liabilities
of COMSAT RSI.
On May 27, 1998, the Company filed a Current Report on Form 8-K disclosing
the fact that a former officer of the Company, then the Company's Chief
Financial Officer, failed to file a Form 3 Statement of Initial Beneficial
Ownership after becoming Chief Financial Officer of the Company.
18
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
On June 16, 1998, the Company filed a Current Report on Form 8-K/A,
amending Form 8-K filed on April 14, 1998, announcing the acquisition of
all of the outstanding common stock of Patton Management Corporation.
On July 16, 1998, the Company field a Current Report on Form 8-K
announcing the acquisition of all of the outstanding common stock of MFS
Network Technologies.
On July 16, 1998 the Company filed a Current Report on Form 8-K/A-2
amending Form 8-K/A, filed May 11, 1998 which amended Form 8-K filed on
February 25, 1998, announcing the acquisition of substantially all of the
assets and the assumption of liabilities of COMSAT RSI.
On July 24, 1998, the Company filed a Current Report on Form 8-K/A-2,
amending Form 8-K/A filed on June 16, 1998 which amended Form 8-K filed on
April 14, 1998, announcing the acquisition of all of the outstanding
common stock of Patton Management Corporation.
19
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABLE TELCOM HOLDING CORP.
(REGISTRANT)
September 21, 1998 By: /S/ FRAZIER L. GAINES
-----------------------
Frazier L. Gaines
President and Chief Executive Officer
September 21, 1998 /S/ MARK A. SHAIN
---------------------
Mark A. Shain
Chief Financial Officer
20
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
EXHIBIT INDEX
2.5.1.2 Agreement between WorldCom Network Services, Inc. and Able Telcom
Holding Corp., dated as of September 9, 1998
3.1.1 Articles of Amendment to the Articles of Incorporation of Able
Telcom Holding Corp.
4.7 Amendment to Able Telcom Holding Corp. 1995 Stock Option Plan,
dated April 24, 1998
4.8 Series B Convertible Preferred Stock Purchase Agreement
4.9 Registration Rights Agreement for Series B Convertible Preferred
Stock Purchase Agreement and 350,000 Warrants
4.10 Registration Rights Agreement for 650,000 Warrants associated with
Series B Convertible Preferred Stock Purchase Agreement
4.11 Form of Common Stock Purchase Warrants for 350,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement
4.12 Form of Common Stock Purchase Warrants for 650,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement
10.25.1 Letter Agreement dated July 2, 1998 related to Securities Purchase
Agreements dated as of January 6, 1998
10.27 Credit Agreement among Able Telcom Holding Corp., NationsBank,
N.A., and the Several Lenders from Time to Time Parties Hereto
dated as of June 11, 1998 (exhibits and schedules omitted)
10.28 Employment Agreement with Mark A. Shain, dated April 27, 1998
10.29 Employment Agreement with Jesus G. Dominguez, dated April 27, 1998
10.30 Employment Agreement with Stacy Jenkins, dated July 16, 1998
10.31 Employment Agreement with Mike Breslin, dated July 28, 1998
10.32 Amendment to June 11, 1998 Credit Agreement among Able Telcom
Holding Corp, NationsBank N.A., and the Several Lenders from Time
to Time Parties thereto,dated as of June 30, 1998
21 Subsidiaries of Able Telcom Holding Corp.
27 Financial Data Schedule
21
EXHIBIT 2.5.1.2
AGREEMENT BETWEEN WORLDCOM NETWORK SERVICES INC.
AND ABLE CONSTRUCTION INC.
SEPTEMBER 9, 1998
This Agreement ("Agreement") confirms our agreement with respect to the
settlement of a dispute between the undersigned with respect to the matters set
forth herein.
This Agreement covers the following matters:
1. NOTE TERMS. The existing Promissory Note with Able Telcom Holding
Corp. ("Able") as the maker and MFS Communications Company, Inc. ("MFS") as the
payee shall be assigned to WorldCom Network Services, Inc. ("WorldCom") and
shall be amended and restated to a principal amount of $30,000,000 bearing
interest at 11.5% from September 1, 1998. The note will be adjusted for any
reductions to the WorldCom credit for the March 31, 1998 costs in excess of
billings. For any amount greater than $10,000,000, Able will apply any such
excess as a credit ratably to the outstanding invoice.
The Maturity Date of the Note will be December 15, 2000 (the "Maturity
Date"). Interest shall accrue and be payable quarterly and on the Maturity Date.
The Note may be prepaid in part or in total without penalty.
The principal amount of the Note shall be prepaid as follows:
a. By applying as a credit thereto an amount equal to 8% of the
amount otherwise payable by WorldCom, or any affiliate
thereof, to Able, or any affiliate thereof, under any
"Management Services Agreement" ("MSA"), including, without
limitation, the MSA dated July 2, 1998;
b. By Able paying WorldCom on the first business day after Able
receives the proceeds of any of the following:
i. $7,000,000 upon the sale of NYSTA conduit;
ii. $1,500,000 upon payment by The Williams Companies of
a fee for the installation of conduit; and
<PAGE>
iii. The greater of 50% of the net profits or 25% of the
proceeds received from time to time under any
maintenance agreement associated with the sale of
NYSTA conduit.
2. ADDITIONAL PAYMENTS. On December 29, 2000, Able shall pay to
WorldCom the following amounts, if positive:
a. The difference between $9,000,000 related to losses on MFS
Network Technologies, Inc. ("MFSNT") projects in existence on
March 31, 1998 (the "Projects") and recorded by MFSNT as of
June 30, 1998 (the "Recorded Losses"), and the amount recorded
for the Recorded Losses as of the Maturity Date;
b. The difference between $3,000,000 related to losses on the
Projects and not recorded by MFSNT as of June 30, 1998 (the
"Unrecorded Losses") and the amount recorded for the
Unrecorded Losses as of the Maturity Date; and
c. The difference between $5,000,000 recorded as reserves for the
litigation described on SCHEDULE 1 attached hereto (the
"Litigation") and the aggregate costs of Able in defending the
Litigation, and payments made in settlement or in payment of
judgments with respect to the Litigation, as of the Maturity
Date.
3. OTHER DOCUMENTS. The Stock Pledge Agreement and the stock options
dated July 2, 1998 shall remain outstanding and in full force and effect, except
that the exercise and registration periods each respectively shall be extended
one year [ANY OTHER DOCUMENTATION TO REMAIN OUTSTANDING?]
4. EQUITY AWARD. Able shall issue to WorldCom a phantom stock award or
other equity participation convertible into common stock of Able (the "Equity
Award") containing substantially the formal provisions of the stock options
described in Paragraph 2 hereof, (including appropriate anti-dilution
provisions) covering 600,000 shares of Able common stock to be exercised in
whole or part by WorldCom on July 2, 1999 or July 2, 2000 or July 2, 2001, such
award or warrant to expire at 12:01 a.m. on July 3, 2001. The per share exercise
price shall be $5 3/32 and the maximum per share stock price as to which the
valuation difference shall be calculated shall be $30 3/32.
-2-
<PAGE>
At the election of Able, the value to be received by WorldCom upon the
exercise of the Equity Award shall be paid in cash or in stock or in a
combination of cash and stock.
The Equity award will contain a provision indicating that Able has no
obligation to issue stock in excess of 19.9% of its then outstanding stock
(calculated in accordance with the rules of the national securities exchange or
quotation system upon which Able stock shall be listed at the time of any such
exercise) PROVIDED THAT, Able shall have the election to obtain appropriate
shareholder approval and other approvals required to issue in excess of 19.9% of
its stock.
4. INDEMNIFICATION. Able will indemnify and hold harmless WorldCom, and
its affiliates, and each of their respective employees, representatives,
officers and directors (the "Indemnified Parties") from and against any and all
claims liabilities, losses, damages, actions, attorneys' fees and demands (the
"Indemnified Losses") resulting from the claims, demands, investigations,
proceedings or lawsuits of or by any person arising out of the business
operations acquired by Able in the MFSNT acquisition EXCEPT for Michigan
township for access rights and the Sirit litigation.
Able shall pay for or reimburse an Indemnified Party for any
ascertained Indemnified Loss in advance of a final disposition of the matter as
to which indemnification is sought within ten (10) days after submission of a
claim for Indemnified Losses by an Indemnified Party.
5. PERFORMANCE BONDS. Promptly after the closing of the transactions
contemplated by this Agreement, Able shall cause WorldCom to be released from
any and all liability on existing performance bonds and reimbursement agreements
(other than bond E-470) relating to any project to which MFSNT is or was a
party.
6. MUTUAL RELEASES. The parties shall enter into mutual releases in
customary form with respect to matters arising before the date hereof, but
excluding obligations hereunder and other outstanding documentation between
WorldCom, Able and their affiliates.
7. LEGAL INTENT. The Parties intend to be legally bound by this
Agreement and agree that this Agreement contains the necessary material items to
be considered a contract. The Parties agree to act in good faith and
expeditiously to prepare, sign and deliver the definitive documentation on or
before September 19, 1998.
-3-
<PAGE>
8. REMEDIES. The parties agree that in addition to all other remedies
which an aggrieved party may have, this Agreement may be enforced by either
party by an action for specific performance in any court of competent
jurisdiction.
This Agreement is entered into this 9th day of September, 1998.
WORLDCOM NETWORK ABLE CONSTRUCTION, INC.
SERVICES INC.
By: /s/ DAVID F. MYERS By: /s/ FRAZIER L. GAINES
------------------------- ------------------------
Name: DAVID F. MYERS Name: FRAZIER L. GAINES
Title: VP & Controller Title: President & CEO
-4-
<PAGE>
PARTIAL
UNDISCLOSED LITIGATION/CLAIMS
(Pending or threatened at time of Contract)
1. While item #13 on Exhibit 6h to the Acquisition Contract discloses
FLORIO VS. LAGUARDIA CONTRACTING, ET AL, it does not disclose the
existence of claims by subs against LaGuardia (our sub) or that
LaGuardia was in Chapter 11.
2. Kenneth Fuhs wrongful death (February '98). Though insurance should
cover the wrongful death claims, there were significant claims by state
or local government (with possible sanctions) for maintaining an unsafe
worksite and tampering with or removing safety devices from
equipment/machinery.
3. Kimberly Person. Employment discrimination (Virginia and federal law
claims). Notice given by Virginia Human Rights Commission on 2-17-98.
HRC#98044E and EEOC #10D980153.
4. AMERICAN UNDERGROUND VS. MFSNT, AAA Arbitration, Baltimore. This is a
$650,000+ claim by a sub under an invoice received by MFSNT in February
1998 after a few months of disputing. Arbitration was demanded on
5-5-98 over this dispute that originated in 1997. The demand seeks
$655,015.80.
5. FIBER OPTEK INTERCONNECT VS. MFSNT. This claim by a sub arose from a
dispute in September, 1997. The claimant sought $119,000 and the case
was settled in June 1998 for $105,700.23.
6. NEWBERRY ALASKA, INC. VS. MFSNT. (Alyeska Project). A dispute arose in
the summer of 1997 over scope of work, change orders, failure to
disclose conditions in job specs. Claimant seeks $4,000,000 above the
contract price. Arbitration demand is expected any day.
7. ALPHATECH, INC. VS. MFSNT, U.S.D.C. Mass., Case #98CV-11189 DPW. Suits
over a teaming agreement dated 1-17-96 related to the E-470 Project and
a teaming agreement dated 6-28-96 related to the NJ Consortium. The
Palintiff alleges breach of both teaming agreements, bad faith,
misappropriation of trade secrets, deceit, promissory estoppel, quantum
meruit and unjust enrichment and seeks damages of "not less than
$3,750,000" plus injunctive relief. Suit was filed June 17, 1998, but
knowledge of the dispute predated the contract.
Appendix 1, p. 1 of 3
<PAGE>
8. U.S. PUBLIC TECHNOLOGIES VS. MFSNT. Initially filed in U.S. District
Court, it has been refiled and is now pending in San Diego Superior
Court, San Diego, California. This is a suit over a teaming agreement
dated 7-19-96 in conjunction with the NJ Consortium. It alleges breach
of contract, bad faith, tortious interference, unfair competition,
promissory estoppel and unjust enrichment, and seeks $8,500,000 plus
costs and fees.
9. AMERICAN INTERNATIONAL CORP. VS. MFSNT. Claim by materialman for
$408,359.80 for materials provided on the Tappan Zee Bridge Project.
Demand letter from claimant's attorney sent 1-12-98. Sent to MFSNT's
outside counsel of 1-26-98.
10. CITY ELECTRIC, INC. Claim/lien notice in the amount of $1,264,838 on
Alyeska Project. Formal claim notice is dated 12-31-97.
11. E-470 PROJECT DISPUTES
Numerous dispute and default threats have been made on this
project claiming lapses, defects and defaults on the part of MFSNT. The
prime contractor's counsel sent a notice of "significant lapses or
defects in performance" on 4-30-97. Threats and demands for cure and
for liquidated damages ($15,000/calendar day, increasing to
$31,000/calendar day) followed. The contractor notified the surety,
Travelers, of its intent to make a claim on the performance bond on
5-29-98, a copy of which was sent to WorldCom. To complete the job
MFSNT projects a loss of approximately $12,000,000. ADR has been
requested.
12. ATCAS PROJECT
This project has been the subject of ongoing disputes
throughout, with numerous claims against MFSNT for noncompliance. MFSNT
also has an ongoing dispute with a major sub, Lockheed. As a result of
these ongoing disputes, monies are being withheld from MFSNT, and
MFSNT's expenses are more than projected.
Appendix 1, p. 2 of 3
<PAGE>
13. SARA FRYD VS. MFSNT OSHA Case #955930
Employee claims wrongful discharge for reporting OSHA violations.
Initial OSHA Complaint #202-389086 was sent to MFSNT on 3-23-98 stating
it had received notice of safety hazards. MFSNT responded 3-25-98. That
file was closed "subject to Complainant's review." Complainant then
made the wrongful termination claim (OSHA #955930) on 4-9-98.
14. DIANE BERGERON. Employment discrimination claim threatened, resulting
in company wide memo advising employees not to talk to Bergeron. Notice
of intent to pursue claim made 4-9-98.
15. CITY OF MADISON HEIGHTS VS. MFSNT, ET AL
Substantially the same type of claims involved in items 11 and
12 on Exhibit 6h to the Acquisition Contract (litigation).
16. NYSTA CONSTRUCTION CAP DISPUTE
There has been a dispute ongoing regarding the construction
cap on NYSTA for approximately $14,000.00. Based on the NYSTA contract
this effectively reduces MFSNT's revenues by $4.5 to $5.0 million.
17. CANADA 104 PROJECT
A default notice had been given to MFSNT by SIRIT after
ongoing threats and demands. An acceptance of cure was recently
received, but only after MFSNT incurred the expense to cure.
18. All matters listed on Exhibit 6h to the Acquisition Agreement
19. TAB Electric (Alyeska)
21. Mass Turnpike (limited to costs or expenditures after 7-8-98)
Appendix 1, p. 3 of 3
EXHIBIT 3.1.1
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
ABLE TELCOM HOLDING CORP.
-----------------------------------
Pursuant to Section 607.0602 of the
Florida Business Corporation Act
------------------------------------
Pursuant to Section 607.0602 of the Florida Business Corporation Act (the
"FBCA"), Able Telcom Holding Corp. (the "COMPANY") hereby adopts the following
Amendment to its Articles of Incorporation, as amended (the "AMENDMENT"):
1. The name of the Corporation is Able Telcom Holding Corp.
2. The Amendment set forth below was duly adopted on June 26, 1998
by the Board of Directors pursuant to a consent in writing in accordance
with Section 607.0821 of the FBCA.
3. This Amendment to the Company's Articles of Incorporation shall
be effected by adding the following Part B to Article III as follows:
B. SERIES B CONVERTIBLE PREFERRED STOCK
(1) DESIGNATION AND AMOUNT. The shares of such series shall be
designated "Series B Convertible Preferred Stock" (herein referred to as
"PREFERRED SHARES"), having a par value per share equal to $0.10, and the
number of shares constituting such series shall be 4,000.
(2) DIVIDENDS. The Preferred Shares will bear dividends ("DIVIDENDS")
at a rate of 4% of the Stated Value per share of the Preferred Shares per annum,
which shall be cumulative, accrue daily from the Issuance Date (as defined
below) and be payable on the last day of each Fiscal Quarter (as defined below)
beginning on the last day of the Fiscal Quarter on October 31,1998 (each a
"DIVIDEND DATE"). If a Dividend Date is not a Business Day (as defined below)
then the Dividend shall be due and payable on the Business Day immediately
following the Dividend Date. Dividends shall be payable in shares of Common
Stock at the Conversion Rate (as defined below) or, at the option of the
Company, in cash, provided that the Dividends which accrued during any period
shall be payable in cash only
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if the Company provides written notice ("DIVIDEND ELECTION NOTICE") to each
holder of Preferred Shares at least 20 days prior to the Dividend Date.
Dividends to be paid in shares of Common Stock shall be paid in a number of
fully paid and nonassessable shares (rounded to the nearest whole share in
accordance with Section 3(h)) of Common Stock based on the Conversion Price (as
defined below) on the 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 4(d)), or an event that with the passage
of time or the giving of notice would constitute a Triggering Event if not
cured, has occurred and is continuing on the date of the Company's Dividend
Election Notice or on 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 below) has not been declared
effective by the Securities and Exchange Commission (the "SEC") on or before the
Dividend Date. Any accrued and unpaid dividends which are not paid (in stock or
cash as applicable) within five (5) Business Days of such accrued and unpaid
dividends' Dividend Date shall bear interest at the rate of 2.0% per month (pro
rated for partial months) from such Dividend Date until the same is paid (the
"DEFAULT INTEREST").
(3) HOLDER'S CONVERSION OF PREFERRED SHARES. A holder of Preferred Shares
shall have the right, at such holder's option, to convert the Preferred Shares
into shares of the Company's common stock, par value $.001 per share (the
"Common Stock"), on the following terms and conditions:
(a) CONVERSION RIGHT. At any time or times on or after the Issuance
Date (as defined below), any holder of Preferred Shares shall be entitled
to convert any whole number of Preferred Shares into fully paid and
nonassessable shares (rounded to the nearest whole share in accordance with
Section 3(h)) of Common Stock, at the Conversion Rate (as defined below);
provided, however, that in no event shall any holder be entitled to convert
Preferred Shares in excess of that number of Preferred Shares which, upon
giving effect to such conversion, would cause the aggregate number of
shares of Common Stock beneficially owned by the holder and its affiliated
entities to exceed 4.99% of the outstanding shares of the Common Stock
following such conversion. For purposes of the foregoing proviso, the
aggregate number of shares of Common Stock beneficially owned by the holder
and its affliates shall include the number of shares of Common Stock
issuable upon conversion of the Preferred Shares with respect to which the
determination of such proviso is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (i) conversion of
the remaining, nonconverted Preferred Shares beneficially owned by the
holder and its affiliates, and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any warrants or convertible preferred
stock) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the holder and its
affliates. Except as set forth in the preceding sentence, for purposes of
this Section 3(a), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended. The
holder may waive the foregoing limitations by written notice to the Company
upon not
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less than 61 days prior notice (with such waiver taking effect only upon the
expiration of such 61 day notice period).
(b) CONVERSION RATE. The number of shares of Common Stock issuable
upon conversion of each of the Preferred Shares pursuant to Sections 3(a)
and 3(g) shall be determined according to the following formula (the
"Conversion Rate"):
CONVERSION AMOUNT
Conversion Price
For purposes of these Articles of Amendment, the following terms shall have
the following meanings:
(i) "CONVERSION PRICE" means, as of any Conversion Date (as
defined in Section 3(f)) or other date of determination, a price equal to 97.0%
of the lesser of (A) the average of the low Trading Prices (as defined below)
for shares of Common Stock for any three (3) Trading Days (which need not be
consecutive) during the twenty-two (22) Trading Days (the "Pricing Period")
immediately preceding the Conversion Date and (B) the low Trading Price for
Shares of Common Stock, each on the Trading Day immediately preceding the
Conversion Date (the "LOW SALES PRICE"), on NASDAQ (as defined below), the New
York Stock Exchange or the American Stock Exchange, as applicable; PROVIDED,
HOWEVER, that with respect to any Conversion Price determined pursuant to
Section 3(i)(B), the Conversion Price shall not be less than ninety-five percent
(95%) of the Low Sales Price on the Conversion Date.
(ii) "CLOSING BID PRICE" means, for any security as of any date
the last closing bid price for such security on the Nasdaq National Market
("NASDAQ") as reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if
NASDAQ is not the principal trading market for such security, the last closing
bid price of such security on the principal securities exchange or trading
market where such security is listed or traded 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 of such security that are listed 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 a majority of the outstanding Preferred Shares (including for purposes of
this determination any Preferred Shares with respect to which the Closing Bid
Price is being determined). 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 3(f)(iii).
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<PAGE>
(All such determinations are to be appropriately adjusted for any stock
dividend, stock split or other similar transaction during any period for which
the Closing Bid Price is being determined).
(iii) "N" means the number of days from, but excluding, the
Issuance Date through and including the Conversion Date for the Preferred Shares
for which conversion is being elected.
(iv) "ISSUANCE DATE" means, with respect to each Preferred Share,
the date of issuance of the applicable Preferred Share.
(v) "CONVERSION AMOUNT" means, on a per share basis, the sum of
(A) the Stated Value, plus (B) unpaid Default Interest through the date of
determination, plus (C) any unpaid dividends.
(vi) "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.
(vii) "FISCAL QUARTER" means each of the periods beginning on
and including November and ending on and including January 31, the period
beginning on and including February 1 and ending on and including April 30, the
period beginning on and including May 1 and ending on and including July 31,
and the period beginning on and including August 1 and ending on and including
October 31.
(viii) "INVESTMENT AGREEMENT" means that certain Convertible
Preferred Stock Purchase Agreement dated June 26, 1998 between the Company and
the initial holders of the Preferred Shares.
(ix) "STATED VALUE" means $5,000.
(x) "REGISTRATION STATEMENT" means the registration statement
covering the resale of the shares of Common Stock issuable upon conversion or
exercise of the Preferred Shares and Warrants (as defined in the Investment
Agreement) and required to be filed by the Company pursuant the Registration
Rights Agreement (as defined below.
(xi) "REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement between the Company and the Investors referred to therein.
(xii) "TRADING DAY" shall mean any day on which the Common
Stock is traded for any period on Nasdaq, or on the principal securities
exchange or other securities market on which the Common Stock is then being
traded.
(xiii) "TRADING PRICE" means, for any security as of any date,
the trading price for such security on the Nasdaq National Market ("NASDAQ") as
reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if NASDAQ is not the
principal trading market for such security, the trading price of such security
on the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg, or if the foregoing do not apply, the
trading price of such security in the
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<PAGE>
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no trading price is reported for such security by
Bloomberg, the trading price of such security that are listed by Bloomberg, or,
if no trading price is reported for such security by Bloomberg, the average of
the trading prices of any market makers for such security as reported in the
"pink sheets" by the National Quotation Bureau, Inc. If the Trading Price cannot
be calculated for such security on such date on any of the foregoing bases, the
Trading 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
outstanding Preferred Shares (including for purposes of this determination any
Preferred Shares with respect to which the Trading Price is being determined).
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 3(f)(iii). (All such determinations are to be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
any period for which the Trading Price is being determined).
(c) [intentionally omitted.]
(d) ADJUSTMENT TO CONVERSION PRICE - DILUTION AND OTHER EVENTS. In
order to prevent dilution of the rights granted under these Articles of
Amendment, the Conversion Price will be subject to adjustment from time to time
as provided in this Section 3(d).
(i) ADJUSTMENT OF CONVERSION PRICE FOR CERTAIN ISSUANCES OF
SECURITIES. (A) Notwithstanding anything else herein to the contrary, if at any
time within twelve (12) months after the Closing Date the Company issues or
sells any Common Stock at a discount greater than the discount specified in
Section 3(b)(i) hereof or at a ceiling price less than the Conversion Price,
then the Conversion Price shall be reduced effective concurrently with such
issue or sale (or thereafter as applicable) to provide the holder such greater
discount or lower Conversion Price except pursuant to presently outstanding
convertible securities and the Company's 1995 Stock Option Plan, as amended, or
other options to employees of the Company or its subsidiaries.
(B) For the purposes of the foregoing adjustment, in the case of the
issuance of any convertible or exchangeable securities, warrants, options or
other rights to subscribe or exchange for or to purchase shares of Common Stock
("Exchangeable Securities"), the maximum number of shares of Common Stock
issuable upon exercise, conversion or exchange of such Exchangeable Securities
shall be deemed to be outstanding, provided that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange or
conversion of such Exchangeable Securities.
(C) In the event of any such issuance for a consideration that
provides a discount greater than the discount specified in Section 3(b)(i)
hereof and that also is at a ceiling price less than the Conversion Price then
in effect, then there shall be only one such adjustment by reason of such
issuance, such adjustment to be that which results in the greatest reduction of
the Conversion Price computed as aforesaid.
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(ii) ADJUSTMENT OF 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
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 Conversion Price in effect
immediately prior to such combination will be proportionately increased.
(iii) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF CONVERTIBLE
SECURITIES. If the Company in any manner issues or sells convertible securities
that are convertible into or exchangeable for Common Stock at a price which
varies with the market price of the Common Stock (the formulation 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 the Preferred Shares ("Variable Notice") on the date of issuance of
such convertible securities. If the holders of Preferred Shares representing at
least two-thirds (2/3) of the Preferred Shares then outstanding provide written
notice via facsimile and overnight courier (the "VARIABLE PRICE ELECTION
NOTICE") to the Company within five (5) business days of receiving a Variable
Notice that such holders desire to replace the Conversion Price then in effect
with the Variable Price described in such Variable Notice, then from and after
the date of the Company's receipt of the Variable Price Election Notice the
Conversion Price will automatically be replaced with the Variable Price
(together with such modifications to these Articles of Amendment as may be
required to give full effect to the substitution of the Variable Price for the
Conversion Price). A holder's delivery of a Variable Price Election Notice shall
serve as the consent required to amend these Articles of Amendment pursuant to
Section 13 below. In the event that a holder delivers a Conversion Notice at any
time 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) 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 (as defined below) 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 Organic Change, the Company will make appropriate
provision (in form and substance 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 otherwise
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 had such Organic Change not taken
place (without taking into
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account any limitations or restrictions on the timing or amount of conversions).
In any case, the Company will make appropriate provision (in form and substance
satisfactory to the holders of a majority of the Preferred Shares then
outstanding) with respect to such holders' rights and interests to insure that
the provisions of this Section 3(d) and Section 3(e) will thereafter be
applicable to the Preferred Shares (including, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity
is other than the Company, an immediate adjustment of the Conversion Price to
reflect the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, and if the value so reflected is less than the
Conversion Price in effect immediately prior to such consolidation, merger or
sale to reflect the price of the common stock of the surviving entity and the
market in which such common stock is traded). The Company will not effect any
such consolidation, merger or sale, unless prior to the consummation thereof,
the successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes, by written instrument (in
form and substance satisfactory to the holders of a majority of the Preferred
Shares then outstanding), the obligation to deliver to each holder of Preferred
Shares such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire. "Person" shall
mean 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.
(v) CERTAIN EVENTS. If any event occurs of the type contemplated
by the provisions of this Section 3(d) but not expressly provided for by such
provisions, 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, however, that no such adjustment will increase
the Conversion Price as otherwise determined pursuant to this Section 3(d).
(vi) NOTICES
(A) Immediately upon any adjustment of the Conversion Price,
the Company will give written notice thereof to each holder of the 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
the Preferred Shares at least 20 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 determing rights to
vote with respect to any Organic Change, dissolution or liquidation and in no
event shall such notice be provided to such holder prior to such information
being made known to the public.
(C) The Company will also give written notice to each holder
of the Preferred Shares at least 20 days prior to the date on which any Organic
Change, dissolution or liquidation will take place and in no event shall such
notice be provided to such holder prior to such information being made known to
the public
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<PAGE>
(vii) CONVERSION PRICE DURING MAJOR ANNOUNCEMENTS.
Notwithstanding anything contained in this paragraph (d) of this Section 4 to
the contrary, in the event the Corporation (i) makes a public announcement that
it intends to consolidate or merge with any other corporation (other than a
merger in which the Corporation is the surviving or continuing corporation and
its capital stock is unchanged) or sell or transfer all or substantially all of
the assets of the Corporation or (ii) any person, group or entity (including the
Corporation) publicly announces a tender offer to purchase 50% or more of the
Corporation's Common Stock or otherwise publicly announces an intention to
replace a majority of the Corporation's Board of Directors by waging a proxy
battle or otherwise (the date of the announcement referred to in clause (i)
on (ii) is hereinafter referred to as the "Announcement Date"), then the
Conversion Price shall, effective upon the Announcement Date and continuing
through the Adjusted Conversion Price Termination Date (as defined below), be
equal to the lower of (x) the Conversion Price which would have been applicable
for an Optional Conversion occurring on the announcement Date and (y) the
Conversion Price that would otherwise be in effect. From and after the Adjusted
Conversion Price Termination Date, the Conversion Price shall be determined as
set forth in Section 4(b)(i). For purposes hereof, "Adjusted Conversion Price
Termination Date" shall mean, with respect to any proposed transaction, tender
offer or removal of the majority of the Board of Directors which a public
announcement as contemplated by this subparagraph (b) has been made, the date
upon which the Corporation (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) consummates or publicly
announces the termination or abandonment of the proposed transaction or tender
offer which caused this subparagraph (vii) to become operative.
(viii) ADJUSTMENT FOR RESTRICTED PERIODS. In the event that (i)
the Corporation fails to obtain effectiveness with the Securities and Exchange
Commission of the Registration Statement (as defined in the Registration Rights
Agreement) on or prior to ninety (120) days following the Issue Date, or (ii)
such Registration Statement lapses in effect, or sales otherwise cannot be made
thereunder, whether by reason of the Corporation's failure or inability to amend
or supplement the prospectus (the "Prospectus") included therein in accordance
with the Registration Rights Agreement or otherwise, after such Registration
Statement becomes effective (including, without limitation, during a Suspension
Grace Period (as defined in the Registration Rights Agreement), then, at the
election of each holder of the Preferred Shares, the Pricing Period shall be
comprised of, (x) in the case of an event described in clause (i), the
twenty-two (22) Trading Days preceding the 120th day following the Issue Date
plus all Trading Days through and including the third Trading Day following the
date of effectiveness of the Registration Statement; and (y) in the case of an
event described in clause (ii), the twenty-two (22) Trading Days preceding the
date on which the holder of the Preferred Shares is first notified that sales
may not be made under the Prospectus, plus all Trading Days through and
including the third Trading Day following the date on which the Holder is first
notified that such sales may again be made under the Prospectus. If a holder of
the Preferred Shares determines that sales may not be made pursuant to the
Prospectus (whether by reason of the Corporation's failure or inability to amend
or supplement the Prospectus or otherwise) it shall so notify the Corporation in
writing and, unless the Corporation provides such holder with a written opinion
of the
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Corporation's counsel to the contrary, such determination shall be binding for
purposes of this paragraph.
(e) PURCHASE RIGHTS. In addition to any adjustments of the Conversion
Price pursuant to Section 3(d), if at any time after the Issuance Date 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 the 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 timing or amount of conversions)
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 the Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(f) MECHANICS OF CONVERSION. Subject to the Company's inability to
fully satisfy its obligations under a Conversion Notice (as defined below) as
provided for in Section 5:
(i) HOLDERS' DELIVERY REQUIREMENTS. To convert Preferred Shares
into full 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. Eastern Time, on such date, a copy of a fully executed
notice of conversion in the form attached hereto as Exhibit I (the "CONVERSION
NOTICE") to the Company and its designated transfer agent (the "TRANSFER
AGENT"), and (B) surrender to a common carrier for delivery to the Company or
the Transfer Agent as soon as practicable following such date, the original
certificate(s) representing the Preferred Shares being converted (or an
indemnification undertaking with respect to such shares in the case of their
loss, theft or destruction) (the "Preferred Stock Certificate(s)") and the
originally executed Conversion Notice.
(ii) COMPANY'S RESPONSE. Upon receipt by the Company of a
facsimile copy of a Conversion Notice, the Company shall as soon as practicable,
but in any event not later than the next business day, send, via facsimile, a
confirmation of receipt of such Conversion Notice to such holder. Upon receipt
by the Company or the Transfer Agent of the Preferred Stock Certificate(s) to be
converted pursuant to a Conversion Notice, together with the originally executed
Conversion Notice, the Company or the Transfer Agent (as applicable) shall, on
the next business day following the date of receipt, (I) issue and surrender to
a common carrier for overnight delivery to the address 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, or (II) 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 The Depository Trust Company. If the number of Preferred Shares
represented by the Preferred Stock Certificate(s) submitted for conversion is
greater than the number of Preferred Shares being converted, then the
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Company or Transfer Agent, as the case may be, shall, as soon as practicable and
in no event later than two business days after receipt of the Preferred Stock
Certificate(s) 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 Conversion Price or the arithmetic calculation of the
Conversion Rate, 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
business day of receipt of such holder's Conversion Notice. If such holder and
the Company are unable to agree upon the determination of the Conversion Price
or arithmetic calculation of the Conversion Rate within one business day of such
disputed determination or arithmetic calculation being submitted to the holder,
then the Company shall within one business day submit via facsimile (A) the
disputed determination of the Conversion Price to an independent, resputable
investment bank or (B) the disputed arithmetic calculation of the conversion
Rate to its 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 48 hours 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. If within five
business days after the Company's or the Transfer Agent's receipt of the
Preferred Stock Certificates to be converted and the Conversion Notice the
Company shall fail (I) to issue a certificate for the number of shares of Common
Stock to which a holder is entitiled or to credit the holder's balance account
with The Depository Trust Company for such number of shares of Common Stock to
which the holder is entitled upon such holder's conv of the Preferred Shares, or
(II) to issue a new Preferred Stock Certificate representing the number of
Preferred Shares to which such holder is entitled, pursuant to Section 3(f)(ii),
in addition to all other available remedies which such holder may pursue
hereunder and under the Investment Agreement (including indemnification pursuant
thereto), the Company shall pay additional damages to such holder on each date
after such fifth (5th) business day that such conversion or delivery of such
Preferred Stock Certificates, as the case may be, is not timely effected in an
amount equal to 0.5% of the product of (A) the sum of the number of shares of
Common Stock not issued to the holder on a timely basis pursuant to Section
3(f)(ii) 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 a timely basis
pursuant to Section 3(f)(ii), the number of shares of Common Stock issuable upon
conversion of the Preferred Shares represented by such Preferred Stock
Certificate as of the last possible date which the Company could have issued
such Preferred Stock Certificate to such holder without violating Section
3(f)(ii); and (B) the Closing Bid Price of the Common Stock on the last possible
date which the Company could
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<PAGE>
have issued such Common Stock and the Preferred Stock Certificate, as the case
may be, to such holder without violating Section 3(f)(ii).
(vi) CONVERSION DEFICIENCY; PREMIUM PRICE REDEMPTION FOR
CONVERSION DEFICIENCY. In the event that the Company does not have a sufficient
number of Common Shares available to satisfy the Company's obligations to any
Holder upon receipt of a Conversion Notice or is otherwise unable or unwilling
to issue such Common Shares (including without limitation by reason of the limit
described in Section 10 of the Registration Rights Agreement) in accordance with
the terms of this Amendment for any reason after receipt of a Conversion Notice,
then:
(A) The Company shall pay in cash to each holder an amount
equal to three percent (3%) of the Liquidation Value for the Series B Preferred
Shares held by such holder for each 30-day period (or portion thereof) that the
Company fails or refuses to issue Common Shares in accordance with the terms of
this Amendment; and
(B) At any time five days after the commencement of the
running of the first 30-day period described above in clause (A) of this
paragraph (iv), at the request of any holder pursuant to a redemption notice,
the Company promptly (1) shall purchase from such holder, at a purchase price
equal to the Premium Redemption Price (as defined in the Registration Rights
Agreement), the number of Series B Preferred Shares equal to such holder's pro
rata share of the "Deficiency", as such term is defined in the Registration
Rights Agreement, if the failure to issue Common Shares results from the lack of
a sufficient number thereof and (2) shall purchase all (or such portion as such
Holder may elect) of such holder's Series B Preferred Stock at such Premium
Redemption Price if the failure to issue Common Shares results from any other
cause. The "Deficiency" shall be equal to the number of Series B Preferred
Shares that would not be able to be converted for Common Shares, due to an
insufficient number of Common Shares available, if all the outstanding Series B
Preferred Shares were submitted for conversion at the Conversion Price set forth
herein as of the date such Deficiency is determined. Any request by a Holder
pursuant to this paragraph (vi) shall be revocable by that Holder at any time
prior to its receipt of the Premium Redemption Price.
(vii) PREMIUM PRICE REDEMPTION FOR CASH PAYMENT DEFAULTS. In the
event that the Company fails or refuses to pay any default payment or honor any
penalty or similar amounts when due, at any holder's request and option the
Company shall purchase all or a portion of the Series B Preferred Stock, Common
Shares and for Warrant Shares held by such holder (with default payments
accruing through the date of such purchase), within five (5) days of such
request, at a purchase price equal to the Premium Redemption Price (as defined
in the Registration Rights Agreement), provided that such holder may revoke such
request at any time prior to receipt of such payment of such purchase price.
Until such time as the Company purchases such Series B Preferred Shares at the
request of such holder pursuant to the preceding sentence, at any holder's
request and option the Company shall as to such holder pay such amount by adding
and including the amount of such default payment to the Conversion Amount and
the Liquidation Value instead of in cash.
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<PAGE>
(viii) DELISTING; BEST EFFORTS. If required, the Company will
use its best efforts to obtain promptly shareholder approval pursuant to NASD
Rule 4460(i) authorizing the issuance of all Common Shares and Warrant Shares
issuable upon the conversion of any shares of Series B Preferred Stock or the
exercise of any Warrants, (including by calling a special meeting of such
shareholders within 60 days of the date of any such attempted conversion) and
having the Company's Board of Directors recommend such approval in a proxy
statement. If a conversion of any shares of Series B Preferred Stock in whole or
in part for Common Shares by an Investor could result in the Company being
delisted from the Nasdaq NMS for issuing in excess of 20% of its outstanding
Common Stock to the holders without the approval of the Company's shareholders,
then the Company, upon the holder's request, must redeem any and all Series B
Preferred Stock covered by the applicable Conversion Notice and any and all
Series B Preferred Stock that would, if a Conversion Notice for all shares of
Series B Preferred Stock were then delivered, result in the Company being
subject to such delisting, at a price equal to 130% of the Liquidation
Preference.
(g) MANDATORY CONVERSION AT MATURITY. If any Preferred
Shares remain outstanding on the Maturity Date (as defined below), then all such
Preferred Shares shall be converted as of such date in accordance with this
Section 3 as if the holders of such Preferred Shares had given the Conversion
Notice of the Maturity Date; provided, however, that if a Triggering Event has
occurred and is continuing on the Mandatory Conversion Date, then the Company
shall, within five business days following the Maturity Date (unless otherwise
notified in writing by the holder of its request to have the Preferred Shares
converted into Common Stock), pay to each holder of Preferred Shares then
outstanding, in immediately available funds, an amount equal to the Triggering
Event Redemption Price (as defined below) as of the Maturity Date. All holders
of Preferred shares shall thereupon surrender all Preferred Stock Certificates,
duly endorsed for cancellation, to the Company or the Transfer Agent, provided
that the Company has complied with its obligations under this Section 3.
"MATURITY DATE" means the date which is five years after the Issuance Date,
subject to extension pursuant to the Registration Rights Agreement, which
extension shall be equal to one and one-half (1 1/2) day for each day in any
Suspension Grace Period (as defined in the Registration Rights Agreement).
(h) FRACTIONAL SHARES. 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 therefore 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.
(i) TAXES. The Company shall pay any and all taxes which may be
imposed upon it with respect to the issuance and delivery of shares of Common
Stock upon the conversion of the Preferred Shares.
(4) REDEMPTION AT OPTION OF HOLDERS.
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<PAGE>
(a) REDEMPTION OPTION UPON MAJOR TRANSACTION. In addition to all other
rights of the holders of Preferred Shares contained herein, simultaneous with or
after the occurrence of a Major Transaction (as defined below), 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 the greater of (i) 130% of the Liquidation Value
(as defined by Section 9); and (ii) the product of (A) the Conversion Rate at
such time, and (B) the Closing Bid Price on the date of the public announcement
of such Major Transaction or the next date on which the exchange or market on
which the Common Stock is traded is open if such public announcement is made
(X) after 12:00 p.m. Eastern Time, on such date or (Y) on a date on which the
exchange or market on which the Common Stock is traded is closed (the "MAJOR
TRANSACTION REDEMPTION PRICE").
(b) REDEMPTION OPTION UPON TRIGGERING EVENT. In addition to all other
rights of the holders of Preferred Shares contained herein, simultaneous with or
after the occurrence of a Triggering Event (as defined below), 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 the greater of (i) 130% of the Liquidation Value;
and (ii) the product of (A) the Conversion Rate on the date of such holder's
delivery of a Notice of Redemption at Option of Holder Upon Triggering Event (as
defined in Section 4(f)), and (B) the greater of (I) the Closing Bid Price on
the trading day immediately preceding such Triggering Event or (II) the Closing
Bid Price on the date of the holder's delivery to the Company of a Notice of
Redemption at Option of Holder Upon Triggering Event (as defined below) or, if
such date of delivery is not a trading day, the next date on which the exchange
or market on which the Common Stock is traded is open (the "TRIGGERING EVENT
REDEMPTION PRICE" and, collectively with the Major Transaction Redemption Price,
the "REDEMPTION PRICE").
(c) "MAJOR TRANSACTION". A "MAJOR TRANSACTION" shall be deemed to have
occurred at such time as any of the following events:
(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; or
(iii) a purchase, tender or exchange offer made to and accepted by the
holders of more than 30% of the outstanding shares of Common Stock.
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<PAGE>
(d) "TRIGGERING EVENT". A "Triggering Event" shall be deemed to have
occurred at such time as any of the following events:
(i) the failure of the Registration Statement to be declared
effective by the SEC on or prior to the date that is 120 days after the Issuance
Date;
(ii) while the Registration Statement is required to be
maintained effective pursuant to the terms of 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
(other than on any days during any Suspension Grace Period (as defined in the
Registration Rights Agreement)) to the holder of the Preferred Shares for sale
of the Registrable Securities (as defined in the Registration Rights Agreement)
in accordance with the terms of the Registration Rights Agreement;
(iii) delisting or suspension from listing of the Common Stock
from NASDAQ, The American Stock Exchange, Inc. or The New York Stock Exchange,
Inc. for a period of 5 consecutive days or for an aggregate of at least 10 days
in any 365-day period;
(iv) the Company's notice to any holder of Preferred Shares,
including by way of public announcement, at any time of its intention not to
comply with proper requests for conversion of any Preferred Shares into shares
of Common Stock, including due to any of the reasons set forth in Section 5(a)
below, or the Company's failure to deliver Common Stock within ten business days
of the Conversion Date; or
(v) any representation or warranty by the Company was not true
and correct at the time made (including the Issuance Date) or the Company
breaches any covenant or other term or condition of the Investment Agreement,
the Registration Rights Agreement, these Articles of Amendment, or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated thereby or hereby, except (i) to the extent
that such breach would not have a Material Adverse Effect (as defined in the
Investment Agreement), and (ii) in the case of a breach of a convenant which is
curable, such breach continues for a period of less than ten days.
(e) MECHANICS OF REDEMPTION AT OPTION OF HOLDER UPON MAJOR TRANSACTION. No
sooner than 15 days nor later than 10 days prior to the consummation of a Major
Transaction, but not prior to the public announcement of such Major Transaction,
the Company shall deliver written notice thereof via facsimile and overnight
courier (a "Notice of Major Transaction") to each holder of Preferred Shares. At
any time after receipt of a Notice of Major Transaction (or, in the event a
Notice of Major Transaction is not delivered at least 10 days prior to a Major
Transaction, at any time on or after the date which is 10 days prior to a Major
Transaction), any holder of the Preferred Shares then outstanding may require
the Company to redeem all or a portion of the holder's Preferred Shares, which
redemption shall be effective concurrent with the consummation of the Major
Transaction, then outstanding by delivering written notice thereof via facsimile
and overnight courier (a "Notice of ~Redemption at Option of Holder Upon Major
Transaction") to the Company, which Notice of Redemption at Option of Holder
Upon Major Transaction shall indicate (i) the number of Preferred Shares that
such holder is submitting for redemption, and (ii) the applicable Major
Transaction Redemption Price, as calculated pursuant to Section 4(a).
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<PAGE>
(f) MECHANICS OF REDEMPTION AT OPTION OF HOLDER UPON TRIGGERING EVENT.
Within one 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. At any time
after the earlier of a holder's receipt of a Notice of Triggering Event and such
holder becoming aware of a Triggering Event, any holder of 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 at Option of Holder
Upon Triggering Event") to the Company, which Notice of Redemption at Option of
Holder Upon Triggering Event shall indicate (i) the number of Preferred Shares
that such holder is submitting for redemption, and (ii) the applicable
Triggering Event Redemption Price, as calculated pursuant to Section 4(b).
(g) PAYMENT OF REDEMPTION PRICE. Upon the Company's receipt of a Notice(s)
of Redemption at Option of Holder Upon Triggering Event or a Notice(s) of
Redemption at Option of Holder Upon Major Transaction 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) or Redemption at
Option of Holder Upon Triggering Event or Notice(s) of Redemption at Option of
Holder Upon Major Transaction and each holder which has sent such a notice shall
promptly submit to the Company or its Transfer Agent such holder's Preferred
Stock Certificate(s) which such holder has elected to have redeemed. The Company
shall deliver the applicable Triggering Event Redemption Price, in the case of a
redemption pursuant to Section 4(f), to such holder within five business days
after the Company's receipt of a Notice of Redemption at Option of Holder Upon
Triggering Event and, in the case of a redemption pursuant to Section 4(e), the
Company shall deliver the applicable Major Transaction Redemption Price
immediately prior to the consummation of the Major Transaction; provided that a
holder's Preferred Stock Certificates shall have been so delivered to the
Company; and provided further that if the Company is unable to redeem all of the
Preferred Shares to be redeemed, the Company shall redeem an amount from each
holder of Preferred Shares being redeemed equal to such holder's pro-rata amount
(based on the number of Preferred Shares held by such holder relative to the
number of Preferred Shares outstanding) of all Preferred Shares being redeemed.
If the Company shall fail to redeem all of the Preferred Shares submitted for
redemption, in addition to any remedy such holder of Preferred Shares may have
under these Articles of Amendment' the Investment Agreement and the Registration
Rights Agreement, the applicable Redemption Price payable in respect of such
unredeemed Preferred Shares shall bear interest at the rate of 2.0% per month
(pro rated for partial months) until paid in full. Until the Company pays such
unpaid applicable Redemption Price in full to a holder or Preferred Shares
submitted for redemption, such holder shall have the option (the "VOID OPTIONAL
REDEMPTION OPTION") to, in lieu of redemption, require the Company to promptly
return to such holder(s) all of the Preferred Shares that were submitted for
redemption by such holder(s) under this Section 4 and for which the applicable
Redemption Price 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(s) and prior to
payment of the full applicable Redemption Price to such holder, (i) the
Notice(s) of
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<PAGE>
Redemption at Option of Holder Upon Triggering Event or the Notice(s) of
Rcdemption at Option of Holder Upon Major Transaction, as the case may be,
shall be null and void with respect to those Preferred Shares submitted for the
redemption and for which the applicable Redemption Price has not been paid, (ii)
the Company shall immediately return any Preferred Shares submitted to the
Company by each holder for redemption under this Section 4(g) and for which the
applicable Redemption Price has not been paid, (iii) the Conversion Price of
such returned Preferred Shares shall be adjusted to the lesser of (A) the
Conversion Price as in effect on the date on which the Void Optional Redemption
Notice(s) is delivered to the Company and (B) the lowest Closing Bid Price
during the period beginning on the date on which the Notice(s) of Redemption of
Option of Holder Upon Major Transaction or the Notice(s) of Redemption at Option
of Holder Upon Triggering Event, as the case may be, is delivered to the
Company; provided that no adjustment shall be made if such adjustment would
result in an increase in the Conversion Price then in effect, and (iv) if the
redemption was caused by a Triggering Event involving the Company's inability to
issue Common Stock because of the Exchange Cap (as defined in Section 12), the
holders of at least two-thirds of the Preferred Shares then outstanding,
including Preferred Shares submitted for redemption pursuant to this Section 4
with respect to which the applicable Redemption Price has not been paid, may
direct the Company to immediately 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 in the electronic bulletin board
or the "pink sheets." Notwithstanding the foregoing, in the event of a dispute
as to the determination of the Closing Bid Price or the arithmetic calculation
of the Redemption Price, such dispute shall be resolved pursuant to Section
3(f)(iii) above. A holder's delivery of a Void Optional Redemption Notice and
exercise of its rights following such notice shall not affect the Company's
obligations to make any payments which have accrued prior to the date of such
notice. Payments provided for in this Section 4 shall have priority to payments
to other stockholders in connection with a Major Transaction.
(5) INABILITY TO FULLY CONVERT.
(a) HOLDER'S OPTION IF COMPANY CANNOT FULLY CONVERT. If, upon the Company's
receipt of a Conversion Notice or on the Maturity Date, the Company cannot issue
shares of Common Stock registered for resale under the Registration Statement
(or which are exempt from the registration requirements under the Securities Act
of 1933, as amendeed (the "Act") pursuant to Rule 144(k) under the Act) for any
reason, including, without limitation, because the Company (x) does not have a
sufficient number of shares of Common Stock authorized and available, (y) is
otherwise prohibited by applicable law or by the rules or regulations of any
stock exchanges, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities, including
without limitation the Exchange Cap, from issuing all of the Common Stock which
is to be issued to a holder of Preferred Shares pursuant to a Conversion Notice
or (z) fails to have a sufficient number of shares of Common Stock registered
for resale under the Registration Statement, then the Company shall issue as
many shares of Common Stock as it is able to issue in accordance with such
holder's Conversion Notice and pursuant to Section 3(f) and, with respect to the
unconverted Preferred Shares, the holder, solely at such holder's option, can
elect to:
(i) require the Company to redeem from such holder those
Preferred Shares for which the Company is unable to issue Common Stock in
accordance with such
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<PAGE>
holder's Conversion Notice ("MANDATORY REDEMPTION") at a price per Preferred
Share (the "MANDATORY REDEMPTION PRICE") equal to the Triggering Event
Redemption Price as of such Conversion Date;
(ii) if the Company's inability to fully convert Preferred Shares
is pursuant to Section 5(a)(z), require the Company to issue restricted shares
of Common Stock in accordance with such holder's Conversion Notice and pursuant
to Section 3(f);
(iii) void its Conversion Notice and retain or have returned, as
the case may be, the nonconverted Preferred Shares that were to be converted
pursuant to such holder's Conversion Notice (provided that a holder's voiding
its Conversion Notice shall not affect the Company's obligation to make any
payments which have accrued prior to the date of such notice); or
(iv) if the Company's inability to fully convert Preferred Shares
is pursuant to the Exchange Cap described in Section 5(a)(y), require the
Company to issue shares of Common Stock in accordance with such holder's
Conversion Notice and pursuant to Section 3(f) at a Conversion Price equal to
the average of Closing Bid Prices of the Common Stock for the five consecutive
trading days preceding such holder's Notice in Response to Inability to Convert
(as defined below).
(b) MECHANICS OF FULFILLING HOLDER'S ELECTION. The Company shall
immediately send via facsimile to a holder of Preferred Shares, upon receipt of
a facsimile copy of a Conversion Notice from such holder which cannot be fully
satisfied as described in Section S(a), a notice of the Company's inability to
fully satisfy such holder's Conversion Notice (the "INABILITY TO FULLY CONVERT
NOTICE"). Such Inability to Fully Convert Notice shall indicate (i) the reason
why the Company is unable to fully satisfy such holder's Conversion Notice, (ii)
the number of Preferred Shares which cannot be converted and (iii) the
applicable Mandatory Redemption Price. Such holder shall notify the Company of
its election pursuant to Section S(a) above by delivering written notice via
facsimile to the Company ("NOTICE IN RESPONSE TO INABILITY TO CONVERT").
(c) PAYMENT OF MANDATORY REDEMPTION PRICE. If such holder shall elect to
have its shares redeemed pursuant to Section 5(a)(i), the Company shall pay the
Mandatory Redemption Price in cash to such holder within ten days of the
Company's receipt of the holder's Notice in Response to Inability to Convert. If
the Company shall fail to pay the applicable Mandatory Redemption Price to such
holder on a timely basis as described in this Section 5(c) (other than pursuant
to a dispute as to the determination of the arithmetic calculation of the
Redemption Price), in addition to any remedy such holder of Preferred Shares may
have under these Articles of Amendment, the Investment Agreement and the
Registration Rights Agreement, such unpaid amount shall bear interest at the
rate of 2.0% per month (pro rated for partial months) until paid in full. Until
the full Mandatory Redemption Price is paid in full to such holder, such holder
may void the Mandatory Redemption with respect to those Preferred Shares for
which the full Mandatory Redemption Price has not been paid and (i) receive back
such Preferred Shares and (ii) the Conversion Price of such returned Preferred
Shares shall be adjusted to the lesser of (A) the
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<PAGE>
Conversion Price in effect on the date on which the holder voided the Mandatory
Redemption and (B) thc lowest Closing Bid Price during the period beginning on
the Conversion Date and ending on the date the holder voided the Mandatory
Redemption. Notwithstanding the foregoing, if the Company fails to pay the
applicable Mandatory Redemption Price, such dispute shall be resolved pursuant
to Section 3(f)(iii) with the term "Mandatory Redemption Price" being
substituted for the term "Conversion Rate"
(d) PRO-RATA CONVERSION AND REDEMPTION. In the event the Company receives a
Conversion Notice, Notice of Redemption at Option of Holder Upon Major
Transaction or Notice of Redemption at Option of Holder Upon Triggering Event
from more than one holder of Preferred Shares on the same day and the Company
can convert and/or redeem some, but not all, of the Preferred Shares pursuant to
this Section 5, the Company shall convert and/or redeem from each holder of
Preferred Shares electing to have Preferred Shares converted and/or redeemed at
such time in amount equal to such holder's pro-rata amount (based on the number
of Preferred Shares held by such holder relative to the number of Preferred
Shares outstanding) of all Preferred Shares being converted and redeemed at
such time.
(6) REISSUANCE OF CERTIFICATES. In the event of a conversion or
redemption pursuant to these Articles of Amendment 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 so converted or redeemed.
(7) RESERVATION OF SHARES. The Company shall, so long as any of the
Preferred Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion 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 (without regard to any limitations on
conversions); provided that the number of shares of Common Stock so reserved
shall at no time be less than 200% of the number of shares of Common Stock for
which the Preferred Shares are at any time convertible. 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 Shares reserved for such transferor. Any shares of Common Stock
reserved and which remain allocated to any person or entity which does not 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
holder.
(8) VOTING RIGHTS. Holders of Preferred Shares shall have no voting
rights, except as required by law, including, but not limited to, the Florida
Business Corporation Act, and as expressly provided in these Articles of
Amendment.
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<PAGE>
(9) 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 "PREFERRED 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
the 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, plus (ii) any unpaid dividends, plus (iii) unpaid Default Interest (such
sum being referred to as the "LIQUIDATION VALUE"); provided that, if the
Preferred 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 Preferred Funds (the "PARI PASSU SHARES"), then each holder of
Preferred Shares and Pari Passu Shares shall receive a percentage of the
Preferred Funds equal to the full amount of Preferred Funds payable to such
holder as a liquidation preference, in accordance with their respective Articles
of Amendment, as a percentage of the full amount of Preferred 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. No holder of
Preferred Shares shall be entitled to receive any amounts with respect thereto
upon any liquidation, dissolution or winding up of the Company other than the
amounts provided for herein; provided that a holder of Preferred Shares shall be
entitled to all amounts previously accrued with respect to amounts owed
hereunder.
(10) PREFERRED RANK; PARTICIPATION.
(i) All shares of Common Stock shall be of junior rank to all
Preferred Shares in 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 rank or PARI PASI 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 Articles of Incorporation or bylaws, or file
any resolution of the board of directors of the Company with the Secretary of
State of the State of Florida 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
- 19 -
<PAGE>
consolidation of the Company with or into another corporation, the Preferred
Shares shall mail1tain their relative powers, designations and preferences
provided for herein and no merger shall result inconsistent therewith.
(ii) 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
Stock, 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 dividend and distributions. Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.
(11) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS WITH RESPECT TO OTHER
CAPITAL STOCK. 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 Common Stock without
the prior express written consent of the holders of not less than two-thirds
(2/3) of the then outstanding Preferred Shares.
(12) Limitation on Number of Conversion Shares. Notwithstanding any other
provision 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 (the "EXCHANGE
CAP") without breaching the Company's obligations under the rules or regulations
of NASDAQ, except that such limitation shall not apply in the event that the
Company (a) obtains the approval of its stockholders as required by applicable
rules and regulations of NASDAQ for issuances of Common Stock in excess of such
amount or (ii) 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. If and to the extent that any such stockholder approval is
required, the Company shall as soon as practicable use its best efforts to
obtain such approval, including by recommending favorable action by the
stockholders. Until such approval or written opinion is obtained, no purchaser
of Preferred Shares pursuant to the Investment 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 of the Investment Agreement and the denominator of
which is the aggregate amount of all the Preferred Shares issued to the
Purchasers pursuant to the Investment Agreement (the "CAP ALLOCATION AMOUNT").
In the event that any Purchaser shall sell or otherwise transfer any of such
Purchaser's Preferred Shares, the transferree 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.
- 20 -
<PAGE>
(13) VOTE TO CHANGE THE TERMS OF OR ISSUE 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 Articles of Incorporation which would
amend, alter, change or repeal any of the powers, designations, preferences and
rights of the Preferred Shares, or (b) any issuance of Preferred Shares other
than pursuant to the Investment Agreement.
(14) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Preferred Stock Certificate(s) representing the Preferred Shares, and, in the
case of loss, theft or destruction, of any indemnification undertaking by the
holder to the Company 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.
(15) 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, and nothing
herein shall limit a holder's right to pursue actual damages for any failure by
the Company to comply with the terms of these 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, with the necessity
of showing economic loss and without any bond or other security being required.
(16) 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 the initial holders of the Preferred Shares
and shall not be construed against any person as the drafter hereof
- 21 -
<PAGE>
(17) 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.
(18) NOTICES. Any notice required to be delivered pursuant to the terms of
these Articles of Amendment shall be delivered, unless otherwise provided in
these Articles of Amendment, in accordance with the terms, and subject to the
notice provisions of, the Investment Agreement.
- 22 -
<PAGE>
IN WITNESS WHEREOF, the Company has caused the foregoing Articles of
Amendment to the Articles of Incorporation to be signed on June _, 1998.
ABLE TELCOM HOLDING CORP.
By:
--------------------
Name:
Title:
- 23 -
<PAGE>
EXHIBIT I
ABLE TELCOM HOLDING CORP
CONVERSION NOTICE
Reference is made to the Articles of Amendment for the Series B Convertible
Preferred Stock (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, per value $0.10 per
share (the "Preferred Shares"), of Able Telcom Holding Corp., a Florida
corporation (the "Company"), indicated below into shares of Common Stock, par
value $.001 per share (the "Common Stock"), of the Company, by tendering the
stock certificate(s) representing the Preferred Shares specified below as of the
date specified below.
Date of Conversion:
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- -------------------------------------------------------------------------------
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:
---------------------------------------
- -------------------------------------------------------------------------------
- 24 -
<PAGE>
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:
-----------------------------------------------------------
- -------------------------------------------------------------------------------
Facsimile Number:
-----------------------------------------------------------
- -------------------------------------------------------------------------------
Authorization:
-----------------------------------------------------------
- -------------------------------------------------------------------------------
By:
-----------------------------------------------------------
- -------------------------------------------------------------------------------
Title:
-----------------------------------------------------------
- -------------------------------------------------------------------------------
Dated:
-----------------------------------------------------------
- -------------------------------------------------------------------------------
Account Number
(if electronic book
entry transfer)
-----------------------------------------------------------
- -------------------------------------------------------------------------------
Transaction Code Number
(if electronic book
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- -------------------------------------------------------------------------------
- 25 -
<PAGE>
entry transfer):
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- -------------------------------------------------------------------------------
THIS NOTICE MUST BE DELIVERED TO COMPANY AND TRANSFER AGENT
- 26 -
EXHIBIT 4.7
AMENDMENT TO STOCK OPTION PLAN
The Company's 1995 Stock Option Plan (The "Stock Option Plan" or the
"Plan") permits the Company to grant awards of options to purchase Common Stock
to eligible persons. An aggregate of 550,000 shares of Common Stock may be
issued upon the exercise of stock options granted under the Stock Option Plan.
On January 23, 1998, the Company's Board of Directors approved
amendments to the Stock Option Plan (the "Plan Amendments"), subject to the
approval of the company's shareholders, to (i) to increase by 750,000 to
1,300,000 the maximum number of shares of Common stock that may be issued
pursuant to awards granted under the Stock Option Plan and (ii) provide for the
granting of awards of shares of Common stock, which may be subject to such
restrictions as the committee administering the Stock Option Plan may determine.
The Company's shareholders are being requested to consider and approve the Plan
Amendments.
PURPOSE. The Company's Board of Directors believes that awards under
the Stock Option Plan serve to attract, retain and motivate key employees and
enhance the incentive of employees to perform at the highest level. The Stock
Option Plan enables the Company to offer long term performance-based
compensation in the form of stock options, thereby aligning employees' interests
more closely with those of the Company's shareholders. The availability of
awards under the Plan also serves to encourage qualified persons to seek and
accept employment with the Company.
SHARES AVAILABLE FOR ISSUANCE. The Stock Option Plan currently provides
for up to 550,000 shares of Common stock to be available pursuant to options
granted under the Stock Option Plan. As of December 31, 1997, the Company had
issued 82,175 shares of Common Stock upon the exercise of options granted under
the Stock Option Plan and options to purchase an addition 352,065 shares
remained outstanding (after giving effect to options which have been forfeited
without being exercised). Accordingly, 115,760 shares of Common Stock remain
available for additional option grants. The Board of Directors believes this
number of shares is insufficient to adequately serve the purposes and objectives
of the Stock Option Plan, and has therefore adopted the Plan Amendments to make
an additional 750,000 shares of Common Stock available for issuance under the
Stock Option Plan. The Plan Amendments will also provide the company with
additional flexibility in structuring stock-based incentive compensation, by
enabling the Company to grant awards under the Stock Option Plan consisting of
shares of Common Stock, which awards may be subject to vesting requirements,
risks of forfeiture and other restrictions determined by the committee
administering the Stock Option Plan. Upon approval of the Plan Amendments by the
shareholders, an aggregate of 865,760 shares of Common Stock (having a market
value of $7,358,960 based on the closing price of the Common stock on February
26, 1998) will be available for issuance pursuant to future awards granted under
the Stock Option Plan, which, together with options currently outstanding,
represents approximately 11.54% of the total issued and outstanding shares of
Common Stock (assuming the issuance of all such shares). Shares of Common Stock
subject to options which expire unexercised or are terminated shall again be
available for the granting of awards under the Stock Option Plan.
ELIGIBILITY. All salaried employees, non-employee directors who do not
own more than 5% of any class of the outstanding capital stock of the Company,
consultants or advisors of the Company and its affiliates are eligible to
participate in the Stock Option Plan. Non-employee directors, consultants and
advisors are eligible to receive only non-qualified stock options.
ADMINISTRATION. The Plan is currently administered by the Board of
Directors (the "Plan Administrators"). The Plan Administrators have the
authority to select those eligible persons to whom awards are granted, to
determine the types of awards and the number of shares subject thereto, and to
set
<PAGE>
the terms, conditions and provisions of such awards. The Plan Administrators are
authorized to interpret the Stock Option Plan, to establish, amend and rescind
any rules and regulations relating to the Stock Option Plan, and to make all
other determinations which may be necessary or advisable for the administration
of the stock Option Plan.
Awards under the STOCK OPTION PLAN. The Stock Option Plan permits the
granting of the following types of awards: (i) stock options, which may be
either options which qualify as "incentive stock options ("ISOs") under the
Internal Revenue Code of 1986, as amended (the "Code"), or options which do not
so qualify ("NQSOs"), and (ii) other awards valued in whole or in part by
reference to, or otherwise based on Common Stock.
STOCK OPTIONS. Stock options may be granted, from time to time, to
those salaried employees, consultants and other persons providing services to
the Company and its affiliates as may be selected by the Plan Administrators.
The purchase price per share of Common Stock purchasable under any stock option
granted is determined by the Plan administrators, but may not be less than 100%
of the fair market value of a share of Common Stock on the date of grant. The
term of each such option, and the time or times when it may be exercised, is
fixed by the Plan Administrators, provided, however, that in the case of NQSOs,
the term shall expire on the earlier of six years from the date of the grant or
in the case of non-employee Directors, the date which is 30 days after the
optionee shall no longer serve as a member of the Board. All terms and
conditions relating to the options are the subject of separate stock option
agreements between the Company and the grantees and approved by the Plan
Administrators. The grant and terms of ISOs are restricted to the extent
required by the Code. Options may be exercised by payment of the purchase price
either (i) in cash, (ii) at the discretion of the Plan Administrators, in Common
Stock having a fair market value on the date the option is exercised equal to
the option exercise price, (iii) at the discretion of the Plan Administrators,
by delivery of the optionee's personal recourse note bearing interest payable at
least annually at no less than 100% of the lowest Federal rate, or (iv) any
combination of (i), (ii) or (iii) above. Participants have no shareholder rights
with respect to any options granted until shares have been issued upon the
proper exercise of the option.
TERMINATION. Each stock option shall expire on such date or dates as
the Plan Administrators shall determine at the time the stock option is granted.
Any NQSO granted to a non-employee Director shall expire on the earlier of (i)
the date which is six years from the date of its grant or (ii) the date which is
30 days after the date that such optionee ceases to serve as a member of the
board. Stock options may also be terminated under certain circumstances
following a Change of Control. See "-Change of Control" below.
RESTRICTED STOCK. If the Plan Amendments are approved by the
shareholders, the Company will be permitted to grant awards to salaried
employees under the Stock Option Plan consisting of shares of Common Stock,
which may be subject to such restrictions and on such terms and conditions as
the Plan Administrators may determine, including the time period over which such
shares shall become vested, the date or dates as of which the risk of forfeiture
of the shares shall lapse, the establishment of conditions for the lapse or
termination of the risk of forfeiture other than the expiration of the vesting
period, and the circumstances under which vesting requirements will be waived or
accelerated. The Plan Administrators will select the recipients of such awards.
Shares of Common Stock awarded under the Stock Option Plan which are subject to
restrictions shall not be transferable, nor shall the recipient be entitled to
receive stock certificates representing such shares, until the lapse or
termination of all such restrictions. Recipients of such awards will otherwise
have all rights as a shareholder of the Company with respect to the shares of
Common Stock so awarded, including the right to vote such shares and to receive
dividends paid on the Common Stock.
NONASSIGNABILITY OF AWARDS. The Stock Option Plan provides that no
award granted under the Stock Option Plan may be sold, assigned, transferred;
pledged or otherwise encumbered by a participant, otherwise than by will or by
the laws of descent and distribution. Each stock option awarded is
<PAGE>
exercisable, during the participant's lifetime, only by the participant.
ADJUSTMENTS. The Stock Option Plan provides that, in the event of any
change in the corporate structure or shares of the Company, the Plan
Administrators will make such substitution or adjustment in the aggregate number
or class of shares which may be distributed under the Stock Option Plan and in
the number, class and option price or other price of shares subject to the
outstanding awards granted under the Stock Option Plan as it deems to be
appropriate in order to maintain the purpose of the original grant. For purposes
of the Stock Option Plan, a change in the corporate structure or shares of the
company shall include, but is not limited to, changes resulting from
recapitalization, stock split, reverse stock split, consolidation, rights
offering, stock dividend, reorganization, or liquidation.
CHANGE OF CONTROL. Upon the occurrence of any dissolution or
liquidation of the company, or a reorganization, merger or consolidation of the
Company with one or more corporations in which the Company is not the surviving
corporation, or a transfer of substantially all of the Company's property or
more than 80% of the then outstanding shares of the Company to another
corporation not controlled by the Company's stockholders (a "Change of
Control"), the Plan and any outstanding Options shall be terminated unless
provision is made in connection with such transaction for the assumption and
continuation of the Plan and such Options or the substitution of new Options
covering the shares of a successor corporation, and all vesting requirements,
risks of forfeiture and other restrictions on awards of Common Stock shall lapse
and terminate. If no such provision for Options is made, the Company is required
to give all option holders advanced written notice of the Change of Control, all
options shall become fully exercisable and the option holders shall have 30 days
in which to exercise their Options.
FEDERAL INCOME TAX ASPECTS OF THE STOCK OPTION PLAN. The following is a
summary of the federal income tax consequences generally arising with respect to
awards under the Stock Option Plan. The grant and exercise of an ISO result in
no taxable income to the participant and no tax deduction for the Company,
except that, upon exercise, the difference between the fair market value of the
underlying shares of Common Stock and the exercise price of the ISO is
includable in the participant's income for alternative minimum tax purposes. If
the participant holds the shares acquired upon exercise of an ISO for at least
two years from the date of the grant of the ISO and at least one year from the
date of exercise, he will recognize taxable capital gain or capital loss upon a
subsequent sale of the shares based upon the difference between the sale
proceeds and the fair market value of the shares on the exercise date. In either
of these events, no deduction would be allowed to the Company for federal income
tax purposes. If the participant disposes of the shares acquired upon exercise
of an ISO within either of the holding periods described above, the option will
be treated as an NQSO.
The grant of an NQSO has no tax consequences to the Company or to the
participant. Upon exercise of an NQSO, however, the participant will recognize
taxable ordinary income in the amount of the excess of the fair market value on
the date of exercise of the shares of Common Stock acquired over the exercise
price, and such amount will be deductible for federal income tax purposes by the
Company. The holder of such shares will, upon a subsequent disposition of the
shares, recognize short-term or long-term capital gain or loss, depending on the
holding period of the shares.
An award of shares of Common Stock has no tax consequences to the
recipient or the company so long as the shares so awarded are subject to a
substantial risk of forfeiture. When the substantial risk of forfeiture
terminates with respect to any shares included in such award, the then fair
market value of such shares will constitute taxable ordinary income to the
recipient, and the Company will be allowed a tax deduction in the same amount.
Dividends received by the participant during the restriction period are treated
as compensation income and therefore are taxed as ordinary income to the
participant and are deductible by the Company. Awards of shared of Common Stock
which are not subject to a substantial risk of forfeiture will result in taxable
ordinary income to the recipient equal to the fair market value of the shares on
the grant date, and the Company will receive a tax deduction in the same amount.
The participant may, under Section 83(b) of the Code, elect to report
the current fair market value
<PAGE>
of restricted stock as ordinary income in the year the award is made, even
though the stock is subject to restrictions. In such a case, the Company will
receive a tax deduction for such fair market value in the year of grant, but
will receive no deduction for any subsequent appreciation during or after the
restriction period. In addition, dividends paid during or after the restriction
period would be treated as dividends to the participant and therefore would not
be deductible by the Company. If a Section 83(b) election is made, any
appreciation in the value of the stock after the date of grant will not be
recognized as capital gain by the participant until such time as the participant
disposes of the stock in a taxable transaction. If the participant forfeits the
stock (i.e., because he has not met the requirements for lapse of restrictions),
the participant will receive no refund or deduction on account of taxes paid in
the year of grant as a result of the Section 83(b) election.
Approval of the Plan Amendments requires the affirmative vote of the
holders of a majority of the shares present in person or represented by proxy at
the Annual Meeting. Unless authority to so vote is withheld, the persons named
in the proxy card intend to vote shares as to which proxies are received in
favor of the Plan Amendments.
EXHIBIT 4.8
EXECUTION VERSION
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
CONVERTIBLE PREFERRED STOCK AGREEMENT ("AGREEMENT") dated as of
June 26, 1998 between Able Telcom Holding Corp., a Florida corporation (the
"COMPANY"), and each person or entity listed as an investor on SCHEDULE I to
this Agreement (each individually an "INVESTOR" and collectively the
"INVESTORS").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Investors, and
the Investors wish to purchase from the Company, an aggregate of 4,000 shares of
Series B Convertible Preferred Stock (the "SERIES B PREFERRED STOCK"), at an
aggregate price of $20,000,000, having the rights and privileges set forth in
the Articles of Amendment setting forth the terms of the Series B Convertible
Preferred Stock of the Company ("ARTICLES OF AMENDMENT") in the form of EXHIBIT
1.1A attached hereto, on the terms and conditions set forth herein; and
WHEREAS, the Series B Preferred Stock will be convertible into shares
("COMMON SHARES") of common stock $0.001 par value per share, of the Company
("COMMON STOCK"), pursuant to the terms of the Articles of Amendment, and the
Investors will have registration rights with respect to such Common Shares and
the Warrant Shares (as defined herein) pursuant to the terms of that certain
Registration Rights Agreement to be entered into between the Company and the
Investors substantially in the form of EXHIBIT 4.2(F) hereto ("REGISTRATION
RIGHTS AGREEMENT"); and
WHEREAS, to induce the Investors to purchase the Series B Preferred
Stock, the Company has agreed to issue to the Investors warrants exercisable for
350,000 shares of Common Stock, in the form attached as EXHIBIT 1.1B (the
"WARRANTS");
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF SERIES B PREFERRED STOCK AND WARRANTS
Section l.1 ISSUANCE OF SERIES B PREFERRED STOCK AND WARRANTS. Upon the
following terms and conditions, the Company shall issue and sell to each
Investor severally, and each Investor severally shall purchase from the Company,
shares of Series B Preferred Stock indicated next to such Investor's name on
SCHEDULE I attached hereto.
(a) ISSUANCE. Upon the following terms and conditions, the
Company shall issue and sell to each Investor, and each Investor severally shall
purchase from the Company, the number of shares of Series B Preferred Stock and
the number of Warrants indicated next to such Investor's name on SCHEDULE I
attached hereto.
<PAGE>
(b) PURCHASE PRICE. The purchase price per share for the
Series B Preferred Stock to be acquired by each Investor (the "PURCHASE PRICE")
shall be $5,000.
(c) THE CLOSING.
(i) The closing of the purchase and sale of the
Series B Preferred Stock and the Warrants (the "CLOSING"),
shall take place at the offices of Arnold & Porter, 555 12th
Street N.W., Washington, D.C. ("INVESTORS' COUNSEL"), at 10:00
a.m., local time on the later of the following: (x) the date
on which the last of the conditions set forth in Article IV
hereof to be fulfilled and applicable to the Closing shall be
fulfilled or waived in accordance herewith, or (y) such other
time and place and/or on such other date as the Investors and
the Company may agree. The date on which the Closing occurs is
referred to herein as the "CLOSING DATE".
(ii) On the Closing Date, the Company shall deliver
to each Investor (x) a certificate or certificates (with the
number of such certificates requested by such Investor)
representing the shares of Series B Preferred Stock purchased
hereunder by such Investor at the Closing registered in the
name of the Investor or its nominee and (y) the Warrants
registered in the name of such Investor or its nominee in such
denominations as reasonably requested by such Investor, and
such Investor shall deliver to the Company the Purchase Price
for the shares of Series B Preferred Stock purchased by such
Investor hereunder by wire transfer in immediately available
funds to an account designated in writing by the Company. The
delivery of payment by such Investor of the Purchase Price
applicable to it as set forth in this paragraph shall
constitute a payment delivered to the Company in satisfaction
of such Investor's obligation to pay the Purchase Price
hereunder. In addition, each of the Company and each Investor
shall deliver all documents, instruments and writings required
to be delivered by such party pursuant to this Agreement at or
prior to the applicable Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to each of the
Investors as of the date hereof and on each Closing Date:
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of Florida and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company does not have any direct or indirect subsidiaries other than the
subsidiaries listed on EXHIBIT 2.1(A) attached hereto. Except where specifically
indicated to the contrary, all references in this Agreement to subsidiaries
2
<PAGE>
shall be deemed to refer to all direct and indirect subsidiaries of the Company.
The Company and each subsidiary is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means (i) any adverse effect
on the business, operations, properties, prospects, or financial condition of
the entity with respect to which such term is used and its subsidiaries or other
entities controlled by such entity, taken as a whole and which is (either alone
or together with all other adverse effects) material to such entity and its
subsidiaries or other entities controlled by such entity taken as a whole, and
(ii) any condition or situation, whether or not a materially adverse effect,
which would prohibit or otherwise adversely interfere with or affect the ability
of any party to this Agreement to enter into or perform its obligations under,
or to consummate the transactions contemplated by, this Agreement, the
Registration Rights Agreement, the Articles of Amendment or the Warrants or any
other agreement or document contemplated hereby or thereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Warrants and the Registration Rights Agreement and to consummate
the transaction contemplated thereby and to issue the Series B Preferred Stock
and Warrants in accordance with the terms hereof and thereof, and has duly filed
with the Secretary of State of the State of Florida the Articles of Amendment,
(ii) the execution and delivery of this Agreement, the Warrants and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including the issuance of the
Series B Preferred Stock, the Warrants, the Common Shares and the Warrant Shares
have been duly authorized by all necessary corporate action, and no further
consent or authorization of the Company or its Board of Directors (or any
committee or subcommittee thereof) or stockholders is required, (iii) this
Agreement has been, and on the Closing Date, the Warrants, the Articles of
Amendment and the Registration Rights Agreement will be, duly executed and
delivered by the Company, and (iv) this Agreement constitutes, and upon
execution, issuance and delivery thereof the Warrants, the Articles of Amendment
and the Registration Rights Agreement shall constitute, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors' rights and
remedies or by other equitable principles of general application.
(c) CAPITALIZATION. The authorized capital stock of the
Company consists of 25,000,000 shares of Common Stock and 1,000,000 shares of
convertible redeemable preferred stock, par value $0.10 per share (the
"Preferred Stock"); there are 9,973,863 shares of Common Stock and no shares of
Preferred Stock issued and outstanding; and 3,295,147 shares of Common Stock and
no shares of Preferred Stock are reserved for issuance to persons other than the
Investors. All of the outstanding shares of the Company's Common Stock and
Preferred Stock have been validly authorized and issued and are fully paid and
nonassessable. No shares of capital stock are entitled to preemptive rights; and
there are as of the date hereof outstanding options for 2,844,071 shares of
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Common Stock and outstanding warrants for 501,708 shares of Common Stock
(excluding the Warrants). Any shares of Preferred Stock issued or to be issued
will be junior in all respects to the Series B Preferred Stock. There are no
other scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights exchangeable for or convertible
into, any shares of capital stock of the Company, or contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to, or commitments to purchase or acquire, any
shares, or securities or rights convertible or exchangeable into shares, of
capital stock of the Company. Attached hereto as EXHIBIT 2.1(C)(I) is a true and
correct copy of the Company's Certificate of Incorporation (the "CHARTER"), as
in effect on the date hereof, and attached hereto as EXHIBIT 2.1(C)(II) is a
true and correct copy of the Company's By-Laws (the "BY-LAWS"), as in effect on
the date hereof.
(d) ISSUANCE OF COMMON SHARES. The Common Shares and the
shares of Common Stock issuable upon the exercise of the Warrants (the "WARRANT
SHARES") are duly authorized and reserved for issuance and, upon such conversion
in accordance with the Articles of Amendment and/or exercise in accordance with
the Warrants, such Common Shares and Warrant Shares will be validly issued,
fully paid and non-assessable, free and clear of any and all taxes, liens,
claims and encumbrances, and entitled to be traded on the Nasdaq National Market
System ("NASDAQ NMS") or the American Stock Exchange or the New York Stock
Exchange (collectively with the Nasdaq NMS, the "APPROVED MARKETS"), and the
holders of such Common Shares and Warrant Shares shall be entitled to all rights
and preferences accorded to a holder of Common Stock. The outstanding shares of
Common Stock are currently listed on the Nasdaq NMS.
(e) NO CONFLICTS. The execution, delivery and performance by
the Company of this Agreement, the Registration Rights Agreement, the Warrants
and the Articles of Amendment, including the issuance of the Series B Preferred
Stock and the Warrants, the conversion of the Series B Preferred Stock into the
Common Shares and the exercise of the Warrants into the Warrant Shares, the
reservation of the Common Shares and Warrant Shares and the consummation by the
Company of the transactions contemplated hereby and thereby do not and will not
(i) result in a violation of the Company's Charter or By-Laws or (ii) violate or
conflict with, or result in a breach of any provision of, 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 agreement, indenture, patent, patent
license or instrument to which the Company or any of its subsidiaries is a
party, or (iii) result in a violation of any federal, state, local or foreign
law, rule, regulation, order, judgment or decree (including Federal and state
securities laws and regulations) 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. The business of the Company and its direct
and indirect subsidiaries is not being conducted in violation of, and is in
compliance with, all applicable laws, ordinances and regulations of any
governmental entity or the Company's Charter or By-Laws. Except for filings or
registrations pursuant to applicable Federal, state or foreign securities laws
that are expressly contemplated by the transactions contemplated
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herein and in the Registration Rights Agreement, the Company is not required
under Federal, state, local or foreign law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it (x) to execute, deliver or perform
any of its obligations under this Agreement, the Registration Rights Agreement,
the Articles of Amendment or the Warrants, (y) to issue and sell the Series B
Preferred Stock and the Warrants in accordance with the terms hereof, to issue
the Common Shares upon conversion of the Series B Preferred Stock or to issue
the Warrant Shares on exercise of the Warrants or (z) for the registration
provisions provided in the Registration Rights Agreement.
(f) SEC DOCUMENTS; NO NON-PUBLIC INFORMATION; FINANCIAL
STATEMENTS. The Common Stock of the Company is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")
and the Company is in full compliance with and has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission ("SEC") pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or l5(d), in addition to one or more registration statements and
amendments thereto heretofore filed by the Company with the SEC (all of the
foregoing including all filings, exhibits, financial statements, schedules and
documents incorporated by reference therein being referred to herein as the "SEC
DOCUMENTS"). The Company has not directly or indirectly provided to the
Investors any material non-public information or any information which,
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company but which has not been so disclosed. As of their
respective dates, the SEC Documents complied (and as of its effective date, the
Registration Statement (as defined in the Registration Rights Agreement) will
comply) in all material respects with the requirements of the Exchange Act (or,
in the case of such Registration Statement, the Securities Act of 1933, as
amended (the "ACT")) and the rules and regulations of the SEC promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such SEC Documents (or such Registration Statement), and none of
the SEC Documents contained (and, as of its effective date, such Registration
Statement will not contain) 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. The SEC Documents contain (and, as of its effective date,
such Registration Statement will contain) all material information concerning
the Company, and no event or circumstance has occurred which would require the
Company to disclose such event or circumstance in order to make the statements
in the SEC Documents not misleading on the date hereof or on the Closing Date
but which has not been so disclosed (assuming for this purpose that the
Company's reports filed under the Exchange Act are being incorporated into an
effective Registration Statement filed by the Company under the Securities Act).
The financial statements of the Company included (or to be included) in the SEC
Documents (or the Registration Statement) comply (or will comply) as to form and
substance in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financia1 statements have been (or will
be) prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved
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(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present (or will fairly present) in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(g) PRINCIPAL EXCHANGE/MARKET. The principal market on which
the Common Stock is currently traded is the Nasdaq NMS.
(h) NO MATERIAL ADVERSE CHANGE. Since October 31, l997, no
Material Adverse Effect has occurred or exists with respect to the Company or
any of its subsidiaries, and no event or circumstance has occurred that with
notice or the passage of time or both is reasonably likely to result in a
Material Adverse Effect with respect to the Company or any of its subsidiaries.
(i) NO UNDISCLOSED LIABILITIES. The Company and its
subsidiaries have no liabilities or obligations not disclosed in the SEC
Documents, other than those liabilities incurred in the ordinary course of the
Company's or its subsidiaries' respective businesses since October 31, 1997,
which liabilities, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company or any of its direct or indirect
subsidiaries.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or
circumstance has occurred or exists with respect to the Company or its direct or
indirect subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.
(k) NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, or, to its knowledge, any person acting on its or their behalf,
has engaged in or conducted any form of general solicitation or general
advertising (within the meaning of Regulation D under the Act) with respect to
or in connection with the offer or sale of the Series B Preferred Stock, the
Warrants, the Common Shares or the Warrant Shares.
(l) NO INTEGRATED OFFERING. Neither the Company, nor any of
its affiliates, nor, to its knowledge, 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 Series B Preferred Stock, the Warrants, the Common Shares or
Warrant Shares under the Act.
The issuance of the Series B Preferred Stock, Warrants, Common
Shares or Warrant Shares to the Investors will not be integrated with any other
issuance of the Company's securities (past, current or future) which requires
stockholder approval under the rules of the Nasdaq NMS.
(m) [INTENTIONALLY OMITTED]
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(n) INTELLECTUAL PROPERTY. The Company (and/or its
wholly-owned subsidiaries) owns or has licenses to use certain patents,
copyrights and trademarks ("INTELLECTUAL PROPERTY") associated with its
business. The Company and its subsidiaries have all intellectual property rights
which are needed to conduct the business of the Company and its subsidiaries as
it is now being conducted or as proposed to be conducted as disclosed in the SEC
Documents. Neither the Company nor any of its subsidiaries has any reason to
believe that the intellectual property rights which it owns are invalid or
unenforceable or that the use of such intellectual property by the Company or
its subsidiaries infringes upon or conflicts with any right of any third party,
and neither the Company nor any of its subsidiaries has received notice of any
such infringement or conflict. Neither the Company nor any of its subsidiaries
has knowledge of any infringement of its intellectual property by any third
party.
(o) NO LITIGATION. Except as set forth in the SEC Documents,
no litigation, arbitration, proceeding or claim (including those for unpaid
taxes) against the Company or any of its subsidiaries is pending or, to the
Company's knowledge, threatened, and no other event has occurred, which if
determined adversely could singly or in the aggregate reasonably be expected to
have a Material Adverse Effect on the Company or could reasonably be expected
singly or in the aggregate to materially and adversely effect the transactions
contemplated hereby. The legal proceedings described in the SEC Documents will
not have such an effect on the transactions contemplated hereby, and will not
have a Material Adverse Effect.
(p) BROKERS. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by any Investor relating to this Agreement or the transactions
contemplated hereby.
(q) ACKNOWLEDGEMENT OF DILUTION. The Company understands and
acknowledges that the number of shares of Common Stock constituting Common
Shares or Warrant Shares may increase substantially in certain circumstances,
including the circumstance where the trading price of the Common Stock declines
which may have a dilutive effect on the Common Stock. Subject to Section 3.14,
the Company acknowledges that its obligation to issue Common Shares upon
conversion of the Series B Preferred Stock and Warrant Shares upon exercise of
the Warrants is absolute and unconditional, regardless of the dilution that such
issuance may have on other shareholders of the Company.
(r) OTHER INVESTORS. Except as set forth on EXHIBIT 2.1(R),
there are no outstanding securities issued by the Company that are entitled to
registration rights under the Act. Except as set forth in EXHIBIT 2.1(R), there
are no outstanding securities issued by the Company that are directly or
indirectly convertible into, exercisable into, or exchangeable for, shares of
Common Stock of the Company that have anti-dilution, preemptive or similar
rights that would be affected or triggered by the issuance of the Series B
Preferred Stock, the Common Shares, the Warrant Shares or the Warrants.
(s) CERTAIN TRANSACTIONS. Except as disclosed in the SEC
Documents, 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
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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 officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
(t) PERMITS; COMPLIANCE. Each of the Company and each of its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"). There is no action or proceeding pending or, to the knowledge of the
Company, threatened regarding suspension or cancellation of any of the Company
Permits, except with respect to such Company Permits the failure of which to
possess, or the cancellation or suspension of which, would not, individually or
in the aggregate, have a Material Adverse Effect on the Company. Neither the
Company nor any of its subsidiaries is in material conflict with, or in material
default or material violation of, any of the Company Permits. Since October 31,
1997, neither the Company nor any of its subsidiaries has received any
notification with respect to possible material conflicts, material defaults or
material violations of applicable laws.
(u) 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 direct and
indirect subsidiaries are engaged. 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
without a significant increase in cost.
(v) INTERNAL ACCOUNTING CONTROLS. Each of the Company and each
of its subsidiaries maintains a system of internal accounting controls
sufficient, in the judgment of the Company's board of directors, 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.
(w) SHAREHOLDER RIGHTS PLAN. None of the acquisition of the
Preferred Shares, Warrants, Common Shares or Warrant Shares, nor the deemed
beneficial ownership of shares of Common Stock prior to, or the acquisition of
such shares pursuant to, the conversion of the Preferred Shares or the exercise
of the Warrants will, in any event or under any circumstance, trigger the poison
pill provisions of any stockholders' rights
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agreement or any similar agreements currently in effect or to be adopted, or a
substantially similar occurrence under any agreement or plan.
(x) ENVIRONMENTAL MATTERS. Except as otherwise disclosed in
the SEC Documents, each of the Company and each of its subsidiaries is in
compliance in all material respects with all applicable state and federal
environmental laws, and no event or condition has occurred that may interfere
with the compliance by the Company or any of its subsidiaries with any
environmental law or that may give rise to any liability under any environmental
law that, individually or in the aggregate, would have a Material Adverse
Effect.
(y) SOLVENCY.
(i) The Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities
(including contingent liabilities) as they mature.
(ii) The Company's assets do not constitute
unreasonably small capital to carry out its business as now
conducted and as proposed to be conducted including the
Company's capital needs taking into account the particular
capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability
thereof.
(iii) The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be payable on
or in respect of its debt). The cash flow together with the
proceeds received from the liquidation of the Company's assets
after taking into account all anticipated uses of the cash
will at all times be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid.
(iv) The Company does not intend, and does not
believe, that final judgments against the Company in actions
for money damages will be rendered at a time when, or in an
amount such that, the Company will be unable to satisfy any
such judgments promptly in accordance with their terms The
Company's cash flow, after taking into account all other
anticipated uses of the cash (including the payments on or in
respect of debt referred to in paragraph (iii) above), will at
all times be sufficient to pay all such judgments promptly in
accordance with their terms.
(v) Neither the Company nor any of its subsidiaries
is subject to any bankruptcy, insolvency or similar
proceeding.
(z) TAXES. All federal, state, city and other tax returns,
reports and declarations required to be filed by or on behalf of the Company or
any of its subsidiaries have been filed and such returns are complete and
accurate and disclose all taxes (whether
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based upon income, operations, purchases, sales, payroll, licenses,
compensation, business, capital, properties or assets or otherwise) required to
be paid in the periods covered thereby. Copies of all such returns have been
provided to the Investors. All taxes shown on such returns and any deficiency
assessments, penalties and interest have been paid. All taxes required to be
withheld by or on behalf of the Company in connection with amounts paid or owing
to any employees, independent contractor, creditor or other party have been
withheld, and such withheld taxes have either been duly and timely paid to the
proper governmental authorities or set aside and reserved in accounts for such
purposes (including, but not limited to any tax required by Chapter 201 of Title
XIV of the Florida Code).
(aa) TITLE TO PROPERTIES; ENCUMBRANCES. There are no real
property, leaseholds, or other interests therein owned by the Company not
reflected in the Company's financial statements included in the Company's Annual
Report on Form 10-K for the year ended October 31, 1997. The Company owns (with
good and marketable title in the case of real property) all the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that it purports to own. All material properties and assets are free and clear
of all encumbrances and are not, in the case of real property, subject to any
rights of way, building use restrictions, exceptions, variances, reservations or
limitations of any nature, except with respect to all such properties and
assets, (a) mortgages or security interests securing specified liabilities or
obligations, with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) liens for current
taxes not yet due, and (c) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value, or impairs the use, of the property subject
thereto, or impairs the operations the Company or any of its subsidiaries, and
(ii) zoning laws and other land use restrictions that do not impair the present
or anticipated use of the property subject thereto. All buildings, plans, and
structures owned by the Company or any of its subsidiaries lie wholly within the
boundaries of the real property owned by the Company or such subsidiaries, and
do not encroach upon the property of, or otherwise conflict with the property
rights of, any other person.
(bb) NO VIOLATION OF CREDITOR COVENANTS. No event of default
has occurred and is continuing (or event which with lapse of time or notice of
both would constitute such an event) under any of the revolving credit
facilities or other financing arrangements of the Company or any of its
subsidiaries.
(cc) EFFECTIVENESS OF SEC FILINGS. The SEC has not issued any
stop order or other order suspending the effectiveness of any registration
involving the Company or any of its subsidiaries.
(dd) ACKNOWLEDGMENT REGARDING INVESTORS' PURCHASE OF
SECURITIES. The Company acknowledges and agrees that the Investors are acting
solely in the capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges that
no Investor is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Investor or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
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incidental to the Investors' purchase of the Securities. The Company further
represents to each Investor that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
(ee) FOREIGN CORRUPT PRACTICES. Neither the Company, nor any
of its subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of
the Investors, severally (as to itself) and not jointly, hereby makes the
following representations and warranties to the Company as of the date hereof
and on the Closing Date:
(a) AUTHORIZATION; ENFORCEMENT. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to purchase the Series B Preferred Stock being
sold hereunder and to acquire the Warrants, (ii) the execution and delivery of
this Agreement and the Registration Rights Agreement by such Investor and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and (iii) this
Agreement constitutes, and upon execution, issuance and delivery thereof the
Registration Rights Agreement will constitute, valid and binding obligations of
such Investor enforceable against such Investor in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(b) NO CONFLICTS. The execution, delivery and performance by
such Investor of this Agreement and the Registration Rights Agreement, the
performance by such Investor under the terms of the Articles of Amendment and
Warrants, and the consummation by such Investor of the transactions contemplated
hereby and thereby do note and will not result in a violation of such Investor's
organizational documents.
(c) INVESTMENT REPRESENTATION. Such Investor is purchasing the
Series B Preferred Stock and the Warrants for its own account and not with a
view to distribution thereof in violation of any securities laws. Such Investor
has no present intention to sell the Series B Preferred Stock, Warrants, Common
Shares or Warrant Shares in violation of Federal or state securities laws and
such Investor has no present arrangement (whether or not legally binding) to
sell the Series B Preferred Stock, Warrants, Common Shares or Warrant Shares to
or through any person or entity; PROVIDED, however, that by making the
representations herein, such Investor does not agree to hold the Series B
Preferred Stock, Warrants, Common Shares or Warrant Shares for any minimum or
other specific term and
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reserves the right to dispose of the Series B Preferred Stock, Warrants, Common
Shares or Warrant Shares at any time in accordance with Federal and state
securities laws applicable to such disposition.
(d) ACCREDITED INVESTOR. Such Investor is an "accredited
investor" as defined in Rule 501 of Regulation D promulgated under the Act. Such
Investor has such knowledge and experience in financial and business matters in
general and investments in particular that it is able to evaluate the merits and
risks of an investment in the Series B Preferred Stock and the Warrants and to
protect its own interests in connection with such investment. In addition (but
without limiting the effect of the Company's representations and warranties
contained herein), such Investor has received such information as it considers
necessary or appropriate for deciding whether to purchase the Series B Preferred
Stock and the Warrants pursuant hereto.
(e) RULE 144. Such Investor understands that there is no
public trading market for the Series B Preferred Stock or the Warrants, that
none is expected to develop, and that the Series B Preferred Stock and the
Warrants must be held indefinitely unless such Series B Preferred Stock or
Warrants are converted or exercised, as the case may be, and the Common Shares
or Warrant Shares, as the case may be, are registered under the Act or an
exemption from registration is available. Such Investor has been advised or is
aware of the provisions of Rule 144 promulgated under the Act.
(f) BROKERS. Such Investor has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the transactions
contemplated hereby.
(g) NOT AN AFFILIATE. Such Investor is not an officer,
director or "affiliate" (as that term in defined in Rule 405 of the Act) of the
Company.
(h) RELIANCE BY THE COMPANY. Such Investor understands that
the Series B Preferred Stock and Warrants are being offered and sold in reliance
on a transactional exemption from the registration requirements of Federal and
state securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Investor set forth herein in order to determine the
applicability of such exemptions and the suitability of such Investor to acquire
the Series B Preferred Stock and Warrants.
ARTICLE III
COVENANTS
Section 3.1 REGISTRATION AND LISTING; EFFECTIVE REGISTRATION. Until
such time as no Series B Preferred Stock or Warrants are outstanding, the
Company will cause the Common Stock to continue at all times to be registered
under Section 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted
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by the Exchange Act or the rules thereunder) to terminate or suspend such
reporting and filing obligations. Until such time as no Series B Preferred Stock
or Warrants are outstanding, the Company shall continue the listing or trading
of the Common Stock on the Nasdaq NMS or one of the other Approved Markets and
shall comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Nasdaq NMS or such other Approved
Market on which the Common Stock is listed and the National Association of
Securities Dealers ("NASD"). The Company shall cause the Common Shares and the
Warrant Shares to be listed on the Nasdaq NMS (or, if the Common Stock is listed
on another of the Approved Markets, on such other Approved Market) no later than
the registration of the Common Shares or the Warrant Shares under the Act, and
at all times shall continue such listing(s) on one of the Approved Markets on
which the Common Stock is listed. As used herein and in the Registration Rights
Agreement, the Articles of Amendment and the Warrants, the term "EFFECTIVE
REGISTRATION" shall mean that (a) all registration obligations of the Company
pursuant to the Registration Rights Agreement have been satisfied, (b) such
registration is not subject to any suspension or stop order, (c) the prospectus
for each of the Common Shares issuable upon conversion of the Series B Preferred
Stock and the Warrant Shares issuable upon exercise of the Warrants is current,
(d) such Common Shares and Warrant Shares are listed for trading on one of the
Approved Markets and such trading has not been suspended for any reason, (e)
none of the Company or any direct or indirect subsidiary of the Company is
subject to any bankruptcy, insolvency or similar proceeding, and (f) no
Interfering Event (as defined in Section 2(b) of the Registration Rights
Agreement) exists.
Section 3.2 SERIES B PREFERRED STOCK ON CONVERSION AND WARRANTS ON
EXERCISE.
(a) Upon any conversion by an Investor (or then holder of
Series B Preferred Stock) of the Series B Preferred Stock pursuant to the terms
thereof, the Company shall issue and deliver to such Investor (or holder) within
three (3) Trading Days (as defined in the Articles of Amendment) of the
Conversion Date (as defined in the Articles of Amendment) a new certificate or
certificates for the number of shares of Series B Preferred Stock which such
Investor (or holder) has not yet elected to convert but which are evidenced in
part by the certificate(s) submitted to the Company in connection with such
conversion (with the number of and denomination of such new certificate(s)
designated by such Investor or holder).
(b) Upon any partial exercise by an Investor (or then holder
of the Warrants) of the Warrants, the Company shall issue and deliver to such
Investor (or holder) within three (3) days of the date on which such Warrants
are exercised, a new Warrant or Warrants representing the number of adjusted
Warrant Shares, in accordance with the terms of Section 2 of the Warrants.
Section 3.3 REPLACEMENT CERTIFICATES AND WARRANTS.
(a) The certificate(s) representing the shares of Series B
Preferred Stock held by any Investor (or then holder) may be exchanged by such
Investor (or such holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of shares of
Series B Preferred Stock, as requested by such Investor
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(or such holder) upon surrendering the same. No service charge will be made for
such registration or transfer or exchange.
(b) The Warrants will be exchangeable at the option of any
Investor (or then holder of the Warrants) at the office of the Company for other
Warrants of different denominations entitling such Investor (or the holder
thereof) to purchase in the aggregate the same number of Warrant Shares as are
purchasable under such Warrants. No service charge will be made for such
transfer or exchange.
Section 3.4 EXPENSES. The Company shall pay in immediately available
funds, at the Closing and promptly upon receipt of any further invoices relating
to same, all reasonable due diligence fees and expenses and attorneys' fees and
expenses of the Investors' Counsel incurred by the Investors in connection with
the preparation negotiation execution and delivery of this Agreement, the
Registration Rights Agreement, the Articles of Amendment, the Warrants and the
related agreements and documents and the transactions contemplated hereunder and
thereunder; PROVIDED, however, that the Company shall have no obligation under
this Section 3.4 to make any payments in excess of $30,000. At Closing, the
Company shall pay the amount due for such fees and expenses (which may include
fees and expenses estimated to be incurred for completion of the transaction
including post-closing matters). In the event such amount is ultimately less
than the actual fees and expenses, the Company shall promptly pay such
deficiency upon receipt of an invoice regarding same.
Section 3.5 SECURITIES COMPLIANCE. The Company shall notify the SEC and
the Nasdaq NMS, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Articles of Amendment, the Registration
Rights Agreement and the Warrants, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation for the legal and valid issuance of the Series B Preferred Stock
hereunder, the Common Shares issuable upon conversion thereof, the Warrants and
the Warrant Shares issuable upon exercise of the Warrants.
Section 3.6 DIVIDENDS OR DISTRIBUTIONS. So long as any shares of Series
B Preferred Stock or Warrants remain outstanding, the Company agrees that it
shall not (a) declare or pay any dividends or make any distributions to any
holder or holders of Common Stock or (b) purchase or otherwise acquire for
value, directly or indirectly, any Common Stock or other equity security of the
Company.
Section 3.7 NOTICES. The Company agrees to provide all holders of
Series B Preferred Stock and Warrants with copies of all notices and
information, including without limitation notices and proxy statements in
connection with any meetings, that are provided to the holders of shares of
Common Stock contemporaneously with the delivery of such notices or information
to such Common Stock holders and within one (1) day after release, copies of all
press releases issued by the Company or any of its subsidiaries.
Section 3.8 USE OF PROCEEDS. The Company agrees that the proceeds
received by the Company from the sale of the Series B Preferred Stock hereunder
shall be used for
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working capital purposes or in connection with the acquisition of MFS Network
Technologies, Inc.
Section 3.9 ADJUSTMENTS. If at any time within twelve (12) months from
the Closing Date the Company sells or issues Common Stock (or other equity
securities or rights exercisable or exchangeable for, or convertible into,
Common Stock or such other equity securities including debt with an equity
component) at a discount greater (or in the Investor's judgment more favorable
to the purchaser thereof) than the discount specified in Section 3(b)(i) of the
Articles of Amendment or at a ceiling price less than the Conversion Price (as
defined in the Articles of Amendment and as adjusted pursuant to the terms
thereof), then the Series B Preferred Stock will automatically (at the
Investor's request) be adjusted to provide for such greater discount or lower or
more favorable Conversion Price, as applicable.
Section 3.10 RESERVATION OF STOCK ISSUABLE UPON CONVERSION OF SERIES B
PREFERRED STOCK AND UPON EXERCISE OF THE WARRANTS. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock solely for the purpose of effecting the conversion of the Series B
Preferred Stock and the exercise of the Warrants, free of preemptive rights,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Series B Preferred Stock
and the full exercise of the Warrants, and, if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all the then outstanding Series B Preferred Stock and the full
exercise of the Warrants, the Company will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including without limitation engaging in best efforts to obtain the
requisite shareholder approval. Without in any way limiting the foregoing, the
Company agrees to reserve and at all times keep available solely for purposes of
conversion of the Series B Preferred Stock and the exercise of the Warrants such
number of authorized but unissued shares of Common Stock that is at least equal
to 200% of the aggregate shares issuable upon conversion of the Series B
Preferred Stock and 150% of the aggregate shares issuable on exercise of the
Warrants, which numbers may be reduced by the number of Common Shares or
Warrant Shares actually delivered pursuant to conversion of the Series B
Preferred Stock or exercise of the Warrants and shall be appropriately adjusted
for any stock split, reverse split, stock dividend or reclassification of the
Common Stock. If the Company falls below the reserves specified in the
immediately preceding sentence and does not cure such non-compliance within 30
days of its start, then the Investors will be entitled to the discount
adjustments specified in Section 2(b)(i) of the Registration Rights Agreement.
If at any time the number of authorized but unissued shares of Common Stock is
not sufficient to effect the conversion of all the then outstanding shares of
Series B Preferred Stock or the full exercise of the Warrants, the Investors
shall be entitled to, INTER ALIA, the premium price redemption rights provided
in the Registration Rights Agreement.
Section 3.11 BEST EFFORTS. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article IV of this Agreement.
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Section 3.12 FORM D; BLUE SKY LAWS. The Company agrees to file a Form D
with respect to the Series B Preferred Stock, Warrants, Common Shares and
Warrant Shares, as required under Regulation D, and to provide a copy thereof to
each Investor promptly after such filing. The Company shall, on or before each
Closing Date, take such action as the Company shall have reasonably determined
is necessary to qualify the Series B Preferred Stock, Warrants, Common Shares
and Warrant Shares for sale to the Investors at the applicable Closing pursuant
to this Agreement under applicable securities or "blue sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to each Investor on or prior
to the Closing Date.
Section 3.13 NO SENIOR INDEBTEDNESS: LIMITATION ON ISSUANCE OF EQUITY.
(a) Until the Registration Statement (as defined in the
Registration Rights Agreement) has been declared effective by the SEC and the
Common Shares are subject to Effective Registration, neither the Company nor any
of its subsidiaries will issue any equity securities or instruments or rights
convertible into or exchangeable or exercisable for any equity securities except
pursuant to presently outstanding convertible securities and the Company's Stock
Option Plan, as amended, or other options to employees of the Company and its
subsidiaries.
(b) For a period of twelve (12) months following the Closing,
except as consented to in writing by the Investors, the Company shall not issue
or grant (i) any convertible securities the terms of which do not provide for a
fixed rate of conversion throughout the term of the security or (ii) any option,
warrant or other right to purchase securities of the Company whose exercise is
contingent upon, or whose price is determined with respect to, the market price
for the Common Stock; provided, however, that the twelve month period shall be
extended one day for each day that there is not Effective Registration.
Section 3.14 DELISTING; BEST EFFORTS. If a conversion of any shares of
Series B Preferred Stock in whole or in part for Common Shares by an Investor
could result in the Company being delisted from the Nasdaq NMS for issuing in
excess of 20% of its outstanding Common Stock to the Investors without the
approval of the Company's shareholders, then the Company, upon the Investor's
request, must redeem any and all Series B Preferred Stock covered by the
applicable Conversion Notice (as defined in the Articles of Amendment) and any
and all Series B Preferred Stock that would, if a Conversion Notice for all
shares of Series B Preferred Stock were then delivered, result in the Company
being subject to such delisting, at a price equal to 130% of the Liquidation
Value (as defined in the Articles of Amendment). If required, the Company will
use its best efforts to obtain promptly shareholder approval pursuant to NASD
Rule 4460(i) authorizing the issuance of all Common Shares and Warrant Shares
issuable upon the conversion of any shares of Series B Preferred Stock or the
exercise of any Warrants, including by calling a special meeting of such
shareholders within 45 days of the date of any such attempted conversion or, if
the Trading Price (as defined in the Articles of Amendment) decreased by more
than 20% over the preceding 30 days, then 45 days shall be increased to 60 days)
and having the Company's Board of Directors recommend such approval in a proxy
statement.
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Section 3.15 REGISTRATION RIGHTS. The Company shall file and use its
best efforts to cause to become effective, as promptly as possible, a
registration statement on Form S-3 under the Act (or in the event that the
Company becomes ineligible to use such form, such other form as the Company is
eligible to use under the Act) covering the resale of the Common Shares and the
Warrant Shares issuable upon the conversion of the shares of Series B Preferred
Stock and the exercise of the Warrants, respectively, and shall take all action
necessary to qualify the Common Shares and the Warrant Shares under all
applicable state securities laws, all in accordance with the Registration Rights
Agreement to be entered into by the Company and the Investors at the Closing.
Section 3.16 LEGENDS. Upon effectiveness of the Registration Statement
(as defined in the Registration Rights Agreement), the Common Shares and the
Warrant Shares and certificates evidencing the same shall at all times be free
of legends (except as otherwise provided herein or in the Articles of Amendment,
Warrants, Registration Rights Agreement), "stop transfers", "stock transfer
restrictions" or other restrictions.
Section 3.17 CORPORATE EXISTENCE. The Company will take all steps
necessary to preserve and continue the corporate existence and solvency of the
Company. So long as an Investor beneficially owns any Series B Preferred Stock,
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 listed for trading on Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
ARTICLE IV
CONDITIONS TO CLOSINGS
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
SELL THE SERIES B PREFERRED STOCK. The obligation hereunder of the Company to
issue and/or sell the Series B Preferred Stock to the Investors at the Closing
(unless otherwise specified) is subject to the satisfaction, at or before the
Closing, of each of the applicable conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
(a) ACCURACY OF THE INVESTORS' REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each Investor will be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties as of an
earlier date, which will be true and correct in all material respects as of such
date).
(b) PERFORMANCE BY THE INVESTORS. Each and every Investor
shall have performed all agreements and covenants and satisfied all conditions
required to be performed or satisfied by it at or prior to the Closing
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(c) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement or the
Articles of Amendment or the Warrants.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTORS TO
PURCHASE THE SERIES B PREFERRED STOCK. The obligation hereunder of each Investor
to acquire and pay for the Series B Preferred Stock at the Closing (unless
otherwise specified) is subject to the satisfaction, at or before the Closing,
of each of the applicable conditions set forth below. These conditions are for
each Investor's benefit and may be waived by each Investor at any time in its
sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties as of an
earlier date, which shall be true and correct in all material respects as of
such date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have
performed all agreements and covenants and satisfied all conditions required to
be performed or satisfied by the Company at or prior to the Closing.
(c) NASDAQ NMS. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the SEC,
the Nasdaq NMS (or other Approved Market) or the NASD, and trading in securities
generally as reported by the Nasdaq NMS (or other Approved Market) shall not
have been suspended or limited or minimum prices shall not have been established
on securities whose trades are reported by the Nasdaq NMS, and the Common Stock
shall not have been delisted from the Nasdaq NMS (or any other Approved Market
where they are currently listed).
(d) NO INJUNCTION. No statute, rule, regulation, executive,
judicial or administrative order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights Agreement
or the Articles of Amendment or the Warrants.
(e) OPINION OF COUNSEL. At the Closing, the Investors shall
have received an opinion of counsel to the Company in the form attached hereto
as EXHIBIT 4.2(E) and such other opinions, certificates and documents as the
Investors or their counsel shall reasonably require incident to the Closing.
(f) REGISTRATION RIGHTS AGREEMENT. The Company and the
Investors shall have executed and delivered the Registration Rights Agreement in
the form and substance of EXHIBIT 4.2(F) attached hereto.
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(g) ADVERSE CHANGES. Since April 30, 1998, no event shall have
occurred which had or is likely to have, in the reasonable judgment of the
Investors, a Material Adverse Effect on the Company or any of its direct or
indirect subsidiaries.
(h) OFFICER'S CERTIFICATE. The Company shall have delivered to
the Investors a certificate in form and substance satisfactory to the Investors
and the Investors' Counsel, executed by an officer of the Company, certifying as
to satisfaction of closing conditions, incumbency of signing officers, and the
true, correct and complete nature of the Charter, By-Laws, good standing of and
authorizing resolutions of the Company.
(i) SERIES B PREFERRED STOCK AND WARRANTS. The Investors shall
have received certificates representing the shares of Series B Preferred Stock
and the Warrants in the form and substance of EXHIBIT 1.1B hereto.
(j) DUE DILIGENCE. Each Investor shall have completed its
financial, accounting, operational and legal due diligence in a manner
satisfactory to such Investor in its sole discretion.
(k) CONSENTS. The Company shall have received and delivered to
the Investors (i) the consent of all applicable lenders, to the extent required,
to the issuance of the Series B Preferred Stock and (ii) the waiver of any and
all pending events of default (or pending events which with the lapse of time or
notice or both would constitute an event of default) thereunder.
ARTICLE V
LEGEND AND STOCK
Section 5.1. The Company will issue one or more certificates
representing the shares of Series B Preferred Stock and the Warrants in the name
of the applicable Investor and in such denominations to be specified by such
Investor prior to (or from time to time subsequent to) Closing. Each certificate
representing the Series B Preferred Stock and the Warrants initially shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
The Company agrees to reissue the shares of Series B Preferred Stock
and the Warrants without the legend set forth above at such time as (i) the
holder thereof is permitted to dispose of such Series B Preferred Stock and/or
Warrants and Common Stock issuable upon conversion or exercise thereof pursuant
to Rule 144(k) under the Act, or
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(ii) such shares of Series B Preferred Stock and/or Warrants are sold to a
purchaser or purchasers who (in the opinion of counsel to the seller or such
purchaser(s), in form and substance customary for opinions of counsel in similar
transactions) are able to dispose of such shares publicly without registration
under the Act.
Prior to the Registration Statement (as defined in the Registration
Rights Agreement) being declared effective, any Common Shares issued pursuant to
conversion of the Series B Preferred Stock or Warrant Shares issued upon
exercise of the Warrants shall bear a legend in the same form as the legend
indicated above. Upon such Registration Statement becoming effective, the
Company agrees to promptly, but no later than three (3) business days
thereafter, issue new certificates representing such Common Shares and Warrant
Shares without such legend. Any Common Shares issued pursuant to conversion of
the Series B Preferred Stock and any Warrant Shares issued upon exercise of the
Warrants after the Registration Statement has become effective shall be free and
clear of any legends, transfer restrictions and stop orders. Notwithstanding the
removal of such legend, each Investor agrees to sell the Common Shares and
Warrant Shares represented by the new certificates in accordance with the
applicable prospectus delivery requirements (if copies of a current prospectus
are provided to such Investor by the Company), if any, or in accordance with an
exception from the registration requirements of the Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement.
ARTICLE VI
TERMINATION
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Closing by the unanimous written consent of
the Company and each of the Investors.
Section 6.2 OTHER TERMINATION. This Agreement may be terminated by
action of the Board of Directors of the Company or by any of the Investors at
any time if the Closing shall not have been consummated by the fifth business
day following the date of this Agreement; provided, however, that the party (or
parties) prepared to close shall retain its (or their) right to sue for any
breach by the other party (or parties).
ARTICLE VII
MISCELLANEOUS
Section 7.1 STAMP TAXES. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Series B
Preferred Stock and the Warrants pursuant hereto, the Common Shares issued upon
conversion of the Series B Preferred Stock and the Warrant Shares issued upon
exercise of the Warrants.
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Section 7.2 SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; JURY TRIAL.
(a) The Company and the investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof,
this being in addition to any other remedy to which any of them may be entitled
by law or equity.
(b) THE COMPANY AND EACH OF THE INVESTORS (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING
IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (IT) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
COMPANY AND EACH OF THE INVESTORS CONSENTS TO PROCESS BEING SERVED IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE
ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
(c) THE COMPANY AND EACH OF THE INVESTORS HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.
Section 7.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with
the Registration Rights Agreement, the Warrants, the Articles of Amendment and
the agreements and documents executed in connection herewith and therewith,
contains the entire understanding of the parties with respect to the matters
covered hereby and thereby and, except as specifically set forth herein or
therein, neither the Company nor any Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by a written instrument
signed by the party against whom enforcement of any such amendment or waiver is
sought.
Section 7.4 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by mail, facsimile or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
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to the Company:
Able Telcom Holding Corp.
1601 Forum Place, Suite 1110,
West Palm Beach, Florida 33401
Attention: Frazier L. Gaines, President
Facsimile: (561) 688-0455
with copies to:
Gunster, Yoakley, Valdes-Fauli & Stewart
Phillips Point, Suite 500 East
777 South Flagler Drive
West Palm Beach, Florida 33401-6194
Attention: Steven J. Serling
Facsimile: (561) 655-5677
to the Investors:
For Palladin Partners I, L.P., Halifax Fund
L.P., The Gleneagles Fund, Palladin Overseas
Fund Limited, Colonial Penn Life Insurance
Company and Palladin Securities, L.L.C.
c/o The Palladin Group, as Attorney-in-Fact
40 West 57th Street
New York, New York 10119
Attention: Robert L. Chender
Facsimile: (212) 698-0554
For RCG International Investors, LDC
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attention: Wayne Bloch
with copies to:
Arnold & Porter
555 Twelfth Street, NW
Washington, D.C. 20004
Attention: L. Stevenson Parker, Esq.
Facsimile: (202) 942-5999
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
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Section 7.5 INDEMNITY. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees but
excluding consequential damages) incurred as a result of such parties' breach of
any representation, warranty, covenant or agreement in this Agreement.
Section 7.6 WAIVERS. No waiver by any party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 7.7 HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 7.8 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The parties hereto may amend
this Agreement without notice to or the consent of any third party. The Company
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of all Investors (which consent may be withheld for any
reason in their sole discretion), except that the Company may assign this
Agreement in connection with the sale of all or substantially all of its assets
provided that the Company is not released from any of its obligations hereunder,
such assignee assumes all obligations of the Company hereunder, and appropriate
adjustment of the provisions contained in this Agreement, the Registration
Rights Agreement, the Articles of Amendment and the Warrants is made, in form
and substance satisfactory to the Investors, to place the Investors in the same
position as they would have been but for such assignment, in accordance with the
terms of the Articles of Amendment and the Warrants. Any Investor may assign
this Agreement (in whole or in part) or any rights or obligations hereunder
without the consent of the Company in connection with any sale or transfer of
shares of the Series B Preferred Stock or Warrants held by such Investor,
provided that such Investor may not assign this Agreement prior to the Closing
Date without the Company's prior written consent except to an affiliate or
affiliates of such Investor.
Section 7.9 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.
Section 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
AND, WHERE APPLICABLE, FEDERAL LAW.
Section 7.11 SURVIVAL. The representations and warranties and the
agreements and covenants of the Company and each Investor contained herein shall
survive the Closing. If any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force
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and effect without said provision, provided that no such severability shall be
effective if it were to materially change the economic benefit of this Agreement
to any party.
Section 7.12 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
Section 7.13 PUBLICITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Investor
without such Investor's consent, unless and until such disclosure is required by
law or applicable regulation, and then only to the extent of such requirement.
The Company agrees that it will deliver a copy of any public announcement
regarding the matters covered by this Agreement, the Registration Rights
Agreement, the Articles of Amendment or the Warrants or any agreement and
document executed herewith and therewith to each Investor and any public
announcement including the name of an Investor to such Investor, reasonably in
advance of the release of such announcements. The Company will provide the
Investor the opportunity to review and comment on any press release announcing
consummation of the Closing or any other press release describing or referring
to the transactions contemplated hereby.
Section 7.14 SEVERABILITY. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warranties, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
Section 7.15 LIKE TREATMENT OF HOLDERS; REDEMPTION. Neither the Company
nor any of its affiliates shall, directly or indirectly, pay or cause to be paid
any consideration (immediate or contingent), whether by way of interest, fee,
payment for the redemption or conversion of the shares of Series B Preferred
Stock or exercise of the Warrants, or otherwise, to any holder of Series B
Preferred Stock or the Warrants, for or as an inducement to, or in connection
with the solicitation of, any consent, waiver or amendment of any terms or
provisions of the Articles of Amendment or this Agreement or the Registration
Rights Agreement or the Warrants, unless such consideration is required to be
paid to all holders of Series B Preferred Stock and Warrants bound by such
consent, waiver or amendment whether or not such holders so consent, waive or
agree to amend and whether or not such holders tender their shares of Series B
Preferred Stock or Warrants for redemption, conversion or exercise. The Company
shall not, directly or indirectly, redeem any shares of the Series B Preferred
Stock unless such offer of redemption is made pro rata to all holders of Series
B Preferred Stock on identical terms.
Section 7.16 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.
[SIGNATURE PAGE FOLLOWS]
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ABLE TELCOM HOLDING CORP.
By: /s/ MARK A. SHAIN
----------------------------------
Name: MARK A. SHAIN
Title: CHIEF FINANCIAL OFFICER
INVESTORS:
--------------------------------------
RGC INTERNATIONAL INVESTORS,
LDC
By: Rose Glen Capital Management,
L.P. Investment Manager
By: RGC General Partner Corp, as
General Partner
By: /s/ WAYNE BLOCK
---------------------------
Wayne Block
Managing Director
By:
/s/ ROBERT L. CHENDER
---------------------------------------
PALLADIN SECURITIES L.L.C.
By:
/s/ ROBERT L. CHENDER
---------------------------------------
HALIFAX FUND, L.P.
By: The Palladin Group, as Attorney-
in-Fact and Investment Advisor
By:
25
<PAGE>
/s/ ROBERT L. CHENDER
---------------------------------------
PALLADIN PARTNERS I, L.P.
By: Palladin Asset Management LLC
as Attorney-in-Fact
By:
/s/ ROBERT L. CHENDER
---------------------------------------
THE GLENEAGLES FUND COMPANY
By: The Palladin Group, as Attorney-
in-Fact and Investment Advisor
By:
/s/ ROBERT L. CHENDER
---------------------------------------
PALLADIN OVERSEAS FUND
LIMITED
By: The Palladin Group, as Attorney-
in-Fact and Investment Advisor
By:
/s/ ROBERT L. CHENDER
---------------------------------------
COLONIAL PENN LIFE INSURANCE
COMPANY
By: The Palladin Group, as Attorney-
in-Fact and Investment Advisor
By:
[Signature page to Able Telcom Holding Corp. Convertible Preferred Stock
Purchase Agreement]
26
<PAGE>
EXHIBITS AND SCHEDULES
Schedule I List of Investors
Exhibit l.1A Form of Articles of Amendment
Exhibit 1.1B Form of Warrant
Exhibit 2.1(a) List of Subsidiaries
Exhibit 2.1(c)(i) Certificate of Incorporation of the Company
Exhibit 2.1(c)(ii) By-Laws of the Company
Exhibit 2.1(r) Outstanding Securities Subject to Registration Rights, etc.
Exhibit 4.2(e) Opinion of Company Counsel
Exhibit 4.2(f) Registration Rights Agreement
27
EXHIBIT 4.9
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
June 30, 1998 between ABLE TELCOM HOLDING CORP., a Florida corporation with
offices at 1601 Forum Place, Suite 1110, West Palm Beach, Florida 33401 (the
"Company") and each of the entities listed under "Investors" on the signature
page hereto (each an "Investor" and collectively the "Investors"), each with
offices at the address listed under such Investor's name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Convertible Preferred Stock Purchase
Agreement by and between the Company and the Investors dated as of June 26,
1998 (the "Purchase Agreement"), the Company initially has agreed to sell and
issue to the Investors, and the Investors have agreed to purchase from the
Company, an aggregate of 4,000 shares of Series B Preferred Stock (the "Series B
Preferred Stock",) at an aggregate price of $20,000,000 on the terms and
conditions set forth therein;
WHEREAS, the Purchase Agreement contemplates that the Series B
Preferred Stock will be convertible into shares (the "Common Shares") of common
stock, $0.001 par value, of the Company ("Common Stock") pursuant to the terms
and conditions set forth in the Articles of Amendment to the Articles of
Incorporation of Able Telcom Holding Corp. (the "Articles of Amendment"); and
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Purchase Agreement, the Company has
agreed to issue to the Investors warrants exercisable for 350,000 shares of
Common Stock in the form attached as EXHIBIT 1.1B;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Purchase
Agreement and this Agreement, the Company and the Investors agree as follows:
1. CERTAIN DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement,
Warrants or the Articles of Amendment. As used in this Agreement, the following
terms shall have the following respective meanings:
"CLOSING" and "CLOSING DATE" shall have the meanings ascribed
to such terms in the Purchase Agreement.
"COMMISSION" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"REGISTRABLE SECURITIES" shall mean: (i) the Common Shares and
Warrants Shares issued to each Holder or its permitted transferee or designee
upon conversion of the Series B Preferred Stock or exercise of the Warrants, as
applicable, or upon any stock split, stock dividend,
<PAGE>
recapitalization or similar event with respect to such Common Shares or Warrant
Shares; (ii) any securities issued or issuable to each Holder upon the
conversion, exercise or exchange of any Series B Preferred Stock, Warrants,
Warrant Shares, or Common Shares; and (iii) any other security of the Company
issued as a dividend or other distribution with respect to, or upon conversion
or exchange of or in replacement of Registrable Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses to be incurred
by the Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, and the expense of any audited financial statements incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company).
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holders not included within "Registration
Expenses".
"HOLDER" and "HOLDERS" shall include an Investor or the
Investors, respectively, and any transferee of the Series B Preferred Stock,
Warrants, Warrant Shares or Common Shares or Registrable Securities which have
not been sold to the public to whom the registration rights conferred by this
Agreement have been transferred in compliance with this Agreement.
"REGISTRATION STATEMENT" shall have the meaning set forth in
Section 2(a) herein.
"REGULATION D" shall mean Regulation D as promulgated pursuant
to the Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of
1933, as amended.
"WARRANTS" shall mean the warrants in form and substance of
EXHIBIT 1.1B to the Purchase Agreement between the Company and the Investors
dated as of the date hereof.
"WARRANT SHARES" shall mean shares of Common Stock of the
Company issued and issuable upon exercise of the Warrants.
2. REGISTRATION REQUIREMENTS. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder on an Approved Market. Such best
efforts by the Company shall include the following:
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<PAGE>
(a) The Company shall, as expeditiously as reasonably possible
after the Closing Date:
(i) But in any event within 45 days thereafter,
prepare and file a registration statement with the Commission pursuant to Rule
415 under the Securities Act on Form S-3 under the Securities Act (or in the
event that the Company is ineligible to use such form, such other form as the
Company is eligible to use under the Securities Act) covering the Registrable
Securities ("Registration Statement") 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
not misleading. Such Registration Statement shall, in addition and without
limitation, register (pursuant to Rule 416 under the Securities Act, or
otherwise) such additional indeterminate number of Registrable Securities as
shall be necessary to permit the conversion in full of the Series B Preferred
Stock or exercise of the Warrants (i) to prevent dilution resulting from stock
splits, stock dividends or similar transactions or (ii) by reason of changes in
the Conversion Price. Thereafter, the Company shall use its best efforts to
cause such Registration Statement and other filings to be declared effective as
soon as possible, and in any event prior to 120 days following the Closing Date.
The number of shares of Common Stock initially included in such Registration
Statement shall be no less than 200% of the number of Conversion Shares and 150%
of the number of Warrant Shares that are then issuable upon conversion of the
Series B Preferred Stock and the exercise of the Warrants, without regard to any
limitation on the Investor's ability to convert the Preferred Stock or exercise
the Warrants. The Company acknowledges that the number of shares initially
included in the Registration Statement represents a good faith estimate of the
maximum number of shares issuable upon conversion of the Preferred Stock and
exercise of the Warrants.
(ii) Prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to keep the
Registration Statement effective and to comply with the provisions of the Act
with respect to the disposition of all securities covered by such Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the Seller
or Sellers thereof as set forth in the Registration Statement and notify the
Holders of the filing and effectiveness of such Registration Statement and any
amendments or supplements. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to cover
all of the Registrable Securities issued or issuable upon conversion of the
Series B Preferred Stock and exercise of the Warrants, the Company shall amend
the Registration Statement, or file a new Registration Statement (on the short
form available therefore, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within twenty (20) business days after the necessity therefor arises (based on
the market price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely). 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. The provisions of Section
2(b)(i) below shall be applicable with respect to such obligation, with the one
hundred and twenty (120) days running from the day after the date on which the
Company reasonably first determines (or reasonably should have determined) the
need therefor.
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<PAGE>
(iii) Furnish to each Holder such numbers of copies
of a current prospectus conforming with the requirements of the Act, copies of
the Registration Statement, any amendment or supplement thereto and any
documents incorporated by reference therein and such other documents as such
Holder may reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder and, in the case of the Registration
Statement referred to in Section 2(a)(i), each letter written by or on behalf of
the Company to the SEC or the staff of the SEC, and each item of correspondence
from the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion of any thereof which contains information for
which the Company has sought confidential treatment). The Company will
immediately notify each Investor by facsimile of the effectiveness of the
Registration Statement or any post-effective amendment. The Company will
promptly respond to any and all comments received from the SEC, with a view
towards causing any Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable and shall promptly file an
acceleration request as soon as practicable following the resolution or
clearance of all SEC comments or, if applicable, following notification by the
SEC that the Registration Statement or any amendment thereto will not be subject
to review.
(iv) (a) Register and qualify, or obtain an
appropriate exemption from registration or qualification, the securities covered
by such Registration Statement under such other securities or "Blue Sky" laws of
such jurisdictions as shall be reasonably requested by each Holder (b) prepare
and file in those jurisdictions such supplements (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof, (c) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and shall not be required to
register or qualify in any jurisdiction where such registration or qualification
is not permitted or approved by such jurisdiction following the Company's best
efforts to obtain such permission or approval.
(v) Notify each Holder immediately of the happening
of any event as a result of which the prospectus (including any supplements
thereto or thereof) included in such Registration Statement, as then in effect,
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and use its best efforts
to promptly update and/or correct such prospectus to correct such untrue
statement or omission, and deliver such number of copies of such supplement or
amendment to each Holder as such Holder may reasonably request.
(vi) Notify each Holder immediately of the issuance
by the Commission or any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose. The Company shall prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible time.
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<PAGE>
(vii) Permit a single firm of counsel, designated as
Holders' counsel by a majority of the Registrable Securities included in the
Registration Statement, to review the Registration Statement and all amendments
and supplements thereto within a reasonable period of time prior to each filing,
and shall not file any document in a form to which such counsel reasonably
objects and will not request acceleration of the Registration Statement without
prior notice to such counsel. The sections of the Registration Statement
covering information with respect to the Investors, the Investor's beneficial
ownership of securities of the Company or the Investors' intended method of
disposition of Registrable Securities shall conform to the information provided
to the Company by each of the Investors.
(viii) List the Registrable Securities covered by
such Registration Statement with all securities exchange(s) and/or markets on
which the Common Stock is then listed and prepare and file any required filings
with the National Association of Securities Dealers, Inc. or any exchange or
market where the Common Shares are traded.
(ix) If applicable, take all steps necessary to
enable Holders to avail themselves of the prospectus delivery mechanism set
forth in Rule 153 (or successor thereto) under the Act.
(x) The Company shall hold in confidence and not make
any disclosure of information concerning an Investor provided to the Company
unless (a)disclosure of such information is necessary to comply with federal or
state securities laws, (b) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (c)
the release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (d) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court of governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or obtain a protective order for,
such information.
(xi) The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.
(xii) The Company shall cooperate with the Investors
who hold Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends with respect to
transferability) representing Registrable Securities to be offered pusuant to
the Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request, and, within three (3) business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in
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<PAGE>
such Registration Statement) an instruction in the form attached hereto as
EXHIBIT 1 and an opinion of such counsel in the form attached hereto as EXHIBIT
2.
(xiii) At the reasonable request of the holders of a
majority-in-interest of the Registrable Securities, 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 the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
(xiv) From and after the date of this Agreement, the
Company shall not, and shall not agree to, allow the holders of any securities
of the Company to include any of their securities in any Registration Statement
under Section 2(a) hereof or any amendment or supplement thereto under Section
3(b) hereof without the consent of the holders of a majority-in-interest of the
Registrable Securities.
(xv) The Company shall take all other reasonable
actions necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to the Registration Statement.
(b) Set forth below in this Section 2(b) are
(I) events that may arise that the Investors consider will interfere with the
full enjoyment of their rights under the Articles of Amendment, the Purchase
Agreement and this Agreement (the "Interfering Events"), and (II) certain
remedies applicable in each of these events.
Paragraphs (i) through (iv) of this Section 2(b)
describe the Interfering Events, provide a remedy to the Investors if an
Interfering Event occurs and provide that the Investors may require that the
Company redeem outstanding shares, of Series B Preferred Stock at a specified
price if certain Interfering Events are not timely cured.
Paragraph (v) provides, INTER ALIA, that if cash
payments required as the remedy in the case of certain of the Interfering Events
are not paid when due, the Company may be required by the Investors to redeem
outstanding shares of Series B Preferred Stock at a specified price.
Paragraph (vi) provides, INTER ALIA, that the
Investors have the right to specific performance.
The preceding paragraphs in this Section 2(b) are
meant to serve only as an introduction to this Section 2(b), are for convenience
only, and are not to be considered in applying, construing or interpreting this
Section 2(b).
(i) DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT.
The Company agrees that it shall file the Registration Statement complying with
the requirements of this Agreement promptly and in any event within 45 days
following the date of the initial closing of the Purchase Agreement (the
"Closing Date") and shall use its best efforts to cause such Registration
Statement to become effective as soon as possible and in any event within 120
days from the Closing Date. In the event that such Registration Statement has
not been declared effective within
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<PAGE>
120 days from the Closing Date, then the Conversion Price (as defined in Section
3(b) of the Articles of Amendment) shall be reduced by 1% of the Conversion
Price on such 120th day after the Closing Date during and after the 30-day
period ("Default Period") from and after the 120th day following the Closing
Date during any part of which such Registration Statement is not effective, and
shall be further reduced by an additional 1.5% during and after each Default
Period thereafter. For example, if the Registration Statement does not become
effective until 160 days from the Closing Date, the Conversion Price during days
121 through 149 shall be equal to 99% of the Conversion Price. The Conversion
Price from and after day number 150 after the Closing Date shall be equal to
97.5% of the Conversion Price. In each case, the Conversion Price shall be
subject to further adjustment as set forth in the Articles of Amendment. If the
Registration Statement has not been declared effective within 180 days after the
Closing Date, then each Holder shall have the right to redemption of its
Preferred Shares by the Company in accordance with Sections 4(b), 4(d)(i) and
4(f) of the Articles of Amendment.
(ii) NO LISTING; PREMIUM PRICE REDEMPTION FOR
DELISTING OF CLASS OF SHARES.
(A) In the event that the Company fails,
refuses or is unable to cause the Registrable Securities covered by the
Registration Statement to be listed with the Approved Market and each other
securities exchange and market on which the Common Stock is then traded at all
times during the period ("Listing Period") from the earlier of (i) the 120th day
following the Closing Date and (ii) the date the Registration Statement is
declared effective by the SEC, until the Maturity Date (provided that such date
shall be deferred 1.5 days for each day that there is no Effective
Registration), then the Company shall pay in cash to each Holder a default
payment in an amount equal to three percent (3%) of the aggregate Liquidation
Value represented by the Series B Preferred Shares held by such Holder for each
30-day period during the Listing Period from and after such failure, refusal or
inability to so list the Registrable Securities until the Registrable Securities
are so listed
(B) In the event that shares of Common Stock
of the Company are delisted from the Approved Market at any time following the
Closing Date and remain delisted for five (5) consecutive trading days, then at
the option of each Holder and to the extent such Holder so elects, the Company
shall redeem the Series B Preferred Stock and/or Common Shares and/or Warrant
Shares held by such Holder, in whole or in part, in accordance with Sections
4(b), 4(d)(iii) and 4(f) of the Articles of Amendment; provided, however, that
such Holder may revoke such request at any time prior to receipt of such payment
of such redemption price. Default payments shall no longer accrue on Series B
Preferred Shares after such shares have been redeemed by the Company pursuant to
the foregoing provision.
(iii) BLACKOUT PERIODS. In the event any Holder's
ability to sell Registrable Securities under the Registration Statement is
suspended for more than (i) five (5) consecutive days or (ii) ten (10) days in
any calendar year ("Suspension Grace Period"), including without limitation by
reason of a suspension of trading of the Common Stock on the Approved Market,
any suspension or stop order with respect to the Registration Statement or the
fact that an event has occurred as a result of which the prospectus (including
any supplements thereto) included in such Registration Statement then in effect
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
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<PAGE>
misleading in light of the circumstances then existing, then the Company shall
pay in cash to each Holder an amount equal to three percent (3%) of the
Liquidation Value for the Series B Preferred Shares held by such holder for each
30-day period from and after the expiration of the Suspension Grace Period. At
any time after the fifth day following the expiration of the Suspension Grace
Period, a Holder shall have the right to have the Company redeem its Series B
Preferred Stock in accordance with Sections 4(b), 4(d)(ii) and 4(f) of the
Articles of Amendment.
(iv) CONVERSION DEFICIENCY; PREMIUM PRICE REDEMPTION
FOR CONVERSION DEFICIENCY. In the event that the Company does not have a
sufficient number of Common Shares available to satisfy the Company's
obligations to any Holder upon receipt of a Conversion Notice (as defined in the
Articles of Amendment) or is otherwise unable or unwilling to issue such Common
Shares (including without limitation by reason of the limit described in Section
10 below) in accordance with the terms of the Articles of Amendment for any
reason after receipt of a Conversion Notice, then:
(A) The Company shall pay in cash to each
Holder an amount equal to three percent (3%) of the Liquidation Value for the
Series B Preferred Shares held by such Holder for each 30 day period (or portion
thereof) that the Company fails or refuses to issue Common Shares in accordance
with the terms of the Articles of Amendment; and
(B) At any time five days after the
commencement of the running of the first 30-day period described above in clause
(A) of this paragraph (iv), at the request of any Holder pursuant to a
redemption notice, the Company promptly (1) shall purchase from such Holder, at
a purchase price equal to 130% of the Liquidation Value (the "Premium Redemption
Price"), the number of Series B Preferred Shares equal to such Holder's pro
rata share of the "Deficiency", as such terms are defined below, if the failure
to issue Common Shares results from the lack of a sufficient number thereof and
(2) shall purchase all (or such portion as such Holder may elect) of such
Holder's Series B Preferred Stock at such Premium Redemption Price if the
failure to issue Common Shares results from any other cause. The "Deficiency"
shall be equal to the number of Series B Preferred Shares that would not be able
to be converted for Common Shares, due to an insufficient number of Common
Shares available, if all the outstanding Series B Preferred Shares were
submitted for conversion at the Conversion Price set forth in the Articles of
Amendment as of the date such Deficiency is determined. Any request by a Holder
pursuant to this paragraph (iv)(B) shall be revocable by that Holder at any time
prior to its receipt of the Premium Redemption Price.
(v) PREMIUM PRICE REDEMPTION FOR CASH PAYMENT
DEFAULTS.
(A) The Company acknowledges that any
failure, refusal or inability by the Company described in the foregoing
paragraphs (i) through (iv) will cause the Holders to suffer damages in an
amount that will be difficult to ascertain, including without limitation damages
resulting from the loss of liquidity in the Registrable Securities and the
additional investment risk in holding the Registrable Securities. Accordingly,
the parties agree that it is appropriate to include in this Agreement the
foregoing provisions for default payments, discounts and mandatory redemptions
in order to compensate the Holders for such damages. The parties acknowledge and
agree that the default payments, discounts and mandatory redemptions set forth
above represent the parties' good faith effort to quantify such damages and, as
such, agree that the
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<PAGE>
form and amount of such default payments, discounts and mandatory redemptions
are reasonable and will not constitute a penalty.
(B) Each default payment provided for in the
foregoing paragraphs (ii) through (iv) shall be in addition to each other
default payment. All default payments (which payments shall be pro rata on a per
diem basis for any period of less than 30 days) required to be made in
connection with the above provisions shall be paid in cash at any time upon
demand, and whether or not a demand is made, by the tenth (lOth) day of each
calendar month for each partial or full 30-day period occurring prior to that
date.
(C) In the event that the Company fails or
refuses to pay any default payment or honor any penalty or similar amounts when
due, at any Holder's request and option the Company shall purchase all or a
portion of the Series B Preferred Stock, Common Shares and/or Warrant Shares
held by such Holder (with default payments accruing through the date of such
purchase), within five (5) days of such request, at a purchase price equal to
the Premium Redemption Price (as defined above), provided that such Holder may
revoke such request at any time prior to receipt of such payment of such
purchase price. Until such time as the Company purchases such Series B Preferred
Shares at the request of such Holder pursuant to the preceding sentence, at any
Holder's request and option the Company shall as to such Holder pay such amount
by adding and including the amount of such default payment to the Conversion
Amount and the Liquidation Value instead of in cash.
(vi) CUMULATIVE REMEDIES. The default payments and
mandatory redemptions provided for above are in addition to and not in lieu or
limitation of any other rights the Holders may have at law, in equity or under
the terms of the Articles of Amendment, the Purchase Agreement, the Warrants or
this Agreement, including without limitation the right to specific performance.
Each Holder shall be entitled to specific performance of any and all obligations
of the Company in connection with the registration rights of the Holders
hereunder.
(vii) DEFERRAL OF MATURITY DATE. In the event of a
failure of Effective Registration, including without limitation by reason of any
of the circumstances described in the foregoing clauses (i) through (iv) above,
then the Maturity Date (as defined in the Articles of Amendment) shall be
deferred by 1.5 days for each day that any of the circumstances in clauses (i),
(ii), (iii) (without regard to the applicability of the Suspension Grace
Period), or (iv) exist
(c) Subject to Section 2(b) above, the Company may suspend the
use of any prospectus used in connection with the Registration Statement only in
the event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission. The Company will use its best efforts
to cause such suspension to terminate at the earliest possible date.
(d) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved shares, if necessary to fulfill
its obligations under this Agreement within five (5) business days of any
shareholders meeting authorizing same and shall use its best efforts to cause
such Registration Statement to become effective within sixty (60) days of such
shareholders meeting. If the Holders become entitled, pursuant to an event
described in clause(iii) of the definition of Registrable Securities, to
receive any securities in respect of Registrable Securities that
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<PAGE>
were already included in a Registration Statement, subsequent to the date such
Registration Statement is declared effective, and the Company is unable under
the securities laws to add such securities to the then effective Registration
Statement, the Company shall promptly file, in accordance with the procedures
set forth herein, an additional Registration Statement with respect to such
newly Registrable Securities. The Company shall use its best efforts to (i)
cause any such additional Registration Statement, when filed, to become
effective under the Securities Act, and (ii) keep such additional Registration
Statement effective during the period described in Section 5 below. All of the
registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable Securities,
including without limitation the provisions providing for default payments
contained herein.
(e) Subject to the last sentence of this Section 2(e), if at
any time prior to the expiration of the Registration Period (as hereinafter
defined) the Company shall file with the SEC a Registration Statement relating
to an offering for its own account or the account of others under the Securities
Act of any of its equity securities (other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to each Investor who is entitled to registration rights under this Section
2(e) written notice of such determination and, if within fifteen (15) days after
the effective date of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder as the underwriter shall permit. Any
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities in proportion to the number of
Registrable Securities sought to be include by such Investors; PROVIDED,
HOWEVER, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities, the holders of which
are not contractually entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and PROVIDED, FURTHER, HOWEVER, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement other than
holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(e) shall be
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(e) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and,
subject to the provisions of this Agreement, on the same terms and conditions as
other shares of Common Stock included in such underwritten offering.
Notwithstanding anything to
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<PAGE>
the contrary set forth herein, the registration rights of the Investors pursuant
to this Section 2(e) shall only be available in the event the Company fails to
timely file, obtain effectiveness or maintain effectiveness of the Registration
Statement to be filed pursuant to Section 2(a) in accordance with the terms of
this Agreement.
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. REGISTRATION ON FORM S-3. The Company shall seek to qualify for
registration on Form S-3 or any comparable or successor form or forms, or in the
event that the Company is ineligible to use such form, such form as the Company
is eligible to use under the Securities Act.
5. REGISTRATION PERIOD. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its best efforts to
keep such registration effective until all the Holders have completed the sales
or distribution described in the Registration Statement relating thereto or, if
earlier, until such Registrable Securities may be sold under Rule 144(k)
(provided that the Company's transfer agent has accepted an instruction from the
Company to such effect).
6. INDEMNIFICATION.
(a) THE COMPANY INDEMNITY. The Company will indemnify each
Holder, each of its officers, directors and partners, and each person
controlling each Holder, within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any state securities law or in either case, any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each Holder, each of its officers, directors and partners,
and each person controlling such Holder, each such underwriter and each person
who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to a Holder to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by such
Holder or the underwriter (if any) therefor and stated to be specifically for
use therein. The indemnity agreement contained in this Section 6(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company
(which consent will not be unreasonably withheld).
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<PAGE>
(b) HOLDER INDEMNITY. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, partners, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors
and partners, and each person controlling such other Holder(s) against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading, and will reimburse the Company and such other
Holder(s) and their directors, officers and partners, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating and defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein, and
provided that the maximum amount for which such Holder shall be liable under
this indemnity shall not exceed the net proceeds received by such Holder from
the sale of the Registrable Securities. The indemnity agreement contained in
this Section 6(b) shall not apply to amounts paid in settlement of any such
claims, losses, damages or liabilities if such settlement is effected without
the consent of such Holder (which consent shall not be unreasonably withheld).
(c) PROCEDURE. Each party entitled to indemnification under
this Article (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. CONTRIBUTION. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in
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<PAGE>
lieu of indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities as between the Company on the one hand and any Holder on the
other, in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by PRO
RATA allocation (even if the Holders or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this section, no Holder or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of any Holder, the net proceeds received by such Holder
from the sale of Registrable Securities or (ii) in the case of an underwriter,
the total price at which the Registrable Securities purchased by it and
distributed to the public were offered to the public exceeds, in any such case,
the amount of any damages that such Holder or underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person liable for or guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not liable for or
guilty of such fraudulent misrepresentation.
8. SURVIVAL. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or the Purchase Agreement or any
underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.
9. INFORMATION BY HOLDERS. Each Holder shall furnish to the Company
such information regarding such Holder and the distribution and/or sale proposed
by such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable
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<PAGE>
Securities and shall not be changed without written consent of such Holder or
its designated representative.
10. NASDAQ LIMIT ON STOCK ISSUANCES. Notwithstanding anything to the
contrary herein, the Company shall not be obligated to issue or register with
the SEC any shares of Common Stock to the extent that such issuance or
registration is prohibited by any rule, regulation or policy of Nasdaq or any
exchange or market upon which the Common Stock may be traded.
11. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Common Shares or Warrant Shares held by any Investor (or then Holder) may be
exchanged by such Investor (or such Holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Common Shares or Warrant Shares, as reasonably requested by such
Investor (or such Holder) upon surrendering the same. No service charge will be
made for such registration or transfer or exchange.
12. TRANSFER OR ASSIGNMENT. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investors by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Series B Preferred Shares or Warrants which transfer has been
effected in compliance with the Articles of Amendment and Warrants, and all
other rights granted to the Investors by the Company hereunder may be
transferred or assigned to any transferee or assignee of any Series B Preferred
Shares or Warrants; provided in each case that the Company must be given written
notice by the such Investor at the time of or within a reasonable time after
said transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned; and provided further that the
transferee or assignee of such rights agrees in writing to be bound by the
registration provisions of this Agreement.
13. MISCELLANEOUS.
(a) REMEDIES. The Company and the Investors acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(b) JURISDICTION. THE COMPANY AND EACH OF THE INVESTORS (I)
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES
SITTING IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES,
AND AGREES NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF
THE SUIT, ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF THE
INVESTORS CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING
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<PAGE>
BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO
IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH
SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW.
(c) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
Able Telcom Holding Corp.
1601 Forum Place
Suite 1110
West Palm Beach, Florida 33401
Facsimile: (561) 688-0455
Attention: Frazier L. Gaines, President
with copies to:
Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
Phillips Point, Suite 500 East
777 South Flagler Drive
West Palm Beach, Florida 33401
Facsimile: (561) 655-5677
Attention: Steven J. Serling, Esq.
to the Investors:
For Palladin Partners I, L.P., Halifax Fund L.P., The
Gleneagles Fund, Palladin Overseas Fund Limited,
Colonial Penn Life Insurance Company and Palladin
Securities, L.L.C.
c/o The Palladin Group, as Attorney-in-Fact
40 West 57th Street
New York, New York 10119
Attention: Robert L. Chender
Facsimile: (212) 698-0554
For RCG International Investors, LDC
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attention: Wayne Bloch
Facsimile: (610)617-0570
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<PAGE>
with copies to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, DC 20004
Facsimile: (202) 942-5999
Attention: L. Stevenson Parker, Esq.
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
(d) WAIVERS. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of the Company and each Investor contained herein
shall survive the Closing.
(e) EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart
(f) PUBLICITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Investor
without its consent, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
(g) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement, the Articles of Amendment and the Warrants and the
agreements and documents contemplated hereby and thereby, contains the entire
understanding and agreement of the parties, and may not be modified or
terminated except by a written agreement signed by both parties.
(h) GOVERNING LAW; CONSENT OF JURISDICTION. THIS AGREEMENT AND
THE VALIDITY AND PERFORMANCE OF THE TERMS HEREOF SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY IN SUCH STATE
AND, WHERE APPLICABLE, FEDERAL LAW.
(i) SEVERABILITY. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
(j) JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.
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<PAGE>
(k) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ABLE TELCOM HOLDING CORP.:
By: /s/ MARK A. SHAIN
---------------------------------------------
Name: Mark A. Shain
Title: Chief Financial Officer
INVESTORS:
--------------------------------------------
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp, as
General Partner
By: /s/ WAYNE BLOCH
---------------------------------
Wayne Bloch
Mananging Director
/s/ ROBERT L. CHENDER
--------------------------------------------
PALLADIN SECURITIES L.L.C.
By: The Palladin Group, as Attorney-in-
Fact and Investment Advisor
By:
/s/ ROBERT L. CHENDER
--------------------------------------------
HALIFAX FUND, L.P.
By: The Palladin Group, as Attorney-in-
Fact and Investment Advisor
By:
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<PAGE>
/s/ ROBERT L. CHENDER
-----------------------------------------
PALLADIN PARTNERS I, L.P.
By: Palladin Asset Management LLC as
Attorney-in-Fact
By:
/s/ ROBERT L. CHENDER
-----------------------------------------
THE GLENEAGLES FUND COMPANY
By: The Palladin Group, as Attorney-in-Fact
and Investment Advisor
By:
/s/ ROBERT L. CHENDER
-----------------------------------------
LADIN OVERSEAS FUND LIMITED
By: The Palladin Group, as Attorney-in-Fact
and Investment Advisor
By:
/s/ ROBERT L. CHENDER
-----------------------------------------
COLONIAL PENN LIFE INSURANCE
COMPANY
By: The Palladin Group, as Attorney-in-Fact
and Investment Advisor
By:
[Signature page to Able Telecom Holding Corp. Registration Rights Agreement]
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<PAGE>
SCHEDULE 1
Palladin Securities L.L.C.
1209 Orange Street
Wilmington, DE 19807
Halifax Fund, L.P.
c/o Citco Fund Services (Cayman
Islands) Ltd.
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
Palladin Partners I, L.P.
1209 Orange Street
Wilmington, DE 19807
The Gleneagles Fund
c/o Citco Fund Services (Cayman
Islands) Ltd.
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
Palladin Overseas Fund Limited
c/o Citco Fund Services (Cayman
Islands) Ltd.
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
Colonial Penn Life Insurance Company
1818 Market Street
Philadelphia, PA 19181
RCG International Investors, LDC
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
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EXHIBIT 4.10
EXECUTION VERSION
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement ) is entered into as of
June 30, 1998 between ABLE TELCOM HOLDING CORP., a Florida corporation with
offices at 1601 Forum Place, Suite 1110, West Palm Beach, Florida 33401 (the
"Company") and each of the entities listed under "Investors" on the signature
page hereto (each an "Investor" and collectively the "Investors"), each with
offices at the address listed under such Investor's name on Schedule I hereto.
W I T N E S S E T H:
WHEREAS, for $1.00 and other consideration, the Company has agreed to
issue to the Investors warrants exercisable for 650,000 shares of Common Stock
in the form attached as Exhibit 1.1A;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the Company and the Investors agree as follows:
1. CERTAIN DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Warrants. As used in this
Agreement, the following terms shall have the following respective meanings:
"APPROVED MARKET" shall mean the NASDAQ, New York Stock
Exchange or American Stock Exchange.
"CLOSING" shall mean the acquisition of the Warrants by the
Holders.
"CLOSING DATE" shall mean June 30, 1998.
"COMMISSION" or "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"REGISTERABLE SECURITIES" shall mean: (i) the Warrants Shares
issued to each Holder or its permitted transferee or designee upon exercise of
the Warrants, or upon any stock split, stock dividend, recapitalization or
similar event with respect to such Warrant Shares; (ii) any securities issued or
issuable to each Holder upon the exercise of any Warrants or Warrant Shares; and
(iii) any other security of the Company issued as a dividend or other
distribution with respect to, or upon conversion or exchange of or in
replacement of Registrable Securities.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and
<PAGE>
applicable rules and regulations thereunder, and the declaration or ordering of
the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses to be incurred
by the Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, and the expense of any audited financial statements incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company).
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holders not included within "Registration
Expenses".
"HOLDER" and "HOLDERS" shall include an Investor or the
Investors, respectively, and any transferee of the Warrants or Warrant Shares or
Registrable Securities which have not been sold to the public to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement.
"REGISTRATION STATEMENT" shall have the meaning set forth in
Section 2(a) herein.
"REGULATION D" shall mean Regulation D as promulgated pursuant
to the Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of
1933, as amended.
"WARRANTS" shall mean the warrants in form and substance of
Exhibit 1.1A hereto.
"WARRANT SHARES" shall mean shares of Common Stock of the
Company issued and issuable upon exercise of the Warrants.
2. REGISTRATION REQUIREMENTS. The Company shall use its best efforts to
effect the registration of the Registrable Securities (including without
limitation the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder. Such best efforts by the Company
shall include the following:
(a) The Company shall, as expeditiously as reasonably possible
after the Closing Date:
(i) But in any event within 45 days thereafter,
prepare and file a registration statement with the Commission pursuant to Rule
4l5 under the Securities Act on Form S-3 under the Securities Act (or in the
event that the Company is ineligible to use such form, such other form as the
Company is eligible to use under the Securities Act) covering the
2
<PAGE>
Registrable Securities ("Registration Statement") 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 not misleading. Such Registration Statement shall, in
addition and without limitation, register (pursuant to Rule 416 under the
Securities Act, or otherwise) such additional indeterminate number of
Registrable Securities as shall be necessary to permit the full exercise of the
Warrants to prevent dilution resulting from stock splits, stock dividends or
similar transactions or (ii) by reason of changes in the Purchase Price.
Thereafter, the Company shall use its best efforts to cause such Registration
Statement and other filings to be declared effective as soon as possible, and in
any event prior to 120 days following the Closing Date. The number of shares of
Common Stock initially included in such Registration Statement shall be no less
than 150% of the number of Warrant Shares that are then issuable upon exercise
of the Warrants, without regard to any limitation on the Investor's ability to
convert the Preferred Stock or exercise the Warrants. The Company acknowledges
that the number of shares initially included in the Registration Statement
represents a good faith estimate of the maximum number of shares issuable upon
exercise of the Warrants.
(ii) Prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to keep the
Registration Statement effective and to comply with the provisions of the Act
with respect to the disposition of all securities covered by such Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the Seller
or Sellers thereof as set forth in the Registration Statement and notify the
Holders of the filing and effectiveness of such Registration Statement and any
amendments or supplements. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to cover
all of the Registrable Securities issued or issuable upon and exercise of the
Warrants, the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefore, if applicable),
or both, so as to cover all of the Registrable Securities, in each case, as soon
as practicable, but in any event within twenty (20) business days after the
necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). 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. The provisions of Section 2(b)(i) below shall be applicable
with respect to such obligation, with the one hundred and twenty (120) days
running from the day after the date on which the Company reasonably first
determines (or reasonably should have determined) the need therefor.
(iii) Furnish to each Holder such numbers of copies
of a current prospectus conforming with the requirements of the Act, copies of
the Registration Statement, any amendment or supplement thereto and any
documents incorporated by reference therein and such other documents as such
Holder may reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder and, in the case of the Registration
Statement referred to in Section 2(a)(i), each letter written by or on behalf of
the Company to the SEC or the staff of the SEC, and each item of correspondence
from the SEC or the staff of the SEC, in
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each case relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment). The Company will immediately notify each Investor by facsimile of
the effectiveness of the Registration Statement or any post-effective amendment.
The Company will promptly respond to any and all comments received from the SEC,
with a view towards causing any Registration Statement or any amendment thereto
to be declared effective by the SEC as soon as practicable and shall promptly
file an acceleration request as soon as practicable following the resolution or
clearance of all SEC comments or, if applicable, following notification by the
SEC that the Registration Statement or any amendment thereto will not be subject
to review.
(iv) (a) Register and qualify, or obtain an
appropriate exemption from registration or qualification, the securities covered
by such Registration Statement under such other securities or "Blue Sky" laws of
such jurisdictions as shall be reasonably requested by each Holder (b) prepare
and file in those jurisdictions such supplements (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof, (c) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and shall not be required to
register or qualify in any jurisdiction where such registration or qualification
is not permitted or approved by such jurisdiction, following the Company's best
efforts to obtain such permission or approval.
(v) Notify each Holder immediately of the happening
of any event as a result of which the prospectus (including any supplements
thereto or thereof) included in such Registration Statement, as then in effect,
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and use its best efforts
to promptly update and/or correct such prospectus to correct such untrue
statement or omission, and deliver such number of copies of such supplement or
amendment to each Holder as such Holder may reasonably request.
(vi) Notify each Holder immediately of the issuance
by the Commission or any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose. The Company shall prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible time.
(vii) Permit a single firm of counsel, designated as
Holders' counsel by a majority of the Registrable Securities included in the
Registration Statement, to review the Registration Statement and all amendments
and supplements thereto within a reasonable period of time prior to each filing,
and shall not file any document in a form to which such counsel reasonably
objects and will not request acceleration of the Registration Statement without
prior notice to such counsel. The sections of the Registration Statement
covering information with respect to the
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Investors, the Investors beneficial ownership of securities of the Company or
the Investors' intended method of disposition of Registrable Securities shall
conform to the information provided to the Company by each of the Investors.
(viii) List the Registrable Securities covered by
such Registration Statement with all securities exchange(s) and/or markets on
which the Common Stock is then listed and prepare and file any required filings
with the National Association of Securities Dealers, Inc. or any exchange or
market where the Common Shares are traded.
(ix) If applicable, take all steps necessary to
enable Holders to avail themselves of the prospectus delivery mechanism set
forth in Rule 153 (or successor thereto) under the Act.
(x) The Company shall hold in confidence and not make
any disclosure of information concerning an Investor provided to the Company
unless (a) disclosure of such information is necessary to comply with federal or
state securities laws, (b) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (c)
the release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (d) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court of governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or obtain a protective order for,
such information.
(xi) The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.
(xii) The Company shall cooperate with the Investors
who hold Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends with respect to
transferability) representing Registrable Securities to be offered pursuant to
the Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request, and, within three (3) business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction in the form attached hereto as Exhibit 1 and an
opinion of such counsel in the form attached hereto as Exhibit 2.
(xiii) At the reasonable request of the holders of a
majority-in-interest of the Registrable Securities, the Company shall prepare
and file with the SEC such amendments
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(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary in order to change the plan of distribution set forth in
such Registration Statement.
(xiv) From and after the date of this Agreement, the
Company shall not, and shall not agree to, allow the holders of any securities
of the Company to include any of their securities in any Registration Statement
under Section 2(a) hereof or any amendment or supplement thereto under Section
3(b) hereof without the consent of the holders of a majority-in-interest of the
Registrable Securities.
The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to the Registration Statement.
The registration required by this Agreement shall be effected by means
of the same registration statement to be filed pursuant to the Registration
Rights Agreement contemplated by the Convertible Preferred Stock Purchase
Agreement dated as of June 26, 1998, between the Company and the persons and
entities specified on Schedule I thereto.
(b) Set forth below in this Section 2(b) are
(I) events that may arise that the Investors consider will interfere with the
full enjoyment of their rights under this Agreement (the "Interfering Events"),
and (II) certain remedies applicable in each of these events.
Paragraphs (i) through (iv) of this Section 2(b)
describe the Interfering Events, and provide a remedy to the Investors if an
Interfering Event occurs.
Paragraph (v) provides, INTER ALIA, that if cash
payments required as the remedy in the case of certain of the Interfering Events
are not paid when due, the Company may be required by the Investors to redeem
outstanding Warrant Shares at a specified price.
Paragraph (vi) provides, INTER ALIA, that the
Investors have the right to specific performance.
The preceding paragraphs in this Section 2(b) are
meant to serve only as an introduction to this Section 2(b), are for convenience
only, and are not to be considered in applying, construing or interpreting this
Section 2(b).
(i) DELAY IN EFFECTIVENESS OF REGISTRATION STATEMENT.
The Company agrees that it shall file the Registration Statement complying with
the requirements of this Agreement promptly and in any event within 45 days
following the date hereof (the "Closing Date") and shall use its best efforts to
cause such Registration Statement to become effective as soon as possible and in
any event within 120 days from the Closing Date. In the event that such
Registration Statement has not been declared effective within 120 days from the
Closing Date, then the Purchase Price (as defined in the Warrant) shall be
reduced by 1% of the Purchase Price on such 120th day after the Closing Date
during and after the 30-day period ("Default Period") from and after the 120th
day following the Closing Date during any part of which such Registration
Statement is not
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effective, and shall be further reduced by an additional 1.5% during and after
each Default Period thereafter. For example, if the Registration Statement does
not become effective until 160 days from the Closing Date, the Purchase Price
during days 121 through 149 shall be equal to 99% of the Purchase Price. The
Purchase Price from and after day number 150 after the Closing Date shall be
equal to 97.5% of the Purchase Price. In each case, the Purchase Price shall be
subject to further adjustment as set forth in the Warrant.
(ii) NO LISTING; PREMIUM PRICE REDEMPTION FOR
DELISTING OF CLASS OF SHARES. In the event that the Company fails, refuses or is
unable to cause the Registrable Securities covered by the Registration Statement
to be listed with the Approved Market and each other securities exchange and
market on which the Common Stock is then traded at all times during the period
("Listing Period") from the earlier of (i) the 90th day following the Closing
Date and (ii) the date the Registration Statement is declared effective by the
SEC, until five years after the date hereof (the "Maturity Date"), then the
Company shall pay in cash to each Holder a default payment in an amount equal to
three percent (3%) of the aggregate market value represented by the Warrant
Shares (measured by the fair market value (as defined in the Warrant) of such
shares as of the date the Company is obligated to make each payment) that would
be issued upon full conversion of the Holder's Warrant (the "Warrant Value") for
each 30-day period during the Listing Period from and after such failure,
refusal or inability to so list the Registrable Securities until the Registrable
Securities are so listed.
(iii) BLACKOUT PERIODS. In the event any Holder's
ability to sell Registrable Securities under the Registration Statement is
suspended for more than (i) five (5) consecutive days or (ii) ten (10) days in
any calendar year ("Suspension Grace Period"), including without limitation by
reason of a suspension of trading of the Common Stock on the Approved Market,
any suspension or stop order with respect to the Registration Statement or the
fact that an event has occurred as a result of which the prospectus (including
any supplements thereto) included in such Registration Statement then in effect
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, then the Company shall
pay in cash to each Holder an amount equal to three percent (3%) of the Warrant
Value held by such holder for each 30 day period from and after the expiration
of the Suspension Grace Period.
(iv) CONVERSION DEFICIENCY; PREMIUM PRICE REDEMPTION
FOR CONVERSION DEFICIENCY. In the event that the Company does not have a
sufficient number of Common Shares available to satisfy the Company's
obligations to any Holder upon receipt of a Subscription Notice or is otherwise
unable or unwilling to issue such Common Shares (including without limitation by
reason of the limit described in Section 10 below) in accordance with the terms
of the Warrant for any reason after receipt of a Subscription Notice, then the
Company shall pay in cash to each Holder an amount equal to three percent (3%)
of the Warrant Value held by such Holder for each 30-day period (or portion
thereof) that the Company fails or refuses to issue Common Shares in accordance
with the terms of the Warrant.
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(v) PREMIUM PRICE REDEMPTION FOR CASH PAYMENT
DEFAULTS.
(A) The Company acknowledges that any
failure, refusal or inability by the Company described in the foregoing
paragraphs (i) through (iv) will cause the Holders to suffer damages in an
amount that will be difficult to ascertain, including without limitation damages
resulting from the loss of liquidity in the Registrable Securities and the
additional investment risk in holding the Registrable Securities. Accordingly,
the parties agree that it is appropriate to include in this Agreement the
foregoing provisions for default payments, discounts and mandatory redemptions
in order to compensate the Holders for such damages. The parties acknowledge and
agree that the default payments, discounts and mandatory redemptions set forth
above represent the parties' good faith effort to quantify such damages and, as
such, agree that the form and amount of such default payments, discounts and
mandatory redemptions are reasonable and will not constitute a penalty.
(B) Each default payment provided for in the
foregoing paragraphs (ii) through (iv) shall be in addition to each other
default payment. All default payments (which payments shall be pro rata on a per
diem basis for any period of less than 30 days) required to be made in
connection with the above provisions shall be paid in cash at any time upon
demand, and whether or not a demand is made, by the tenth (10th) day of each
calendar month for each partial or full 30-day period occurring prior to that
date.
(C) In the event that the Company fails or
refuses to pay any default payment or honor any penalty or similar amounts when
due, at any Holder's request and option the Company shall purchase all or a
portion of the Warrant Shares held by such Holder (with default payments
accruing through the date of such purchase), within five (5) days of such
request, at a purchase price equal to 130% of the fair market value (as defined
in the Warrant) of such Warrant Shares or, if and to the extent that the Warrant
has not been exercised, by a 30% reduction in the then Purchase Price, provided
that such Holder may revoke such request at any time prior to receipt of such
payment of such purchase price.
(vi) CUMULATIVE REMEDIES. The default payments and
mandatory redemptions provided for above are in addition to and not in lieu or
limitation of any other rights the Holders may have at law, in equity or under
the terms of the Warrants or this Agreement, including without limitation the
right to specific performance. Each Holder shall be entitled to specific
performance of any and all obligations of the Company in connection with the
registration rights of the Holders hereunder.
(c) Subject to Section 2(b) above, the Company may suspend the
use of any prospectus used in connection with the Registration Statement only in
the event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission. The Company will use its best efforts
to cause such suspension to terminate at the earliest possible date.
(d) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved shares, if necessary to fulfill
its obligations under this Agreement, within five (5) business days of any
shareholders meeting authorizing same and shall use its best efforts to cause
such Registration Statement to become effective within sixty (60) days of such
shareholders
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meeting If the Holders become entitled, pursuant to an event described in clause
(iii) of the definition of Registrable Securities, to receive any securities in
respect of Registrable Securities that were already included in a Registration
Statement, subsequent to the date such Registration Statement is declared
effective, and the Company is unable under the securities laws to add such
securities to the then effective Registration Statement, the Company shall
promptly file, in accordance with the procedures set forth herein, an additional
Registration Statement with respect to such newly Registrable Securities. The
Company shall use its best efforts to (i) cause any such additional Registration
Statement, when filed, to become effective under the Securities Act, and (ii)
keep such additional Registration Statement effective during the period
described in Section 5 below. All of the registration rights and remedies under
this Agreement shall apply to the registration of such newly reserved shares and
such new Registrable Securities, including without limitation the provisions
providing for default payments contained herein.
(e) Subject to the last sentence of this Section 2(e), if at
any time prior to the expiration of the Registration Period (as hereinafter
defined) the Company shall file with the SEC a Registration Statement relating
to an offering for its own account or the account of others under the Securities
Act of any of its equity securities (other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to each Investor who is entitled to registration rights under this Section
2(e) written notice of such determination and, if within fifteen (15) days after
the effective date of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder as the underwriter shall permit. Any
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities in proportion to the number of
Registrable Securities sought to be include by such Investors; PROVIDED,
HOWEVER, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities, the holders of which
are not contractually entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and PROVIDED, FURTHER, HOWEVER, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement other than
holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(e) shall be
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(e) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such
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Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering. Notwithstanding anything to the contrary set forth herein, the
registration rights of the Investors pursuant to this Section 2(e) shall only be
available in the event the Company fails to timely file, obtain effectiveness or
maintain effectiveness of the Registration Statement to be filed pursuant to
Section 2(a) in accordance with the terms of this Agreement.
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. REGISTRATION ON FORM S-3. The Company seek to qualify for
registration on Form S-3 or any comparable or successor form or forms, or in the
event that the Company is ineligible to use such form, such form as the Company
is eligible to use under the Securities Act.
5. REGISTRATION PERIOD. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its best efforts to
keep such registration effective until all the Holders have completed the sales
or distribution described in the Registration Statement relating thereto or, if
earlier, until such Registrable Securities may be sold under Rule 144(k)
(provided that the Company's transfer agent has accepted an instruction from the
Company to such effect).
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6. INDEMNIFICATION
(a) THE COMPANY INDEMNITY. The Company will indemnify each
Holder, each of its officers, directors and partners, and each person
controlling each Holder, within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any state securities law or in either case, any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each Holder, each of its officers, directors and partners,
and each person controlling such Holder, each such underwriter and each person
who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to a Holder to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by such
Holder or the underwriter (if any) therefor and stated to be specifically for
use therein. The indemnity agreement contained in this Section 6(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company
(which consent will not be unreasonably withheld).
(b) HOLDER INDEMNITY. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, partners, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors
and partners, and each person controlling such other Holder(s) against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading, and will reimburse the Company and such other
Holder(s) and their directors, officers and partners, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating and defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information
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furnished to the Company by such Holder and stated to be specifically for use
therein, and provided that the maximum amount for which such Holder shall be
liable under this indemnity shall not exceed the net proceeds received by such
Holder from the sale of the Registrable Securities. The indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement of
any such claims, losses, damages or liabilities if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld).
(c) PROCEDURE. Each party entitled to indemnification under
this Article (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. CONTRIBUTION. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just and
equitable if
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contribution pursuant to this Section 7 were determined by PRO RATA allocation
(even if the Holders or the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraphs.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraphs shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net proceeds received by such Holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total price at
which the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any damages
that such Holder or underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person liable for or guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not liable for or guilty of such fraudulent
misrepresentation.
8A. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the
Investors, severally (as to itself) and not jointly, hereby makes the following
representations and warranties to the Company as of the date hereof:
(a) AUTHORIZATION; ENFORCEMENT. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and to
acquire the Warrants, (ii) the execution and delivery of this Agreement by such
Investor and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate or partnership action, and (iii)
upon execution, issuance and delivery hereof this Agreement will constitute, a
valid and binding obligation of the Investor enforceable against such Investor
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general application.
(b) NO CONFLICTS. The execution, delivery and performance by
such Investor of this Agreement and the performance by such Investor under the
terms of the Warrants do not and will not result in a violation of such
Investor's organizational documents.
(c) INVESTMENT REPRESENTATION. Such Investor is purchasing the
Warrants for its own account and not with a view to distribution thereof in
violation of any securities laws. Such Investor has no present intention to sell
the Warrants or the Warrant Shares in violation of Federal or state securities
laws and such Investor has no present arrangement (whether or not legally
binding) to sell the Warrants or the Warrant Shares to or through any person or
entity; PROVIDED, however, that by making the representations herein, such
Investor does not agree to hold the Warrants or the Warrant Shares for any
minimum or other specific term and reserves the right to dispose of the Warrants
or the Warrant Shares at any time in accordance with Federal and state
securities laws applicable to such disposition.
(d) ACCREDITED INVESTOR. Such Investor is an "accredited
investor" as defined in
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<PAGE>
Rule 501 of Regulation D promulgated under the Act. Such Investor has such
knowledge and experience in financial and business matters in general and
investments in particular that it is able to evaluate the merits and risks of an
investment in the Warrants and to protect its own interests in connection with
such investment. In addition (but without limiting the effect of the Company's
representations and warranties contained herein), such Investor has received
such information as it considers necessary or appropriate for deciding whether
to purchase the Warrants.
(e) RULE 144. Such Investor understands that there is no
public trading market for the Warrants, that none is expected to develop, and
that the Warrants must be held indefinitely unless such Warrants are exercised
and the Warrant Shares are registered under the Act or an exemption from
registration is available Such Investor has been advised or is aware of the
provisions of Rule 144 promulgated under the Act.
(f) BROKERS. Such Investor has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the transactions
contemplated hereby.
(g) NOT AN AFFILIATE. Such Investor is not an officer,
director or "affiliate" (as that term in defined in Rule 405 of the Act) of the
Company.
(h) RELIANCE BY THE COMPANY. Such Investor understands that
the Warrants are being offered and sold in reliance on a transactional exemption
from the registration requirements of Federal and state securities laws and that
the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such Investor set
forth herein in order to determine the applicability of such exemptions and the
suitability of such Investor to acquire the Warrants.
8B. SURVIVAL. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or any underwriting agreement, (ii) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Company, and (iii) the consummation of the sale or successive resales of
the Registrable Securities.
9. INFORMATION BY HOLDERS. Each Holder shall furnish to the Company
such information regarding such Holder and the distribution and/or sale proposed
by such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder or its designee representative.
10. NASDAQ LIMIT ON STOCK ISSUANCES. Notwithstanding anything to the
contrary herein, the Company shall not be obligated to issue or register with
the SEC any shares of Common Stock to the extent that such issuance or
registration is prohibited by any rule, regulation or policy of Nasdaq or any
exchange or market upon which the Common Stock may be traded.
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<PAGE>
11. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Common Shares or Warrant Shares held by any investor (or then Holder) may be
exchanged by such Investor (or such Holder) at any time and from time to time
for certificates with different denominations representing an equal aggregate
number of Common Shares or Warrant Shares, as reasonably requested by such
Investor (or such Holder) upon surrendering the same. No service charge will be
made for such registration or transfer or exchange.
12. TRANSFER OR ASSIGNMENT. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investors by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Warrants which transfer has been effected in compliance with the
Warrants, and all other rights granted to the Investors by the Company hereunder
may be transferred or assigned to any transferee or assignee of any Warrants;
provided in each case that the Company must be given written notice by such
Investor at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned; and provided further that the transferee or
assignee of such rights agrees in writing to be bound by the registration
provisions of this Agreement.
13. MISCELLANEOUS.
(g) REMEDIES. The Company and the Investors acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(h) JURISDICTION. THE COMPANY AND EACH OF THE INVESTORS (I)
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT, THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES
SITTING IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES,
AND AGREES NOT TO ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF
THE SUIT, ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF THE
INVESTORS CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR
NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS
PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
(i) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
15
<PAGE>
to the Company:
Able Telcom Holding Corp
1601 Forum Place
Suite 1110
West Palm Beach, Florida 33401
Facsimile: (561) 688-0455
Attention: Frazier L. Gaines, President
with copies to:
Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
Phillips Point, Suite 500 East
777 South Flagler Drive
West Palm Beach, Florida 33401
Facsimile: (561) 655-5677
Attention: Steven J. Serling, Esq.
to the Investors:
For Palladin Partners I, L.P., The Gleneagles Fund,
Palladin Overseas Fund Limited
c/o The Palladin Group, as Attorney-in-Fact
40 West 57 Street
New York, New York 10119
Attention: Robert L. Chender
Facsimile: (212) 698-0554
For RCG International Investors, LDC
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attention: Wayne Bloch
Facsimile: (610)617-0570
with copies to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, DC 20004
Facsimile: (202) 942-5999
Attention: L. Stevenson Parker, Esq.
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
16
<PAGE>
(d) WAIVERS. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of the Company and each Investor contained herein
shall survive the Closing.
(e) EXECUTION. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(f) PUBLICITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Investor
without its consent, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement. The
Company agrees to deliver a copy of any public announcement regarding the
matters covered by this Agreement or any agreement or document executed herewith
to each Investor and any public announcement including the name of an Investor
to such Investor, prior to the publication of such announcements.
(g) ENTIRE AGREEMENT. This Agreement, together with the
Warrants and the agreements and documents contemplated hereby and thereby,
contains the entire understanding and agreement of the parties, and may not be
modified or terminated except by a written agreement signed by both parties.
(h) GOVERNING LAW; CONSENT OF JURISDICTION. THIS AGREEMENT AND
THE VALIDITY AND PERFORMANCE OF THE TERMS HEREOF SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WTTH THE INTERNAL LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY IN SUCH STATE
AND, WHERE APPLICABLE, FEDERAL LAW.
(i) SEVERABILITY. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
(j) JURY TRIAL. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.
(k) TITLES. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
[SIGNATURE PAGE FOLLOWS]
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written
ABLE TELCOM HOLDING CORP.
By: /S/ MARK A. SHAIN
-------------------------------------
Name: Mark A. Shain
Title: Chief Financial Officer
INVESTORS:
------------------------------------------
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp, as
General Partner
By: /s/ WAYNE BLOCH
--------------------------
Wayne Bloch
Managing Director
------------------------------------------
PALLADIN PARTNERS I, L.P.
By: The Palladin Group, as Attorney-in-Fact
and Investment Advisor
By: /s/ ROBERT L. CHENDER
---------------------------------
Robert L. Chender
------------------------------------------
THE GLENEAGLES FUND
By: The Palladin Group, as Attorney-in-Fact
and Investment Advisor
By: /s/ ROBERT L. CHENDER
---------------------------------
Robert L. Chender
18
<PAGE>
/s/ ROBERT L. CHENDER
------------------------------------------
PALLADIN OVERSEAS FUND LIMITED
By: The Palladin Group, as Attorney-in-Fact
and Investment Advisor
By:
[SIGNATURE PAGE TO ABLE TELCOM HOLDING CORP. REGISTRATION RIGHTS AGREEMENT]
19
<PAGE>
SCHEDULE 1
NAME OF PURCHASER ADDRESS OF PURCHASER
- ----------------- --------------------
RGC International Investors, LDC c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwd, PA 19004
Palladin Overseas Fund Limited c/o Citco Fund Services (Cayman Islands) Ltd.
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
Palladin Partners I, L.P. 1209 Orange Street
Wilmington, DE 19807
The Gleneagles Fund Company c/o Citco Fund Services (Cayman Islands) Ltd.
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
20
EXHIBIT 4.11
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
---------------------------
June 30, 1998 ABLE TELCOM HOLDING CORP.
---------------------------
Common Stock Purchase Warrant
Able Telcom Holding Corp., a Florida corporation (the "COMPANY"),
hereby certifies that for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Palladin Securities L.L.C., having
an address at 1209 Orange Street, Wilmington, DE 19807 ("PURCHASER") or any
other Warrant Holder, as defined below, is entitled, on the terms and conditions
set forth below, to purchase from the Company at any time beginning on the date
hereof and ending on the fifth anniversary of the Closing Date, as defined
below, as extended 1.5 times the number of days between the 120th day following
the Closing Date and the anniversary on which there had been no Effective
Registration, as defined below, 17,500 fully paid and nonassessable shares of
Common Stock, $.001 par value, of the Company (the "COMMON STOCK"), at a
purchase price per share of Common Stock of $19.80 (the "CONVERSION PRICE").
Such Conversion Price may from time to time be adjusted pursuant to the terms of
the Articles of Amendment and the Agreement (the "PURCHASE PRICE"), as the same
may be adjusted pursuant to Section 6 herein.
1. DEFINITIONS.
(a) The term "AGREEMENT" shall mean the Convertible Preferred
Stock Purchase Agreement dated as of June 26, 1998, between the Company and the
Investors signatory thereto.
(b) The term "ARTICLES OF AMENDMENT" shall mean the Articles
of Amendment providing for the Series B Prefered Stock dated as of June 26,
1998.
(c) The term "EFFECTIVE REGISTRATION" shall have the meaning
specified in the Agreement
(d) The term "CLOSING DATE" shall mean June 30, 1998.
<PAGE>
(e) The term "REGISTRATION RIGHTS AGREEMENT" shall mean the
Registration Rights Agreement, dated as of June 30, 1998, between the
Company and the Investors signatory thereto.
(f) The term "WARRANT HOLDER" shall mean the Purchaser or any
assignee of all or any portion of this Warrant.
(g) The term "WARRANT SHARES" shall mean the Shares of Common
Stock or other securities issuable upon exercise of this Warrant.
Capitalized terms used but not defined in this Warrant shall have the
meanings specified in the Agreement or the Articles of Amendment.
2. EXERCISE OF WARRANT.
This Warrant may be exercised by the Warrant Holder, in whole or in
part, at any time and from time to time by either of the following methods:
(a) The Warrant Holder may surrender this Warrant, together with the
form of subscription at the end hereof duly executed by such Warrant Holder
("SUBSCRIPTION NOTICE"), at the offices of the Company or any transfer agent for
the Common Stock; together with payment of the aggregate Purchase Price for all
Warrant Shares exercised; or
(b) The Warrant Holder may also exercise this Warrant, in whole or in
part, in a "cashless" or "net-issue" exercise by delivering to the offices of
the Company or any transfer agent for the Common Stock this Warrant, together
with a Subscription Notice specifying the number of Warrant Shares to be
delivered to such Warrant Holder ("DELIVERABLE SHARES") and the number of
Warrant Shares with respect to which this Warrant is being surrendered in
payment of the aggregate Purchase Price for the Deliverable Shares ("SURRENDERED
SHARES"); provided that the Purchase Price multiplied by the number of
Deliverable Shares shall not exceed the value of the Surrendered Shares; and
provided further that the sum of the number of Deliverable Shares and the number
of Surrendered Shares so specified shall not exceed the aggregate number of
Warrant Shares represented by this Warrant. For the purposes of this provision,
each Warrant Share as to which this Warrant is surrendered will be attributed a
value equal to the fair market value (as defined below) of the Warrant Share
minus the Purchase Price of the Warrant Share (the "Spread"). The number of
Deliverable Shares shall be equal to (i) the number of Surrendered Shares
multiplied by the Spread; divided by (ii) the fair market value of the Common
Stock on the date of exercise.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised and/or surrendered, and the Company, at its expense,
shall within three (3) Trading Days (as defined below) issue and deliver or upon
the order of Warrant Holder a new Warrant of like tenor in the name of Warrant
Holder or as Warrant Holder (upon payment by Warrant Holder of any applicable
transfer taxes) may request, reflecting such adjusted Warrant Shares.
2
<PAGE>
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within three (3) Trading Days thereafter, the Company shall
transmit the certificates (together with any other stock or other securities or
property to which Warrant Holder is entitled upon exercise) by messenger or
overnight delivery service to reach the address designated by such holder within
three (3) Trading Days after the receipt of the Subscription Notice ("T+3"). If
such certificates are not received by the Warrant Holder within T+3, then the
Warrant Holder will be entitled to revoke and withdraw its exercise of its
Warrant at any time prior to its receipt of those certificates.
In lieu of delivering physical certificates
representing the Warrant Shares deliverable upon exercise of Warrants, provided
the Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the
Warrant Holder, the Company shall use its best efforts to cause its transfer
agent to electronically transmit the Warrant Shares issuable upon exercise to
the Warrant Holder, by crediting the account of Warrant Holder's prime broker
with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The
time periods for delivery described above shall apply to the electronic
transmittals through the DWAC system. The parties agree to coordinate with DTC
to accomplish this objective. The exchange pursuant to Section 3 shall be deemed
to have been made immediately prior to the close of business on the date of the
Subscription Notice. The person or persons entitled to receive the Warrant
Shares issuable upon such exercise shall be treated for all purposes as the
record holder or holders of such Common Shares at the close of business on the
date of the Subscription Notice.
The term "TRADING DAY" means (x) if the Common Stock
is listed on the New York Stock Exchange or the American Stock Exchange, a day
on which there is trading on such stock exchange, (y) if the Common Stock is not
listed on either of such stock exchanges but sale prices of the Common Stock are
reported on an automated quotation system, a day on which trading is reported on
the principal automated quotation system on which sales of the Common Stock are
reported, or (z) if the foregoing provisions are inapplicable, a day on which
quotations are reported by National Quotation Bureau Incorporated.
(b) This Warrant may not be exercised as to fractional shares
of Common Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Common Stock, then
in such event the Warrant Holder shall be entitled to cash equal to the fair
market value of such fractional share. For purposes of this Warrant, "fair
market value" shall equal the closing trading price of the Common Stock on the
Approved Market which is the principal trading exchange or market for the Common
Stock (the "Principal Market") on the date of determination or, if the Common
Stock is not listed or admitted to trading on any Approved Market, the average
of the closing bid and asked prices on the over-the-counter market as furnished
by any New York Stock Exchange member firm reasonably selected from time to time
by the Company for that purpose and reasonably acceptable to the Warrant Holder,
or, if the Common Stock is not listed or admitted to trading on any Approved
Market or traded over-the-counter and the average price cannot be determined as
contemplated above, the fair-market value of the Common Stock shall be as
reasonably determined in good faith by the Company's Board of
3
<PAGE>
Directors with the concurrence of the Warrant Holder.
4. REPURCHASE OF WARRANT SHARES AT THE OPTION OF THE COMPANY. At any
time and from time to time, from the date hereof until all Warrant Shares
represented by this Warrant have been exercised, provided that the Company at
such time is not in breach of the provisions of this Warrant, the Registration
Rights Agreement and the Investment Agreement, and that there is Effective
Registration, the Company may purchase from the Holder the Warrant at a purchase
price per share equal to (i) $35.00 times (ii) a number equal to the number of
Warrant Shares remaining exercisable pursuant to the Warrant, subject to
adjustments provided in Section 6 hereof (the "Repurchase Price"). Any such
repurchase by the Company shall be preceded by a "Notice of Repurchase" sent by
the Company to the Holder of the Warrant Shares to be repurchased. The
Repurchase Price shall be paid by the Company to the Holder, or such Holder's
designee, in cash 30 days following the receipt by the Holder of the Notice of
Repurchase. Until such 30th day following receipt of the Notice of Repurchase,
the Holder's right to exercise this Warrant pursuant to Section 2 hereof shall
remain unaffected.
5. (A) REPRESENTATIONS AND COVENANTS OF THE COMPANY.
(a) The Company shall comply with its obligations under the
Registration Rights Agreement with respect to the Warrant Shares, including,
without limitation, the Company's obligation to have filed and declared and
maintained effective a registration statement registering the Warrant Shares
under the Securities Act of 1933, as amended (the "ACT").
(b) The Company shall take all necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, including, without limitation, the notification of the Principal
Market, for the legal and valid issuance of this Warrant and the Warrant Shares
to the Warrant Holder under this Warrant.
(c) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall take all steps necessary to insure
that the Common Stock remains listed on the Principal Market.
(d) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
The Company has authorized and reserved for issuance to Warrant Holder the
requisite number of shares of Common Stock to be issued pursuant to this
Warrant.
(e) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, 150% of such
number of shares of Common Stock as shall from time to time be issuable
hereunder.
(f) With a view to making available to the Warrant Holder the
benefits of Rule 144 promulgated under the Act and any other rule or regulation
of the Securities and Exchange Commission ("SEC") that may at any time permit
Warrant Holder to sell securities of
4
<PAGE>
the Company to the public without registration, the Company agrees to use its
best efforts to:
i) make and keep public information available, as
those terms are understood and defined in Rule 144, at all
times;
ii) file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and
the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"); and
iii) furnish to any Warrant Holder forthwith upon
request a written statement by the Company that it has
complied with the reporting requirements of Rule 144 and of
the Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably
requested to permit any such Warrant Holder to take advantage
of any rule or regulation of the SEC permitting the selling of
any such securities without registration.
(B) REPRESENTATIONS AND COVENANTS OF THE PURCHASER.
The Purchaser shall not resell Warrant Shares, unless such resale is
pursuant to an effective registration statement under the Act or pursuant to an
applicable exemption from such registration requirements.
6. ADJUSTMENT OF PURCHASE PRICE AND REPURCHASE PRICE AND NUMBER OF
SHARES. The number of and kind of securities purchasable upon exercise of this
Warrant and the Purchase Price and the Repurchase Price shall be subject to
adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the
Company shall at any time after the date hereof but prior to the expiration of
this Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist, the
number of Warrant Shares as to which this Warrant is exercisable as of the date
of such subdivision, split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate proportional adjustments
(decrease in the case of subdivision, increase in the case of combination) shall
also be made to the Purchase Price and Repurchase Price payable per share, so
that the aggregate Purchase Price or Repurchase Price payable for the total
number of Warrant Shares or Warrants purchasable under this Warrant as of such
date shall remain the same as it would have been before such subdivision or
combination.
(b) STOCK DIVIDEND. If at any time after the date hereof the
Company declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into or exchangeable for
Common Stock ("COMMON STOCK EQUIVALENTS") without payment of any consideration
by holders of Common Stock for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common
5
<PAGE>
Stock issuable upon exercise or conversion thereof), then the number of shares
of Common Stock for which this Warrant may be exercised shall be increased as of
the record date (or the date of such dividend distribution if no record date is
set) for determining which holders of Common Stock shall be entitled to receive
such dividends, in proportion to the increase in the number of outstanding
shares (and shares of Common Stock issuable upon conversion of all such
securities convertible into Common Stock) of Common Stock as a result of such
dividend, and the Purchase Price and the Repurchase Price shall be
proportionately reduced so that the aggregate Purchase Price and Repurchase
Price for all the Warrant Shares issuable hereunder immediately after the record
date (or on the date of such distribution, if applicable), for such dividend
shall equal the aggregate Purchase Price or Repurchase Price so payable
immediately before such record date (or on the date of such distribution, if
applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date hereof
the Company distributes to holders of its Common Stock, other than as part of
its dissolution, liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets (other than
Common Stock), then the number of Warrant Shares for which this Warrant is
exercisable shall be increased to equal: (i) the number of Warrant Shares for
which this Warrant is exercisable immediately prior to such event, (ii)
multiplied by a fraction, (A) the numerator of which shall be the fair market
value per share of Common Stock on the record date for the dividend or
distribution, and (B) the denominator of which shall be the fair market value
price per share of Common Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Common Stock of the
value (as jointly determined in good faith by the Board of Directors of the
Company and the Warrant Holder) of any and all such evidences of indebtedness,
shares of capital stock, other securities or property, so distributed. The
Purchase Price shall be reduced to equal: (i) the Purchase Price in effect
immediately before the occurrence of any event (ii) multiplied by a fraction,
(A) the numerator of which is the number of Warrant Shares for which this
Warrant is exercisable immediately before the adjustment, and (B) the
denominator of which is the number of Warrant Shares for which this Warrant is
exercisable immediately after the adjustment. The Repurchase Price shall be
reduced to equal: (i) $35.00 (ii) multiplied by a fraction, (A) the numerator of
which is the number of Warrant Shares for which this Warrant is exercisable
immediately before the adjustment, and (B) the denominator of which is the
number of Warrant Shares for which this Warrant is exercisable immediately after
the adjustment.
(d) MERGER, ETC. If at any time after the date hereof there
shall be a merger or consolidation of the Company with or into or a transfer of
all or substantially all of the assets of the Company to another entity, then
the Warrant Holder shall be entitled to receive upon or after such transfer,
merger or consolidation becoming effective, and upon payment of the Purchase
Price then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by Warrant Holder for the shares
of stock subject to this Warrant had this Warrant been exercised just prior to
such transfer, merger or consolidation becoming effective or to the applicable
record date thereof, as the case may be. The Company will not merge or
consolidate with or into any other corporation, or sell or otherwise transfer
its property, assets and business substantially as an entirety to another
corporation, unless the corporation resulting from such merger or consolidation
(if not the Company), or such transferee corporation, as the case may be, shall
expressly assume, by supplemental agreement reasonably satisfactory in form and
substance to the Warrant Holder, the
6
<PAGE>
due and punctual performance and observance of each and every covenant and
condition of this Warrant to be performed and observed by the Company.
(e) RECLASSIFICATION, ETC. If at any time after the date
hereof there shall be a reorganization or reclassification of the securities as
to which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Warrant Holder
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price then in
effect, the number of shares or other securities or property resulting from such
reorganization or reclassification, which would have been received by the
Warrant Holder for the shares of stock subject to this Warrant had this Warrant
at such time been exercised.
(f) PURCHASE PRICE ADJUSTMENT. In the event that within twelve
(12) months of the Closing Date the Company issues or sells any Common Stock or
securities which are convertible into or exchangeable for its Common Stock or
any convertible securities, or any warrants or other rights to subscribe for or
to purchase or any options for the purchase of its Common Stock or any such
convertible securities (other than (i) shares or options issued or which may be
issued to employees, directors or consultants, or pursuant to the Company's
employee or director option plans, (ii) shares issued upon exercise of warrants
issued prior to the date hereof to John Hancock Mutual Life Insurance Co. and
its affiliates, (iii) shares issued upon exercise of warrants issued prior to
the date hereof in conjunction with the Company's issuance of Series A Preferred
Stock, and (iv) shares issued upon exercise of options, warrants or rights
outstanding on the date of the Agreement and listed in any of the Company's
reports filed under the Exchange Act during the previous 12 months) at an
effective purchase price per share which is less than the greater of the
Purchase Price then in effect or the fair market value (as defined in Section
3(b) above) of the Common Stock on the Trading Day next preceding such issue or
sale, then in each such case, the Purchase Price in effect immediately prior to
such issue or sale shall be reduced effective concurrently with such issue or
sale to an amount determined by multiplying the Purchase Price then in effect by
a fraction, (x) the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or sale, plus
(2) the number of shares of Common Stock which the aggregate consideration
received by the Company for such additional shares would purchase at such fair
market value or, Purchase Price as the case may be, then in effect; and (y) the
denominator of which shall be the number of shares of Common Stock of the
Company outstanding immediately after such issue or sale.
For the purposes of the foregoing adjustment, in the case of the
issuance of any convertible securities, warrants, options or other rights to
subscribe for or to purchase or exchange for, shares of Common Stock
("CONVERTIBLE SECURITIES"), the maximum number of shares of Common Stock
issuable upon exercise, exchange or conversion of such Convertible Securities
shall be deemed to be outstanding, provided that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange or
conversion of such Convertible Securities.
The number of shares which may be purchased hereunder shall be
increased proportionately to any reduction in Purchase Price pursuant to this
paragraph 6(f), so that after such adjustments the aggregate Purchase Price
payable hereunder for the increased number of shares shall be the same as the
aggregate Purchase Price in effect just prior to such adjustments.
7
<PAGE>
In the event of any such issuance for a consideration which is less
than such fair market value and also less than the Purchase Price then in
effect, than there shall be only one such adjustment by reason of such issuance,
such adjustment to be that which results in the greatest reduction of the
Purchase Price computed as aforesaid.
7. NO IMPAIRMENT. The Company will not, by amendment of its Articles 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 of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Warrant Holder against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any Warrant Shares above the amount payable
therefor on such exercise, and (b) will take all such action as may be
reasonably necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
8. NOTICE OF ADJUSTMENTS. Whenever the Purchase Price, Repurchase
Price, or number of Shares purchasable hereunder shall be adjusted pursuant to
Section 6 hereof, the Company shall execute and deliver to the Warrant Holder a
certificate setting-forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated and the Purchase Price or the Repurchase Price and number of
shares purchasable hereunder after giving effect to such adjustment, and shall
cause a copy of such certificate to be mailed (by first class mail, postage
prepaid) to the Warrant Holder.
9. RIGHTS AS SHAREHOLDER. Prior to exercise of this Warrant, the
Warrant Holder shall not be entitled to any rights as a shareholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of shareholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least 10 Trading Days prior to the date specified
therein, a notice specifying the date on which any such record date is to be
taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
10. LIMITATION ON EXERCISE. Notwithstanding anything to the contrary
contained herein, this Warrant may not be exercised by the Warrant Holder to the
extent that, after giving effect to Warrant Shares to be issued pursuant to a
Subscription Notice, the total number of shares of Common Stock deemed
beneficially owned by such holder (other than by virtue of ownership of this
Warrant, or ownership of other securities that have limitations on the holder's
rights to convert or exercise similar to the limitations set forth herein),
together with all shares of Common Stock deemed beneficially owned by the holder
is "affiliates" (as defined in Rule 144 of the Act) that would be aggregated for
purposes of determining whether a group under Section 13(d) of the Exchange Act
exists, would exceed the Warrant Holder's Restricted Ownership Percentage
8
<PAGE>
specified on Schedule I to the Agreement; PROVIDED that (w) each Warrant Holder
shall have the right at any time and from time to time to reduce its Restricted
Ownership Percentage immediately upon notice to the Company or in the event of a
Change in Control Transaction, (x) each Warrant Holder shall have the right at
any time and from time to time to increase its Restricted Ownership Percentage
or otherwise waive in whole or in part the restrictions of this Section 10 upon
61 days' prior notice to the Company or immediately in the event of a Change in
Control Transaction, (y) each Warrant Holder can make subsequent adjustments
pursuant to (w) or (x) any number of times from time to time (which adjustment
shall be effective immediately if it results in a decrease in the Restricted
Ownership Percentage or shall be effective upon 61 days' prior written notice or
immediately in the event of a Change in Control Transaction if it results in an
increase in the Restricted Ownership Percentage) and (z) each Warrant Holder may
eliminate or reinstate this limitation at any time and from time to time (which
elimination will be effective upon 61 days' prior notice and which reinstatement
will be effective immediately). Without limiting the foregoing, in the event of
a Change in Control Transaction, any holder may reinstate immediately (in whole
or in part) the requirement that any increase in its Restricted Ownership
Percentage be subject to 61 days' prior written notice, notwithstanding such
Change in Control Transaction, without imposing such requirement on, or
otherwise changing such holder's rights with respect to, any other Change in
Control Transaction. For this purpose, any material modification of the terms of
a Change in Control Transaction will be deemed to create a new Change in Control
Transaction. The term "DEEMED BENEFICIALLY OWNED" as used in this Warrant shall
exclude shares that might otherwise be deemed beneficially owned by reason of
the convertibility of the Preferred Shares. A "CHANGE IN CONTROL TRANSACTION"
will be deemed to have occurred upon the earlier of the announcement or
consummation of a transaction or series of transactions (other than the Merger)
involving (x) any consolidation or merger of the Company with or into any other
corporation or other entity or person (whether or not the Company is the
surviving corporation), or any other corporate reorganization or transaction or
series of related transactions in which in excess of 50% of the Company's voting
power is transferred through a merger, consolidation, tender offer or similar
transaction, or (y) in excess of 50% of the Corporation's Board of Directors
consists of directors not nominated by the prior Board of Directors of the
Company, or (z) any person (as defined in Section 13(d) of the Exchange Act,
together with its affiliates and associates (as such terms are defined in Rule
405 under the Act), beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Company's voting power. The delivery of
a Subscription Notice by the Warrant Holder shall be deemed a representation by
such holder that it is in compliance with this paragraph.
11. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense promptly will execute and deliver, in lieu thereof a new Warrant of like
tenor.
12. SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; CHOICE OF LAW
(a) The Company and the Warrant Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant were not
9
<PAGE>
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Warrant and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which either of them may be entitled by law or equity.
(b) EACH OF THE COMPANY AND THE WARRANT HOLDER (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT AND (II) HEREBY WAIVES,
AND AGREES NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAUSE THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF
THE SUIT, ACTION OR PROCEEDING IS IMPROPER EACH OF THE COMPANY AND THE WARRANT
HOLDER CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING
BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO
IT UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH
SHALL AFFECT OR ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW.
(c) THE COMPANY AND THE WARRANT HOLDER IRREVOCABLY WAIVE THEIR
RIGHT TO TRIAL BY JURY.
(d) THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
AND, WHERE APPLICABLE, FEDERAL LAW.
13. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Exhibits hereto and
the provisions contained in the Agreement or the Registration Rights Agreement
or the Articles of Amendment contain the entire understanding of the parties
with respect to the matters covered hereby and thereby and, except as
specifically set forth herein and therein, neither the Company nor the Warrant
Holder makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
14. NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by telex (with correct answer back received), telecopy or
facsimile at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:
10
<PAGE>
to the Company:
Able Telcom Holding Corp.
1601 Forum Place
Suite 1110
West Palm Beach, FL. 33401
Attention Fazier L. Gaines, President
Facsimile: (561) 688-0455
with copies to:
Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
Phillips Point, Suite 500 East
777 South Flagler Drive
West Palm Beach, Florida 33401-6194
Attention: Steven J. Serling, Esq.
Facsimile: (561) 655-5677
to the Warrant Holder:
Palladin Securities L.L.C.
c/o The Palladin Group, L.P.
40 West 57th Street
New York, New York 10019
Attention: Robert L. Chender
Facsimile: (212) 698-0554
with copies to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004
Attention: L. Stevenson Parker, Esq.
Facsimile: (202) 942-5999
Either party hereto may from time to time change its address for notices under
this Section 14 by giving at least 10 days' prior written notice of such changed
address to the other party hereto.
15. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
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<PAGE>
16. ASSIGNMENT. This Warrant may be transferred or assigned, in whole
or in part, at any time and from time to time by the then Warrant Holder by
submitting this Warrant to the Company together with a duly executed Assignment
in substantially the form and substance of the Form of Assignment which
accompanies this Warrant and, upon the Company's receipt hereof, and in any
event, within three (3) business days thereafter, the Company shall issue a
Warrant to the Warrant Holder to evidence that portion of this Warrant, if any
as shall not have been so transferred or assigned; provided, however, that such
transfer or assignment shall be registered or qualified under all applicable
securities laws, or otherwise exempt therefrom.
17. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon any
entity succeeding to the Company by merger, consolidation or acquisition of all
or substantially all of the Company's assets.
[SIGNATURE PAGE FOLLOWS]
12
<PAGE>
Dated: June 30, 1998 ABLE TELCOM HOLDING CORP.
By:/S/ FRAZIER L. GAINES
------------------------------------------
Name: Frazier L. Gaines
Title: President
[CORPORATE SEAL]
Attest:
By: /S/ MARK A. SHAIN
---------------------------
Its Chief Financial Officer
(SIGNATURE PAGE OF ABLE TELCOM HOLDING CORP. COMMON STOCK PURCHASE WARRANT)
13
<PAGE>
(SUBSCRIPTION NOTICE)
FORM OF WARRANT EXERCISE
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO: ABLE TELCOM HOLDING CORP.
ATTN: SECRETARY
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant:
(A) for, and to purchase thereunder, ______ shares of Common Stock
of Able Telcom Holding Corp., a Florida corporation (the
"Common Stock"), and herewith, or by wire transfer, makes
payment of $________ therefor; or
(B) in a "cashless" or "net-issue exercise" for, and to purchase
thereunder, __________ shares of Common Stock, and herewith
makes payment therefor with ____________ Surrendered Warrant
Shares.
The undersigned requests that the certificates for such shares be issued in the
name of, and
___(A) delivered to ______________, whose address is _____________;
or
___(B) electronically transmitted and credited to the account of
________________, undersigned's prime broker (Account
No._____________) with Depository Trust Company through its
Deposit Withdrawal Agent Commission system.
Dated:________
_________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Address)
Tax Identification Number: ______________
14
<PAGE>
----------
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and transfers unto
_______________ the right represented by the within Warrant to purchase
_________ shares of Common Stock of ABLE TELCOM HOLDING CORP., a Florida
corporation, to which the within Warrant relates, and appoints
__________________ Attorney to transfer such right on the books of ABLE TELCOM
HOLDING CORP., a Florida corporation, with full power of substitution of
premises.
Dated: _______________
_________________________________________
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Address)
Signed in the presence of:
_____________________________________
EXHIBIT 4.12
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
_____________________
June 30, 1998
ABLE TELCOM HOLDING CORP.
_____________________
Common Stock Purchase Warrant
Able Telcom Holding Corp., a Florida corporation (the "COMPANY"),
hereby certifies that for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Palladin Partners I, L.P., having
an address at 1209 Orange Street, Wilmington, DE 19807 ("PURCHASER") or any
other Warrant Holder, as defined below, is entitled, on the terms and conditions
set forth below, to purchase from the Company at any time beginning on the date
hereof and ending on the fifth anniversary of the Closing Date, as defined
below, as extended 1.5 times the number of days between the 120th day following
the Closing Date and such anniversary on which there had been no Effective
Registration, as defined below, 113,750 fully paid and nonassessable shares of
Common Stock, $.001 par value, of the Company (the "COMMON STOCK"), at a
purchase price per share of Common Stock of $19.80 (the "Conversion Price").
Such Conversion Price may from time to time be adjusted pursuant to the terms of
the Articles of Amendment (the "PURCHASE PRICE"), as the same may be adjusted
pursuant to Section 6 herein.
1. DEFINITIONS.
(a) The term "ARTICLES OF AMENDMENT" shall mean the Articles of
Amendment providing for the Series B Preferred Stock dated as of June 26, 1998.
(b) The term "EFFECTIVE REGISTRATION" shall mean that (a) all
registration obligations of the Company pursuant to the Registration Rights
Agreement have been satisfied, (b) such registration is not subject to any
suspension or stop order, (c) the prospectus for each of the Warrant Shares
issuable upon exercise of the Warrants is current, (d) the Warrant Shares are
listed for trading on one of the Approved Markets (as defined in the
Registration Rights Agreement) and such trading has not been suspended for any
reason, (e) none of the Company or any direct or indirect subsidiary of the
Company is subject to any bankruptcy, insolvency or similar proceeding, and (f)
no Interfering Event (as defined in the Registration Rights Agreement) exists.
<PAGE>
(c) The term "CLOSING DATE" shall mean June 30, 1998.
(d) The term "REGISTRATION RIGHTS AGREEMENT" shall mean the
Registration Rights Agreement, dated as of June 30, 1998, between the Company
and the Investors signatory thereto.
(e) The term "WARRANT HOLDER" shall mean the Purchaser or any assignee
of all or any portion of this Warrant.
(f) The term "WARRANT SHARES" shall mean the Shares of Common Stock or
other securities issuable upon exercise of this Warrant
Capitalized terms used but not defined in this Warrant shall have the
meanings specified in the Articles of Amendment.
2. EXERCISE OF WARRANT.
This Warrant may be exercised by the Warrant Holder, in whole or in
part, at any time and from time to time by either of the following methods:
(a) The Warrant Holder may surrender this Warrant, together with the
form of subscription at the end hereof duly executed by such Warrant Holder
("SUBSCRIPTION NOTICE"), at the offices of the Company or any transfer agent for
the Common Stock; together with payment of the aggregate Purchase Price for all
Warrant Shares exercised; or
(b) The Warrant Holder may also exercise this Warrant, in whole or in
part, in a "cashless" or "net-issue" exercise by delivering to the offices of
the Company or any transfer agent for the Common Stock this Warrant, together
with a Subscription Notice specifying the number of Warrant Shares to be
delivered to such Warrant Holder ("DELIVERABLE SHARES") and the number of
Warrant Shares with respect to which this Warrant is being surrendered in
payment of the aggregate Purchase Price for the Deliverable Shares ("SURRENDERED
SHARES"); provided that the Purchase Price multiplied by the number of
Deliverable Shares shall not exceed the value of the Surrendered Shares; and
provided further that the sum of the number of Deliverable Shares and the number
of Surrendered Shares so specified shall not exceed the aggregate number of
Warrant Shares represented by this Warrant. For the purposes of this provision,
each Warrant Share as to which this Warrant is surrendered will be attributed a
value equal to the fair market value (as defined below) of the Warrant Share
minus the Purchase Price of the Warrant Share (the "Spread"). The number of
Deliverable Shares shall be equal to (i) the number of Surrendered Shares,
multiplied by the Spread; divided by (ii) the fair market value of the Common
Stock on the date of exercise.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised and/or surrendered, and the Company, at its expense,
shall within three (3) Trading Days (as defined below) issue and deliver or upon
the order of Warrant Holder a new Warrant of like tenor in the name of Warrant
Holder or as Warrant Holder (upon payment by Warrant Holder of any applicable
transfer taxes) may request, reflecting such adjusted Warrant Shares. ~
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<PAGE>
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant, as soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) Trading Days thereafter, the Company shall transmit the
certificates (together with any other stock or other securities or property to
which Warrant Holder is entitled upon exercise) by messenger or overnight
delivery service to reach the address designated by such holder within three (3)
Trading Days after the receipt of the Subscription Notice ("T+3"). If such
certificates are not received by the Warrant Holder within T+3, then the Warrant
Holder will be entitled to revoke and withdraw its exercise of its Warrant at
any time prior to its receipt of those certificates.
In lieu of delivering physical certificates representing the Warrant
Shares deliverable upon exercise of Warrants, provided the Company's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Warrant Holder, the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Warrant Shares issuable upon exercise to the Warrant Holder, by
crediting the account of Warrant Holder's prime broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system. The time periods for
delivery described above shall apply to the electronic transmittals through the
DWAC system. The parties agree to coordinate with DTC to accomplish this
objective. The exchange pursuant to Section 3 shall be deemed to have been made
immediately prior to the close of business on the date of the Subscription
Notice. The person or persons entitled to receive the Warrant Shares issuable
upon such exercise shall be treated for all purposes as the record holder or
holders of such Common Shares at the close of business on the date of the
Subscription Notice.
The term "TRADING DAY" means (x) if the Common Stock is listed on the
New York Stock Exchange or the American Stock Exchange, a day on which there is
trading on such stock exchange, (y) if the Common Stock is not listed on either
of such stock exchanges but sale prices of the Common Stock are reported on an
automated quotation system, a day on which trading is reported on the principal
automated quotation system on which sales of the Common Stock are reported, or
(z) if the foregoing provisions are inapplicable, a day on which quotations are
reported by National Quotation Bureau Incorporated.
(b) This Warrant may not be exercised as to fractional shares of Common
Stock. In the event that the exercise of this Warrant, in full or in part, would
result in the issuance of any fractional share of Common Stock then in such
event the Warrant Holder shall be entitled to cash equal to the fair market
value of such fractional share. For purposes of this Warrant, "FAIR MARKET
VALUE" shall equal the closing trading price of the Common Stock on the Approved
Market which is the principal trading exchange or market for the Common Stock
(the "PRINCIPAL MARKET") on the date of determination or, if the Common Stock is
not listed or admitted to trading on any Approved Market, the average of the
closing bid and asked prices on the over-the-counter market as furnished by any
New York Stock Exchange member firm reasonably selected from time to time by the
Company for that purpose and reasonably acceptable to the Warrant Holder, or, if
the Common Stock is not listed or admitted to trading on any Approved Market or
traded over-the-counter and the average price cannot be determined as
contemplated above, the fair market value of the Common Stock shall be as
reasonably determined in good faith by the Company's Board of Directors with the
concurrence of the Warrant Holder.
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<PAGE>
4. REPURCHASE OF WARRANT SHARES AT THE OPTION OF THE COMPANY. At any
time and from time to time, from the date hereof until all Warrant Shares
represented by this Warrant have been exercised, provided that the Company at
such time is not in breach of the provisions of this Warrant and the
Registration Rights Agreement, and that there is Effective Registration the
Company may purchase from the Holder the Warrant at a purchase price per share
equal to (i) $35.00 times (ii) a number equal to the number of Warrant Shares
remaining exercisable pursuant to the Warrant, subject to adjustments provided
in Section 6 hereof (the "Repurchase Price"). Any such repurchase by the Company
shall be preceded by a "Notice of Repurchase" sent by the Company to the Holder
of the Warrant Shares to be repurchased. The Repurchase Price shall be paid by
the Company to the Holder, or such Holder's designee, in cash 30 days following
the receipt by the Holder of the Notice of Repurchase. Until such 30th day
following receipt of the Notice of Repurchase, the Holder's right to exercise
this Warrant pursuant to Section 2 hereof shall remain unaffected.
5. (A) REPRESENTATIONS AND COVENANTS OF THE COMPANY.
(a) The Company shall comply with its obligations under the
Registration Rights Agreement with respect to the Warrant Shares, including,
without limitation, the Company's obligation to have filed and declared and
maintained effective a registration statement registering the Warrant Shares
under the Securities Act of 1933, as amended (the "ACT").
(b) The Company shall take all necessary action and proceedings as may
be required and permitted by applicable law, rule and regulation, including,
without limitation, the notification of the Principal Market, for the legal and
valid issuance of this Warrant and the Warrant Shares to the Warrant Holder
under this Warrant.
(c) From the date hereof through the last date on which this Warrant is
exercisable, the Company shall take all steps necessary to insure that the
Common Stock remains listed on the Principal Market.
(d) The Warrant Shares, when issued in accordance with the terms
hereof, will be duly authorized and, when paid for or issued in accordance with
the terms hereof, shall be validly issued, fully paid and non-assessable. The
Company has authorized and reserved for issuance to Warrant Holder the requisite
number of shares of Common Stock to be issued pursuant to this Warrant.
(e) The Company shall at all times reserve and keep available, solely
for issuance and delivery as Warrant Shares hereunder, 150% of such number of
shares of Common Stock as shall from time to time be issuable hereunder.
(f) With a view to making available to the Warrant Holder the benefits
of Rule 144 promulgated under the Act and any other rule or regulation of the
Securities and Exchange Commission ("SEC") that may at any time permit Warrant
Holder to sell securities of the Company to the public without registration, the
Company agrees to use its best efforts to:
i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
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ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"); and
iii) furnish to any Warrant Holder forthwith upon request a
written statement by the Company that it has complied with the
reporting requirements of Rule 144 and of the Act and the Exchange Act,
a copy of the most recent annual or quarterly report of the Company,
and such other reports and documents so filed by the Company as may be
reasonably requested to permit any such Warrant Holder to take
advantage of any rule or regulation of the SEC permitting the selling
of any such securities without registration.
(B) REPRESENTATIONS AND COVENANTS OF THE PURCHASER.
The Purchaser shall not resell Warrant Shares, unless such resale is
pursuant to an effective registration statement under the Act or pursuant to an
applicable exemption from such registration requirements.
6. ADJUSTMENT OF PURCHASE PRICE AND REPURCHASE PRICE AND NUMBER OF
SHARES. The number of and kind of securities purchasable upon exercise of this
Warrant and the Purchase Price and the Repurchase Price shall be subject to
adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. If the Company
shall at any time after the date hereof but prior to the expiration of this
Warrant subdivide its outstanding securities as to which purchase rights under
this Warrant exist, by split-up, spin-off, or otherwise, or combine its
outstanding securities as to which purchase rights under this Warrant exist, the
number of Warrant Shares as to which this Warrant is exercisable as of the date
of such subdivision, split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination. Appropriate proportional adjustments
(decrease in the case of subdivision, increase in the case of combination) shall
also be made to the Purchase Price and Repurchase Price payable per share, so
that the aggregate Purchase Price or Repurchase Price payable for the total
number of Warrant Shares or Warrants purchasable under this Warrant as of such
date shall remain the same as it would have been before such subdivision or
combination.
(b) STOCK DIVIDEND. If at any time after the date hereof the Company
declares a dividend or other distribution on Common Stock payable in Common
Stock or other securities or rights convertible into or exchangeable for Common
Stock ("COMMON STOCK EQUIVALENTS") without payment of any consideration by
holders of Common Stock for the additional shares of Common Stock or the Common
Stock Equivalents (including the additional shares of Common Stock issuable upon
exercise or conversion thereof), then the number of shares of Common Stock for
which this Warrant may be exercised shall be increased as of the record date (or
the date of such dividend distribution if no record date is set) for determining
which holders of Common Stock shall be entitled to receive such dividends, in
proportion to the increase in the number of outstanding shares (and shares of
Common Stock issuable upon conversion of all such securities convertible into
Common Stock) of Common Stock as a result of such dividend, and the Purchase
Price and the
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Repurchase Price shall be proportionately reduced so that the aggregate Purchase
Price and Repurchase Price for all the Warrant Shares issuable hereunder
immediately after the record date (or on the date of such distribution if
applicable), for such dividend shall equal the aggregate Purchase Price or
Repurchase Price so payable immediately before such record date (or on the date
of such distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time after the date hereof the
Company distributes to holders of its Common Stock, other than as part of its
dissolution, liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets (other than
Common Stock), then the number of Warrant Shares for which this Warrant is
exercisable shall be increased to equal: (i) the number of Warrant Shares for
which this Warrant is exercisable immediately prior to such event, (ii)
multiplied by a fraction, (A) the numerator of which shall be the fair market
value per share of Common Stock on the record date for the dividend or
distribution, and (B) the denominator of which shall be the fair market value
price per share of Common Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Common Stock of the
value (as jointly determined in good faith by the Board of Directors of the
Company and the Warrant Holder) of any and all such evidences of indebtedness,
shares of capital stock, other securities or property, so distributed. The
Purchase Price shall be reduced to equal: (i) the Purchase Price in effect
immediately before the occurrence of any event (ii) multiplied by a fraction,
(A) the numerator of which is the number of Warrant Shares for which this
Warrant is exercisable immediately before the adjustment, and (B) the
denominator of which is the number of Warrant Shares for which this Warrant is
exercisable immediately after the adjustment. The Repurchase Price shall be
reduced to equal: (i) $35.00 (ii) multiplied by a fraction, (A) the numerator of
which is the number of Warrant Shares for which this Warrant is exercisable
immediately before the adjustment, and (B) the denominator of which is the
number of Warrant Shares for which this Warrant is exercisable immediately after
the adjustment.
(d) MERGER, ETC. If at any time after the date hereof there shall be a
merger or consolidation of the Company with or into or a transfer of all or
substantially all of the assets of the Company to another entity, then the
Warrant Holder shall be entitled to receive upon or after such transfer, merger
or consolidation becoming effective, and upon payment of the Purchase Price then
in effect, the number of shares or other securities or property of the Company
or of the successor corporation resulting from such merger or consolidation,
which would have been received by Warrant Holder for the shares of stock subject
to this Warrant had this Warrant been exercised just prior to such transfer,
merger or consolidation becoming effective or to the applicable record date
thereof, as the case may be. The Company will not merge or consolidate with or
into any other corporation, or sell or otherwise transfer its property, assets
and business substantially as an entirety to another corporation, unless the
corporation resulting from which merger or consolidation (if not the Company),
or such transferee corporation, as the case may be, shall expressly assume, by
supplemental agreement reasonably satisfactory in form and substance to the
Warrant Holder, the due and punctual performance and observance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company.
(e) RECLASSIFICATION, ETC. If at any time after the date hereof there
shall be a reorganization or reclassification of the securities as to which
purchase rights under this Warrant exist into the same or a different number of
securities of any other class or classes, then the Warrant
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<PAGE>
Holder shall thereafter be entitled to receive upon exercise of this Warrant,
during the period specified herein and upon payment of the Purchase Price then
in effect, the number of shares or other securities or property resulting from
such reorganization or reclassification, which would have been received by the
Warrant Holder for the shares of stock subject to this Warrant had this Warrant
at such time been exercised.
(f) PURCHASE PRICE ADJUSTMENT. In the event that within twelve (12)
months of the Closing Date the Company issues or sells any Common Stock or
securities which are convertible into or exchangeable for its Common Stock or
any convertible securities, or any warrants or other rights to subscribe for or
to purchase or any options for the purchase of its Common Stock or any such
convertible securities (other than (i) shares or options issued or which may be
issued to employees, directors or consultants, or pursuant to the Company's
employee or director option plans, (ii) shares issued upon exercise of the
warrant issued prior to the date hereof to John Hancock Mutual Life Insurance
Co. and its affiliates, (iii) shares issued upon exercise of warrants issued
prior to the date hereof in conjunction with the Company's issuance of Series A
Preferred Stock, and (iv) shares issued upon exercise of options, warrants or
rights outstanding on the date of the Agreement and listed in any of the
Company's reports filed under the Exchange Act during the previous 12 months) at
an effective purchase price per share which is less than the greater of the
Purchase Price then in effect or the fair market value (as defined in Section
3(b) above) of the Common Stock on the Trading Day next preceding such issue or
sale, then in each such case, the Purchase Price in effect immediately prior to
such issue or sale shall be reduced effective concurrently with such issue or
sale to an amount determined by multiplying the Purchase Price then in effect by
a fraction, (x) the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or sale, plus
(2) the number of shares of Common Stock which the aggregate consideration
received by the Company for such additional shares would purchase at such fair
market value or, Purchase Price as the case may be, then in effect; and (y) the
denominator of which shall be the number of shares of Common Stock of the
Company outstanding immediately after such issue or sale.
For the purposes of the foregoing adjustment, in the case of the
issuance of any convertible securities, warrants, options or other rights to
subscribe for or to purchase or exchange for, shares of Common Stock
("CONVERTIBLE SECURITIES"), the minimum number of shares of Common Stock
issuable upon exercise, exchange or conversion of such Convertible Securities
shall be deemed to be outstanding, provided that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange or
conversion of such Convertible Securities.
The number of shares which may be purchased hereunder shall be
increased proportionately to any reduction in Purchase Price pursuant to this
paragraph 6(f), so that after such adjustments the aggregate Purchase Price
payable hereunder for the increased number of shares shall be the same as the
aggregate Purchase Price in effect just prior to such adjustments.
In the event of any such issuance for a consideration which is less
than such fair market value and also less than the Purchase Price then in
effect, than there shall be only one such adjustment by reason of such issuance,
such adjustment to be that which results in the greatest reduction of the
Purchase Price computed as aforesaid.
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<PAGE>
7. NO IMPAIRMENT. The Company will not, by amendment of its Articles 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 of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Warrant Holder against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any Warrant Shares above the amount payable
therefor on such exercise, and (b) will take all such action as may be
reasonably necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
8. NOTICE OF ADJUSTMENTS. Whenever the Purchase Price, Repurchase
Price, or number of Shares purchasable hereunder shall be adjusted pursuant to
Section 6 hereof; the Company shall execute and deliver to the Warrant Holder a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated and the Purchase Price or the Repurchase Price and number of
shares purchasable hereunder after giving effect to such adjustment, and shall
cause a copy of such certificate to be mailed (by first class mail, postage
prepaid) to the Warrant Holder.
9. RIGHTS AS SHAREHOLDER. Prior to exercise of this Warrant, the
Warrant Holder shall not be entitled to any rights as a shareholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of shareholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least 10 Trading Days prior to the date specified
therein, a notice specifying the date on which any such record date is to be
taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
10. LIMITATION ON EXERCISE. Notwithstanding anything to the contrary
contained herein this Warrant may not be exercised by the Warrant Holder to the
extent that, after giving effect to Warrant Shares to be issued pursuant to a
Subscription Notice, the totd1 number of shares of Common Stock deemed
beneficially owned by such holder (other than by virtue of ownership of this
Warrant, or ownership of other securities that have limitations on the holder's
rights to convert or exercise similar to the limitations set forth herein),
together with all shares of Common Stock deemed beneficially owned by the
holders "affiliates" (as defined in Rule 144 of the Act) that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Exchange Act exists, would exceed 4.99% of the outstanding Common Stock
("Restricted Ownership Percentage"); PROVIDED that (w) each Warrant Holder shall
have the right at any time and from time to time to reduce its Restricted
Ownership Percentage immediately upon notice to the Company or in the event of a
Change in Control Transaction, (x) each Warrant Holder shall have the right at
any time and from time to time to increase its Restricted Ownership Percentage
or, otherwise waive in whole or in part the restrictions of this Section 10 upon
61 days prior notice to the Company or immediately in the event of a Change in
Control Transaction, (y) each Warrant
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<PAGE>
Holder can make subsequent adjustments pursuant to (w) or (x) any number of
times from time to time (which adjustment shall be effective immediately if it
results in a decrease in the Restricted Ownership Percentage or shall be
effective upon 61 days' prior written notice or immediately in the event of a
Change in Control Transaction if it results in an increase in the Restricted
Ownership Percentage) and (z) each Warrant Holder may eliminate or reinstate
this limitation at any time and from time to time (which elimination will be
effective upon 61 days' prior notice and which reinstatement will be effective
immediately). Without limiting the foregoing, in the event of a Change in
Control Transaction, any holder may reinstate immediately (in whole or in part)
the requirement that any increase in its Restricted Ownership Percentage be
subject to 61 days' prior written notice, notwithstanding such Change in Control
Transaction, without imposing such requirement on, or otherwise changing such
holder's rights with respect to, any other Change in Control Transaction. For
this purpose, any material modification of the terms of a Change in Control
Transaction will be deemed to create a new Change in Control Transaction. The
term "DEEMED BENEFICIALLY OWNED" as used in this Warrant shall exclude shares
that might otherwise be deemed beneficially owned by reason of the
convertibility of the Preferred Shares. A "CHANGE IN CONTROL TRANSACTION" will
be deemed to have occurred upon the earlier of the announcement or consummation
of a transaction or series of transactions (other than the Merger) involving (x)
any consolidation or merger of the Company with or into any other corporation or
other entity or person (whether or not the Company is the surviving
corporation), or any other corporate reorganization or transaction or series of
related transactions in which in excess of 50% of the Company's voting power is
transferred through a merger, consolidation, tender offer or similar
transaction, or (y) in excess of 50% of the Corporation's Board of Directors
consists of directors not nominated by the prior Board of Directors of the
Company, or (z) any person (as defined in Section 13(d) of the Exchange Act,
together with its affiliates and associates (as such terms are defined in Rule
405 under the Act), beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Company's voting power. The delivery of
a Subscription Notice by the Warrant Holder shall be deemed a representation by
such holder that it is in compliance with this paragraph
11. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense promptly will execute and deliver, in lieu thereof a new Warrant of like
tenor.
12. SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION; CHOICE OF LAW
(a) The Company and the Warrant Holder acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall he entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Warrant and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
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<PAGE>
(b) EACH OF THE COMPANY AND THE WARRANT HOLDER (I) HEREBY IRREVOCABLy
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN
NEW YORK COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS WARRANT AND (II) HEREBY WAIVES, AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. EACH OF THE COMPANY AND THE WARRANT HOLDER
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT
UNDER THIS WARRANT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND
SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH
SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY APPLICABLE LAW.
(c) THE COMPANY AND THE WARRANT HOLDER IRREVOCABLY WAIVE THEIR RIGHT TO
TRIAL BY JURY.
(d) THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND, WHERE
APPLICABLE, FEDERAL LAW.
13. ENTIRE AGREEMENT; AMENDMENTS. This Warrant, the Exhibits hereto and
the provisions contained in the Agreement or the Registration Rights Agreement
or the Articles of Amendment contain the entire understanding of the parties
with respect to the matters covered hereby and thereby and, except as
specifically set forth herein and therein, neither the Company nor the Warrant
Holder makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
14. NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by telex (with correct answer back received), telecopy or
facsimile at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day doing normal business hours where such notice is to be received) or
(b) on the second business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The addresses for such communications
shall be:
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to the Company:
Able Telcom Holding Corp.
1601 Forum Place
Suite 1110
West Palm Beach, FL. 33401
Attention:
Facsimile:
with copies to:
Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
Phillips Point, Suite 500 East
777 South Flagler Drive
West Palm Beach, Florida 33401-6194
Attention: Steven J. Serling, Esq.
Facsimile: (561) 655-5677
to the Warrant Holder:
Palladin Partners I, L.P.
c/o The Palladin Group, L.P.
40 West 57th Street
New York, New York
Attention: Robert L.Chender
Facsimile: (212) 698-0554
with copies to:
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004
Attention: L. Stevenson Parker, Esq.
Facsimile: (202) 942-5999
Either party hereto may from time to time change its address for
notices under this Section 14 by giving at least 10 days' prior written notice
of such changed address to the other party hereto.
15. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
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<PAGE>
16. ASSIGNMENT. This Warrant may be transferred or assigned, in whole
or in part, at any time and from time to time by the then Warrant Holder by
submitting this Warrant to the Company together with a duly executed Assignment
in substantially the form and substance of the Form of Assignment which
accompanies this Warrant and, upon the Company's receipt hereof, and in any
event, within three (3) business days thereafter, the Company shall issue a
Warrant to the Warrant Holder to evidence that portion of this Warrant, if any
as shall not have been so transferred or assigned; provided, however, that such
transfer or assignment shall be registered or qualified under all applicable
securities laws, or otherwise exempt therefrom.
17. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon any
entity succeeding to the Company by merger, consolidation or acquisition of all
or substantially all of the Company's assets.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
Dated: JUNE 30, 1998 ABLE TELCOM HOLDING CORP.
---------------
By: /S/ FRAZIER L. GAINES
--------------------------------
Name: Frazier L. Gaines
Title: President
[CORPORATE SEAL]
Attest:
By: /S/ ILLEGIBLE
---------------------------
Its Chief Financial Officer
(SIGNATURE PAGE OF ABLE TELCOM HOLDING CORP. COMMON STOCK PURCHASE WARRANT)
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<PAGE>
(SUBSCRIPTION NOTICE)
FORM OF WARRANT EXERCISE
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO: ABLE TELCOM HOLDING CORP.
ATTN: SECRETARY
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant:
___(A) for, and to purchase thereunder, ________ shares of Common
Stock of Able Telcom Holding Corp., a Florida corporation (the
"Common Stock"), and herewith, or by wire transfer, makes
payment of $_______ therefore, or
___(B) in a "cashless" or "net-issue exercise" for, and to purchase
thereunder, _____ shares of Common Stock, and herewith makes
payment therefore with _____ Surrendered Warrant Shares.
The undersigned requests that the certificates for such shares be
issued in the name of, and
___(A) delivered to ______________, whose address is ____________; or
___(B) electronically transmitted and credited to the account of
____________, undersigned's prime broker (Account No.
____________ ) with Depository Trust Company through its
Deposit Withdrawal Agent Commission system.
Dated: _____________
____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
Tax Identification Number: _________________
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<PAGE>
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and
transfers unto _______________ the right represented by the within Warrant to
purchase ____ shares of Common Stock of ABLE TELCOM HOLDING CORP., a Florida
corporation, to which the within Warrant relates, and appoints
_______________________ Attorney to transfer such right on the books of ABLE
TELCOM HOLDING CORP., a Florida corporation, with full power of substitution of
premises.
Dated: ____________
____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
Signed in the presence of:
______________________________________
EXHIBIT 10.25.1
ABLE TELCOM HOLDING CORP.
1601 Forum Place
Suite 1110
West Palm Beach, FL 33401
July 2, 1998
John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, MA 02117
Attn: John Tisdale, Esq.
Re: Note Agreement dated as of January 6, 1998 Among Able Telcom
Holding Corp. ("Able" or the "Company"), John Hancock Mutual Life
Insurance Company, John Hancock Variable Life Insurance Company and
Signature 1A (Cayman), Ltd. ("Note Agreement"), re $10 Million 12%
Senior Subordinated Notes Due January 6, 2005 (the "Notes")
Gentlemen:
You hold the Notes of Able pursuant to the Note Agreement Able proposes to close
on its acquisition of MFS Network Technologies, Inc. ("MFS") (the "MFS
Investment"), which is structured as a merger of MFS into a subsidiary of Able,
which will be the surviving corporation (the "Surviving Subsidiary"). Able has
already deposited $10 million toward the purchase price (as permitted by
our letter of May 29, 1998) and proposes to pay $5 million toward the purchase
price at closing, and to temporarily finance the balance of the purchase price,
up to $87 million, by a note (the "Seller Note") to the seller, MFS
Communications Company, Inc. ("MFSCC") in the form of Exhibit 1, with $20
million payable on the Note on July 31, 1998 and the balance payable August 31,
1998, with interest at 12% per annum. The Note will be secured by a pledge to
WorldCom, Inc. (parent of MFSCC) of all the shares of MFS to be acquired by Able
pursuant to the terms of a pledge agreement (the "Pledge Agreement") in the form
of Exhibit 2.
Capitalized terms used herein, and not defined herein, shall have the respective
meanings ascribed to them in the Note Agreement.
1. WAIVERS BY THE NOTEHOLDERS. Each of the holders of the Notes consent and
waive the provisions of:
(a) Section 4.3(a) of the Note Agreement to the extent necessary to permit
the pledge of the MFS shares acquired by Able and securing the Note;
<PAGE>
July 2, 1998
Page 2
(b) Section 4.6 and Section 4.7 of the Note Agreement to the extent
necessary to permit Able to issue the Seller Note and permit to exist,
through but not including the Expiration Date (as defined below), the
indebtedness created thereby; and
(c) Section 4.8 of the Note Agreement to the extent necessary to permit the
MFS Investment;
and each holder of Notes waives any Event of Default which would result from
the making of the MFS Investment and the execution and delivery of the Seller
Note and the Pledge Agreement.
Each of the foregoing waivers and consents shall expire by its terms on the
earliest to occur of ("Expiration Date"):
(i) August 31, 1998;
(ii) the Payment Date (as defined in the Seller Note);
(iii) such earlier date as the holder of the Seller Note accelerates the
maturity thereof, demands payment thereof or exercises any other
Remedies in respect of the Seller Note or the Pledge Agreement; or
(iv) the date, if any, upon which the Company fails to comply with the
provisions of paragraph 4 hereof.
2. RANKING OF SELLER NOTE. Notwithstanding the waiver set forth in paragraph 1,
the Company and the holders of the Notes agree that the Seller Note is not
Senior Debt; that the subordination provisions in the Seller Note are, and
are intended to be, an inducement to and a consideration of the agreements of
the holders of Notes in paragraph 1; each holder of the Notes has
conclusively relied on such subordination provisions; and each holder of
Notes is intended to be, and is, a third party beneficiary of such
subordination provision.
3. PAYMENT OF NOTES. In consideration of the agreements of the holders of Notes
in paragraph 1 hereof, the parties agree that the Company shall pay on the
Expiration Date the entire principal amount of all the Notes, together with
an amount equal to the Prepayment Compensation Amount due at such time in
respect of the principal amount of the Notes being so paid and interest on
such principal amount then being paid accrued to the Expiration Date. In
connection with such prepayment, when, as and if made, each holder of Notes
waives the provisions of Section 1.9 of the Note Agreement. Such prepayment
shall be made in the manner provided in Section 1.10 of the Note Agreement.
<PAGE>
July 2, 1998
Page 3
The Company acknowledges that the failure to make such prepayment when due
shall constitute an immediate Event of Default pursuant to Section 6.1(a)(i)
and Section 6.1(a)(ii) of the Note Agreement.
4. ADDITIONAL AGREEMENTS OF THE COMPANY; DESIGNATION OF SUBSIDIARIES.
(a) The Company designates the Surviving Subsidiary as an Unrestricted
Subsidiary pursuant to Section 4.10 of the Note Agreement. The Company
agrees not to designate the Surviving Corporation or any successor or
assign a Restricted Subsidiary.
(b) The Company further agrees that it will not, nor will it permit any
Restricted Subsidiary to, make any Investment in the Surviving
Corporation (other than the MFS Investment itself on the date hereof).
(c) The Company will not at any time exercise its right pursuant to
paragraph 2 of the Additional Terms and Conditions section of the Seller
Note to prepay the Seller Note, or otherwise prepay, retire, or
otherwise acquire for value all or any portion of the Seller Note.
The Company agrees and acknowledges that the failure to comply with any
provision of this paragraph 4 is an immediate Event of Default pursuant to
the Note Agreement.
5. CONDITIONS TO EFFECTIVENESS. The waiver and consent provisions of paragraph 1
hereof shall not become effective until or unless the following conditions
precedent have been satisfied:
(a) the holders of the Senior Debt shall have consented, on terms acceptable
to the holders of the Notes, to the incurrence and maintenance of the
Debt represented by the Seller Note, the execution and delivery of the
Pledge Agreement, the making of the Investment and any and all other
related transactions which would, but for the terms of such consent,
violate the Senior Credit Agreement;
(b) the holders of the Senior Debt shall have consented, on terms acceptable
to the holders of the Notes, to the terms of this consent;
(c) the Seller Note shall be in the form of Exhibit 1 hereto;
(d) the Pledge Agreement shall be in the form of Exhibit 2 hereto; and
<PAGE>
July 2, 1998
Page 4
(e) the Company shall have paid, by wire transfer in immediately available
funds, the reasonable costs and expense (including reasonable fees and
disbursements of Hebb & Gitlin, as counsel to the holders of the Notes)
incurred by the holders of the Notes in connection with the
consideration, negotiation, preparation or execution of this consent and
the transactions related thereto.
6. REPRESENTATION AND WARRANTY. The Company has obtained all consents of all
other Persons (including, without limitation, its creditors) necessary to
permit the incurrence and maintenance of the Debt represented by the Seller
Note, the execution and delivery of the Pledge Agreement, the making of the
Investment, the execution and delivery of this consent and any and all other
related transactions, without resulting in any breach of or default under any
agreement with any such other Person. Able is not in default under any
provision of the Note Agreement and does not expect to be in default under
any provision of its Senior Debt (as defined in the Note Agreement) at the
time of entering into the above-described transaction.
To be consistent, the expiration of the waivers set forth in our letters of May
29, 1998 and June 12, 1998 are extended through August 31, 1998.
Except as provided above, all terms of the Note Agreement, including the letter
agreements of May 29, 1998 and June 12, 1998, as amended, shall continue in full
force and effect.
Very truly yours
ABLE TELCOM HOLDING CORP.
By: /s/ FRAZIER L. GAINES
-------------------------------------
Frazier L. Gaines, President
We the owners and holders of all of the Notes agree to the above.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ STEPHEN J. BLEWITT
-------------------------------------
Name: Stephen J. Blewitt
Title: Senior Investment Officer
<PAGE>
July 2, 1998
Page 5
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By: /s/ STEPHEN J. BLEWITT
-------------------------------------
Name: Stephen J. Blewitt
Title: Authorized Officer
SIGNATURE 1A (CAYMAN), LTD
By: /s/ JOHN W. PLUTG
-------------------------------------
Name: John W. Plutg
Title: Authorized Officer
<PAGE>
EXHIBIT A
JULY 2 LETTER
EXHIBIT 10.27
================================================================================
CREDIT AGREEMENT
among
ABLE TELCOM HOLDING CORP., as Borrower
NATIONSBANK, N.A., as Administrative Agent
and
The Several Lenders
from Time to Time Parties Hereto
Dated June 11, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1. DEFINITIONS .......................................................1
1.1 Defined Terms .......................................................1
1.2 Other Definitional Provisions ......................................26
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS ..................................27
2.1 Revolving Credit Facility ..........................................27
2.2 Procedure for Revolving Credit Borrowings ..........................28
2.3 Repayment of Loans .................................................28
SECTION 3. LETTERS OF CREDIT ................................................29
3.1 L/C Commitment .....................................................29
3.2 Procedure for Issuance of Letters of Credit ........................29
3.3 Letter of Credit Participations ....................................30
3.4 Reimbursement Obligation of the Borrower ...........................31
3.5 Obligations Absolute ...............................................32
3.6 Letter of Credit Payments ..........................................32
3.7 L/C Application ....................................................32
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS ...........................33
4.1 Interest Rates and Payment Dates ..................................33
4.2 Optional and Mandatory Prepayments and Commitment Reductions ......33
4.3 Fees ..............................................................35
4.4 Computation of Interest and Fees ..................................36
4.5 Conversion and Continuation Options ...............................36
4.6 Minimum Amounts of Tranches .......................................37
4.7 Inability to Determine Interest Rate ..............................37
4.8 Treatment and Payments ............................................38
4.9 Requirements of Law ...............................................39
4.10 Taxes .............................................................40
4.11 Indemnity .........................................................42
4.12 Change of Lending Offce ...........................................43
4.13 Replacement of Lenders under Certain Circumstances ................43
SECTION 5. REPRESENTATIONS AND WARRANTIES ...................................43
5.1 Financial Condition ...............................................43
5.2 Financial Statements/No Change ....................................45
5.3 Existence; Compliance with Law ....................................45
5.4 Power; Authorization; Enforceable Obligations .....................45
5.5 No Legal Bar ......................................................46
5.6 No Material Litigation ............................................46
5.7 No Default ........................................................46
i
<PAGE>
PAGE
----
5.8 Ownership of Property; Intellectual Property ......................46
5.9 No Burdensome Restrictions ........................................47
5.10 Taxes .............................................................47
5.11 Federal Regulations ...............................................47
5.12 ERISA .............................................................48
5.13 Investment Company Act; Other Regulations .........................48
5.14 Subsidiaries ......................................................48
5.15 Purpose of Loans ..................................................48
5.16 Certain Regulatory Matters ........................................49
5.17 Environmental Matters .............................................49
5.18 Security Documents ................................................50
5.19 Solvency ..........................................................50
5.20 Year 2000 Matters .................................................51
SECTION 6. CONDITIONS PRECEDENT .............................................51
6.1 Conditions to Initial Loans .......................................51
6.2 Conditions to Each Loan for a Subject Acquisition .................56
6.3 Conditions to all Letters of Credit ...............................57
6.4 Conditions to all Loans ...........................................58
6.5 Conditions to Conversions or Continuations ........................58
SECTION 7. AFFIRMATIVE COVENANTS ............................................59
7.1 Financial Statements ..............................................59
7.2 Certificates; Other Information ...................................60
7.3 Payment of Obligations ............................................61
7.4 Conduct of Business and Maintenance of Existence, etc. ............61
7.5 Maintenance of Property; Insurance ................................61
7.6 Inspection of Property; Books and Records; Discussions ............62
7.7 Notices ...........................................................62
7.8 Environmental Laws ................................................63
7.9 Collateral ........................................................63
7.10 Compliance Certificates ...........................................64
SECTION 8. NEGATIVE COVENANTS ...............................................64
8.1 Financial Covenants ...............................................64
8.2 Limitation on Indebtedness ........................................65
8.3 Limitation on Liens ...............................................66
8.4 Limitation on Fundamental Changes .................................66
8.5 Limitation on Sale of Assets ......................................66
8.6 Limitation on Restricted Payments. ................................67
8.7 Limitation on Issuances of Capital Securities. ....................67
8.8 Limitation on Acquisitions, Investments, Loans and Advances .......67
8.9 Limitation on Optional Payments of Indebtedness ...................68
ii
<PAGE>
PAGE
----
8.10 Limitation on Modifications of Certain Agreements ................69
8.11 Limitation on Transactions with Affiliates .......................69
8.12 Limitation on Sales and Leasebacks ...............................69
8.13 Limitation on Changes in Fiscal Year .............................69
8.14 Limitation on Negative Pledge Clauses ............................70
8.15 Certain Intercompany Matters .....................................70
8.16 Limitation on Restrictions on Subsidiary Distributions ...........70
8.17 Limitation on Lines of Business ..................................71
SECTION 9. EVENTS OF DEFAULT ................................................71
SECTION 10. THE ADMINISTRATIVE AGENT ........................................74
10.1 Appointment ......................................................74
10.2 Delegation of Duties .............................................74
10.3 Exculpatory Provisions ...........................................75
10.4 Reliance by Administrative Agent .................................75
10.5 Notice of Default ................................................75
10.6 Non-Reliance on Administrative Agent and Other Lenders ...........76
10.7 Indemnification ..................................................76
10.8 Administrative Agent in Its Individual Capacity ..................77
10.9 Successor Administrative Agent ...................................77
SECTION 11. MISCELLANEOUS ...................................................77
11.1 Amendments and Waivers ...........................................77
11.2 Notices ..........................................................78
11.3 No Waiver; Cumulative Remedies ...................................79
11.4 Survival of Representations and Warranties .......................80
11.5 Payment of Expenses and Taxes ....................................80
11.6 Successors and Assigns; Participations and Assignments ...........81
11.7 Application of Proceeds after Default; Adjustments; Set-off ......83
11.8 Counterparts; When Effective .....................................84
11.9 Severability .....................................................85
11.10 Integration ......................................................85
11.11 Governing Law ....................................................85
11.12 Submission To Jurisdiction; Waivers ..............................85
11.13 Acknowledgments ..................................................86
11.14 Confidentiality ..................................................86
11.15 Waivers of Jury Trial ............................................87
11.16 Maximum Interest Rate ............................................87
iii
<PAGE>
ANNEX l Lender Commitments
EXHIBITS
- --------
Exhibit A Revolving Credit Note
Exhibit B Assignment and Acceptance
Exhibit C Compliance Certificate
Exhibit D Guaranty Agreement
Exhibit E Intercompany Note
Exhibit F Notice of Borrowing
Exhibit G Notice of Conversion/Continuation
Exhibit H Notice of Letter of Credit Request
Exhibit I Perfection Certificate
Exhibit J-1 Form of Pledge Agreement [Borrower]
Exhibit J-2 Form of Pledge Agreement [Subsidiary]
Exhibit K Intentionally Deleted
Exhibit L-1 Form of Security Agreement [Borrower]
Exhibit L-2 Form of Security Agreement [Subsidiary]
Exhibit M Intentionally Deleted
Exhibit N Closing Certificate
Exhibit O Opinion of Gunster, Yoakley, Valdes-Fauli & Stewart
SCHEDULES
- ---------
Schedule 1.1 Non-Restricted Subsidiaries
Schedule 5.1(a-1) Additional Financial Statement Disclosure
Schedule 5.1(a-2) Material Changes Since October 31, 1997
Schedule 5.1(b) Pro Forma Financial Statements, Budgets and Projections
Schedule 5.6 Material Litigation
Schedule 5.14 Subsidiaries
Schedule 8.14 Agreements Containing Negative Pledges
iv
<PAGE>
CREDIT AGREEMENT, dated June 11, 1998, among ABLE TELCOM HOLDING
CORP., a Florida corporation (the "BORROWER"), the several lenders from time to
time parties to this Credit Agreement (the "LENDERS") and NATIONSBANK, N.A., as
Administrative Agent for the Lenders hereunder.
RECITALS
The Borrower and the subsidiaries of Borrower desire that the Lenders
furnish the extensions of credit provided for herein, which the Borrower will
use (a) to refinance existing indebtedness of the Borrower and the NationsBank
Existing Credits (identified below), and (b) for general corporate purposes of
the Borrower and the subsidiaries of Borrower, including, without limitation,
working capital, capital expenditures and Subject Acquisitions (as such term is
hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms have
the meanings assigned to them below:
"ABR": for any day, the rate per annum (rounded upwards, if
necessary, to the next 1/lOOth of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Rate in
effect on such day, plus 1/2 of 1%. For purposes hereof: "PRIME RATE"
means the rate of interest per annum publicly announced from time to
time by the Administrative Agent as its U.S. dollar prime commercial
lending rate (which rate may or may not be the lowest rate of interest
charged by the Administrative Agent); and "FEDERAL FUNDS RATE" means,
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 which is a Business Day, the average of the
quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized
standing selected by it. Any change in the ABR due to a change in the
Prime Rate or the Federal Funds 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 Rate, respectively.
"ABR LOAN": any Loan that bears interest computed on the basis
of the ABR.
"ACQUISITION CRITERIA": with respect to any proposed Subject
Acquisition, the following criteria:
1
<PAGE>
(a) no Default shall have occurred and be continuing
(i) on the date the acquisition agreements (including but not
limited to option agreements and agreements to enter into
option agreements) for such Subject Acquisition are executed
and delivered by the Borrower, directly or indirectly through
a Wholly Owned Subsidiary, or (ii) on the date the Subject
Acquisition is consummated and, in each case, no Default would
occur after giving effect to the consummation of such Subject
Acquisition and the transactions contemplated thereby,
including, without limitation, pro forma compliance with
Section 8.1;
(b) such Subject Acquisition (i) is the acquisition
of assets or rights to acquire or use assets (including
pursuant to an option agreement) of a Person engaged in a
Permitted Line of Business or (ii) is the acquisition of not
less than 80% of the Capital Securities of a Person engaged in
a Permitted Line of Business and, if such acquisition is for
less than 100% of the Capital Securities of such Person, such
acquisition, including the terms of the Capital Securities
that are not acquired directly or indirectly by the Borrower
or that are issued to other Persons in connection with such
acquisition, shall be acceptable to the Administrative Agent;
(c) the operations of the enterprise constituting
such Subject Acquisition shall (i) have generated positive
EBITDA for the period of twelve consecutive calendar months
ending immediately prior to the date of the closing of the
Subject Acquisition (the "TEST PERIOD") or (ii) have generated
positive EBITDA on a pro forma basis as of the end of such
test period after taking into account scheduled adjustments to
EBITDA acceptable to the Administrative Agent; and
(d) if such Subject Acquisition is or is made
pursuant to an option agreement, such option agreement is on
terms and conditions which are acceptable to the
Administrative Agent.
"ADMINISTRATIVE AGENT": NationsBank of Texas, N.A. in its
capacity as Administrative Agent for the Lenders pursuant to this
Agreement and any successor Administrative Agent appointed pursuant to
Section 10.9.
"AFFILIATE": of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. "Affiliate" shall be deemed
to include, without limiting the application of the preceding sentence,
any Person owning, directly or indirectly, 5% or more of the voting
common stock of such Person and any relative of such Person and any
trust in which such Person and such Person's relatives own beneficially
a 10% or greater interest. For the purposes of this definition,
"control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
2
<PAGE>
"AGREEMENT": this Credit Agreement, as amended, supplemented
and otherwise modified from time to time, including, without
limitation, all extensions, renewals, restatements, rearrangements and
refundings hereof and increases of any Facility provided for herein.
"APPLICABLE MARGIN": with respect to each Loan at any date,
the applicable percentage per annum set forth below based upon the
Status on such date:
<TABLE>
<CAPTION>
APPLICABLE MARGIN
-----------------------------
STATUS EURODOLLAR LOANS ABR LOANS
---------- ---------------- ---------
<S> <C> <C>
Level I 1.250% 0.250%
Level II 1.500% 0.500%
Level III 1.750% 0.750%
Level IV 2.000% 1.000%
</TABLE>
"ASSET SALE": any Disposition (whether in one transaction or a
series of related transactions) by the Borrower or any Subsidiary,
except for (a) Dispositions pursuant to Section 8.5(a),(b) or (c);(b)
Dispositions in an amount less than or equal to [$1,000,000], PROVIDED
that such Dispositions are in the ordinary course of business, and (c)
Dispositions to the Borrower or any Wholly Owned Subsidiary.
"ASSIGNEE": as defined in Section 11.6(c).
"ASSIGNMENT AND ACCEPTANCE": an Assignment and Acceptance
substantially in the form of Exhibit B.
"AUTHORIZATION": any filing, recording and registration with,
and any validation or exemption, approval, order, authorization,
consent, License, certificate, franchise and permit from, any
Governmental Authority.
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Revolving
Credit Lender at any time, an amount equal to the excess, if any, of
(a)the amount of such Revolving Credit Lender's Revolving Credit
Commitment at such time, over (b) the sum of such Revolving Credit
Lender's aggregate outstanding (i) Revolving Credit Loans and (ii)
participations in L/C Obligations at such time.
"BOARD": the Board of Governors of the Federal Reserve System
or any successor.
"BOARD OF DIRECTORS": either the board of directors of the
Borrower or any duly authorized committee of that board.
3
<PAGE>
"BOARD RESOLUTION": a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Borrower to have been duly
adopted by requisite action by the Board of Directors and to be in full
force and effect on the date of such certification, and delivered to
the Administrative Agent.
"BORROWER": as defined in the preamble hereto.
"BORROWER CAPITAL SECURITY": (a) any Capital Security (i) of
any type referred to in clause (a) of the definition of "Capital
Security" contained in this Section 1 and (ii) of which the Borrower is
the issuer and (b) any Capital Security of any type referred to in
clause (b) of such definition of "Capital Security" which is
convertible into or exchangeable for or exercisable to acquire any
Borrower Capital Security of any type referred to in clause (a) of this
definition.
"BORROWING DATE": any Business Day specified in a notice
pursuant to Section 2.2 as a date on which the Borrower requests the
Lenders to make Loans hereunder.
"BUSINESS DAY": any day other than a Saturday, Sunday or day
on which commercial banks in New York City or Dallas, Texas are
authorized or required by law to close; PROVIDED, HOWEVER, that when
used in connection with a Eurodollar Loan, the term "Business Day"
shall also exclude any day on which banks are not open for dealings in
Dollar deposits in the London interbank market.
"CAPITAL EXPENDITURES": as of the last day of any fiscal
quarter of the Borrower, the aggregate amount of expenditures made by
the Borrower and the Subsidiaries during the period of four fiscal
quarters of the Borrower ending on such day which are or should be
capitalized in accordance with GAAP as in effect on the date of this
Agreement.
"CAPITAL LEASE": a lease of (or other agreement conveying the
right to use) real or personal property that is required to be
classified and accounted for as a capital lease under GAAP as in effect
on the date of this Agreement and, for purposes of this Agreement, the
amount of any Capital Lease obligation at any date shall be the
capitalized amount thereof at such date as determined in accordance
with GAAP as in effect on the date of this Agreement.
"CAPITAL SECURITY": (a) any capital stock, partnership,
membership, joint venture or other ownership or equity interest,
participation or securities (whether voting or non-voting, whether
preferred, common or otherwise, and including any stock appreciation,
contingent interest or similar right) and (b) any option, warrant,
security or other right (including debt securities or other evidence of
Indebtedness) directly or indirectly convertible into or exercisable or
exchangeable for, or otherwise to acquire directly or indirectly, any
stock, interest, participation or security described in clause (a)
above.
"CASH EQUIVALENTS": (a) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any
4
<PAGE>
agency thereof, (b) certificates of deposit and Eurodollar time
deposits with maturities of one year or less from the date of
acquisition and overnight bank deposits of any Lender or of any
commercial bank having capital and surplus in excess of $500,000,00O,
(c) 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 or any
agency thereof, (d) in addition to the Cash Equivalents permitted by
clauses (b) and (c) above, certificates of deposits and Eurodollar time
deposits with maturities of one year or less from the date of
acquisition, overnight bank deposits and repurchase obligations having
a term of not more than 30 days with respect to securities issued or
fully guaranteed or insured by the United States government or any
agency thereof, in each case, of any other commercial bank having
capital and surplus in excess of $100,000,000, PROVIDED, that such Cash
Equivalents do not exceed $1,000,000 in the aggregate at any time
outstanding, (e) commercial paper of a domestic issuer at the time of
acquisition having a rating of at least A-1 by Standard and Poor's
Ratings Group ("S&P") or P-1 by Moody's Investors Service, Inc.
("MOODY'S"), (f) 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, or by any political
subdivision or taxing authority of any such state, commonwealth or
territory, the securities of which state, commonwealth, territory,
political subdivision or taxing authority (as the case may be) are
rated at least A by S&P or A by Moody's, or (g) shares of money market
mutual or similar funds which invest exclusively in assets satisfying
the requirements of clauses (a), (b), (c), (e) or (f) of this
definition.
"CHANGE OF CONTROL": the acquisition by a person or group of
persons acting in concert in one or more transactions of the ability to
vote or control the voting of more than 30% of the equity interests of
the Borrower, provided, however that exercise of the WorldCom Option
will not be deemed to be a Change of Control.
"CHARTER DOCUMENTS": with respect to any Person, (a) the
articles or certificate of formation, incorporation or organization (or
the equivalent organizational documents) of such Person, (b) the
bylaws, partnership agreement, limited liability company agreement or
regulations (or the equivalent governing documents) of such Person and
(c) each document setting forth the designation, amount and relative
rights, limitations and preferences of any class or series of such
Person's Capital Securities or of any rights in respect of such
Person's Capital Securities.
"CODE": the Internal Revenue Code of 1986.
"COMMITMENT": as to any Lender on any day, the sum of the
Revolving Credit Commitments of such Lender.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or
5
<PAGE>
is part of a group which includes the Borrower and which is treated as
a single employer under Section 414 of the Code.
"COMPLETED ACQUISITION": an acquisition (including the entry
into an option agreement) by the Borrower, directly or indirectly
through a Wholly Owned Subsidiary, consummated in accordance with
Section 8.8 and, if applicable, Section 6.2.
"COMPLIANCE CERTIFICATE": a certificate of the Chief Executive
Officer or Chief Financial Officer of the Borrower (unless any or
another Responsible Officer of the Borrower is provided for herein),
substantially in the form of Exhibit C.
"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 and is bound to
perform any duty or obligation thereunder or by which it or any of its
property or assets is bound.
"CURRENT ASSETS": with respect to the Borrower and its
Restricted Subsidiaries, consolidated current assets as determined in
accordance with GAAP as in effect on the date of this Agreement.
"CURRENT LIABILITIES": with respect to the Borrower and its
Restricted Subsidiaries, consolidated current liabilities as determined
in accordance with GAAP as in effect on the date of this Agreement.
"CURRENT RATIO": as of the last day of any fiscal quarter, the
ratio of (a) Current Assets as of such day to (b) Current Liabilities
as of such day.
"DEBT SERVICE": for any period with respect to the Borrower
and its Restricted Subsidiaries, determined on a consolidated basis in
accordance with GAAP as in effect on the date of this Agreement, the
sum of, without duplication, (a) Cash Interest Expense, (b) scheduled
payments of principal on Indebtedness, including, without limitation,
mandatory prepayments, if any, required as a result of the reductions
in the aggregate amount of the Total Revolving Credit Commitment
mandated by Section 4.2(b) (but excluding any payments required
pursuant to Section 4.2(c) other than payments made pursuant to Section
4.2(c) solely as a result of the operation of Section 4.2(b), (d) or
(e), (c) to the extent not included in (a) or (b), scheduled payments
in respect of Capital Leases and (d) net obligations of the Borrower
for such period under Interest Rate Hedge Agreements, in each case paid
during such period.
"DEFAULT": any of the events specified in Section 9, whether
or not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"DISPOSITION": as defined in Section 8.5.
6
<PAGE>
"DISQUALIFIED STOCK": any Capital Security which, by its terms
(or by the terms of any security into which it is convertible or for
which it is exchangeable), at the option of the holder thereof or upon
the happening of any event, matures or is mandatorily redeemably
pursuant to a sinking fund obligation or otherwise, or is redeemable,
at the option of the holder thereof, in whole or in part.
"DOLLARS" and "$": dollars in lawful currency of the United
States of America.
"EBITDA": for the period of twelve consecutive months next
preceding the date of any determination thereof with respect to the
Borrower and its Subsidiaries, Net Income for such period plus, without
duplication, for such period, (a) Interest Expense to the extent
deducted in determining such Net Income, (b) Income Tax Expenses to the
extent deducted in determining such Net Income, and (c) depreciation
and amortization for such period.
"EFFECTIVE DATE": as defined in Section 11.8.
"ENVIRONMENTAL CLAIMS": any written accusation, allegation,
notice of violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any Governmental
Authority or any Person for damages, injunctive or equitable relief,
personal injury (including sickness, disease or death), Remedial Action
costs, tangible or intangible property damage, natural resource
damages, nuisance, pollution, any adverse effect on the environment
caused by any Hazardous Material, or for files, penalties or
restrictions, resulting from or based upon: (a) the existence or the
continuation of the existence, of a Release (including sudden or
non-sudden, accidental or non-accidental Releases); (b) exposure to any
Hazardous Material; (c) the presence, use, handling, transportation,
storage, treatment or disposal of any Hazardous Material; or (d) the
violation or alleged violation of any Environmental Law or
Environmental Permit.
"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.
"ENVIRONMENTAL PERMIT": any applicable permit, approval,
authorization, certificate, license, variance, filing or permission
required by or from any Governmental Authority pursuant to any
Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of the maximum reserve requirements
in effect on such day (including, without limitation, basic,
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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 per annum rate of
interest quoted by the Administrative Agent at which Dollar deposits
are offered by the Administrative Agent to prime banks at or about
10:00 A.M., New York City time, two Business Days prior to the
beginning of such Interest Period in the interbank Eurodollar market
where the Eurodollar and foreign currency and exchange operations in
respect of its Eurodollar Loans are then being conducted for delivery
on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its
Eurodollar Loan to be outstanding during such Interest Period.
"EURODOLLAR LOANS": any Loan that bears interest computed on
the basis of the Eurodollar Rate.
"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/lOOth of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EVENT OF DEFAULT": any of the events specified in Section 9,
PROVIDED, that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"EXISTING BANK FACILITY": that certain Senior Secured
Revolving Credit Facility dated as of April 6, 1998, by and among the
Borrower, SunTrust Bank, South Florida, National Association and Bank
of America, FSB, as amended from time to time.
"EXTENDED REINVESTMENT DEADLINE": as defined in the definition
of "Reinvestment Notice."
"FAIR MARKET VALUE": as to any property or assets of the
Borrower or any Subsidiary or any property or assets proposed to be
acquired by the Borrower or any Subsidiary, the fair market value of
such property or assets as determined by the unanimous resolution of
the board of directors of the Borrower with respect to the property or
assets of the Borrower or any Subsidiary or the property or assets to
be acquired by the Borrower or any Subsidiary, as the case may be.
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"FEE LETTER": the letter agreement dated June ll, 1998
between NationsBank, N.A. and NationsBanc Montgomery Securities LLC, on
the one hand, and the Borrower, on the other hand, respecting certain
fees payable by such latter Person in connection with this Agreement
and the L/C Fee Letter.
"FINANCIAL STATEMENTS": the financial statements required to
be delivered to the Administrative Agent pursuant to Section 7.1.
"FIRST YEAR INTEREST EXPENSE": as of the date of any
determination with respect to any Person and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP as in effect
on the Effective Date, (a) for the period commencing on the date next
succeeding the Effective Date and ending on such date of determination,
all interest expense and commitment fees with respect to Total Debt for
such period, whether accrued or paid, including, without limitation,
imputed interest on obligations under Capital Leases, less (b) all
interest income received during such period.
"FIXED CHARGE RATIO": as of the last day of any fiscal
quarter, the ratio of (a) EBITDA for the twelve consecutive calendar
months ending on such day, minus Income Tax Expense for the four
consecutive fiscal quarters ending on such day for such four fiscal
quarters, to (b) Fixed Charges for such four fiscal quarters.
"FIXED CHARGES": for the period of the four consecutive fiscal
quarters ending on any day, with respect to the Borrower and its
Subsidiaries, determined on a consolidated basis in accordance with
GAAP as in effect on the Effective Date, the sum of (a) Debt Service
for such period, and (b) Capital Expenditures during such period.
"GAAP": generally accepted accounting principles and practices
as in effect from time to time and concurred in by the independent
certified accountants certifying the Financial Statements required by
Section 7.1(a), applied on a basis consistent (except for changes
concurred in by such independent certified public accountants and
disclosed therein) with the most recent audited Financial Statements
delivered to the Lenders, except as otherwise specifically provided
herein.
"GOVERNMENTAL AUTHORITY": any Federal, state, local or foreign
government, or other entity (including, without limitation, any
governmental or quasi-governmental agency or authority) exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GUARANTEE OBLIGATION": for any Person, without duplication,
any liability, contingent or otherwise, of such Person guaranteeing or
otherwise becoming liable for any obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and
including, without limitation, any liability of such Person, direct or
indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such obligation or to
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<PAGE>
purchase (or to advance or supply funds for the purchase of any
security for the payment of such obligation, (b) to purchase property,
securities or services for the purpose of assuming the owner of such
obligation of the payment of such obligation or (c) to maintain working
capital, equity capital or other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to
pay such obligation; PROVIDED, that the term "Guarantee Obligation"
does not include endorsements for collection or deposit in the ordinary
course of the endorser's business. With respect to the Borrower and the
Subsidiaries, the amount of any Guarantee Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made or, if
not stated or determinable, the maximum reasonably anticipated
liability in respect thereof, as determined in good faith by the
Borrower with respect to any Guarantee Obligation of the Borrower or
any Subsidiary, as the case may be.
"GUARANTY AGREEMENT": a Guaranty Agreement substantially in
the form of Exhibit D, as the same may be amended, supplemented and
otherwise modified from time to time.
"HAZARDOUS MATERIALS": all explosive or radioactive substances
or wastes, hazardous or toxic substances or wastes, pollutants, solid,
liquid or gaseous wastes, including petroleum or petroleum distillates,
friable asbestos or asbestos-containing materials, polychlorinated
biphenyls ("PCBs") or PCB-containing materials or equipment, radon gas,
infectious or medical wastes regulated pursuant to any Environmental
Law and all other substances or wastes of any nature regulated pursuant
to any Environmental Law.
"HIGHEST LAWFUL RATE": with respect to any Lender at the
particular time in question, the maximum rate of interest which, under
applicable Requirements of Law, such Lender is then permitted to charge
on the Obligations owing to it. If the maximum rate of interest which,
under applicable Requirements of Law, such Lender is permitted to
charge on such Obligations shall change after the date hereof, the
Highest Lawful Rate shall be automatically increased or decreased, as
the case may be, from time to time as of the effective time of each
change in the Highest Lawful Rate without notice to the Borrower or any
other Loan Party.
"INCOME TAX EXPENSE": all cash income taxes paid by the
Borrower and the Subsidiaries during the relevant period of
determination.
"INDEBTEDNESS": with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, (b)
all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, including obligations incurred in connection with
the acquisition of property, assets or businesses, (c) all obligations
of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (d)
all obligations of such Person issued or assumed as the deferred
purchase price of property, assets or services (excluding trade
accounts payable, and accrued expenses
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<PAGE>
incurred or arising in the ordinary course of business, payable in
accordance with customary practices and not more than 90 days past
due), (e) all Indebtedness of other Persons secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property or assets (including
revenues, income and profit) owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, (f) all
Guarantee Obligations of such Person, (g) all obligations in respect of
Capital Leases of such Person, (h) all obligations of such Person in
respect of Interest Rate Hedge Agreements (i) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person
and (j) Disqualified Stock. The Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which
such Person is a general partner or member, other than to the extent
that the instrument or agreement evidencing such Indebtedness expressly
limits the liability of such Person in respect thereof pursuant to
provisions and terms reasonably satisfactory to the Administrative
Agent.
"INDEBTEDNESS FOR BORROWED MONEY": all Indebtedness of a
Person of the types described in clauses (a), (b), (c), (d) and (i) of
the definition of "Indebtedness" contained in this Section 1 and,
without duplication of the types of Indebtedness described in such
clauses (a), (b), (c), (d) and (i), the type of Indebtedness described
in clause (e) of such definition to the extent that any such
Indebtedness constitutes Indebtedness of the type described in clause
(a), (b), (c), (d) or (i) of such definition of "Indebtedness" assumed
by such Person.
"INDEMNIFIED PERSON": as defined in Section 11.5.
"INFORMATION": written information (other than financial
statements, budgets, projections and similar financial data),
including, without limitation, certificates, reports, statements and
documents.
"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.
"INTERCOMPANY NOTES": promissory notes, substantially in the
form of Exhibit E, evidencing the intercompany loans made by the
Borrower directly or indirectly to any of the Subsidiaries.
"INTEREST COVERAGE RATIO": commencing with the fiscal quarter
ending April 30, 1998, as of the last day of any fiscal quarter, the
ratio of (i) EBITDA for the twelve consecutive calendar months ending
on such day, to (ii) Interest Expense for the four consecutive fiscal
quarters ending on such day.
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<PAGE>
"INTEREST EXPENSE": as of the date of any determination with
respect to any Person and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP as in effect on the date of
this Agreement, (a) all interest expense and commitment fees with
respect to Total Debt during the four consecutive fiscal quarters of
such Person most recently ended, whether accrued or paid, including,
without limitation, imputed interest on obligations under Capital
Leases, less (b) all interest income received during such period.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, (i) the last
day of each March, June, September and December prior to the maturity
date thereof and (ii) such maturity date, (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, (i) each day which is three months or
a whole multiple thereof, after the first day of such Interest Period
and (ii) the last day of such Interest Period and (d) as to any portion
of any Revolving Loan being repaid on a scheduled payment date in
respect thereof, or being prepaid pursuant to Section 4.2, the date of
such repayment or prepayment.
"INTEREST PERIOD": with respect to any Eurodollar Loan:
(i) 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/Continuation, as the case
may be, given with respect thereto; and
(ii) 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, all of the foregoing provisions relating to Interest Periods
are subject to the following:
(1) 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;
(2) any Interest Period that would otherwise extend
beyond the Revolving Credit Termination Date shall end on the
Revolving Credit Termination Date or such due date, as
applicable;
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<PAGE>
(3) 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
(4) the Borrower shall use reasonable efforts to
select Interest Periods so as not to require a payment or
prepayment of any Eurodollar Loan during an Interest Period
for such Loan.
"INTEREST RATE HEDGE AGREEMENT": any interest rate protection
agreement, interest rate futures contract, interest rate option,
interest rate cap or other interest rate hedge arrangement, to or under
which the Borrower is a party or a beneficiary.
"INVESTMENTS": as defined in Section 8.8.
"ISSUING LENDER": NationsBank, PROVIDED, in the event that
NationsBank shall be replaced as the Administrative Agent pursuant to
Section 10.9, (a) no Letter of Credit shall be issued by NationsBank on
or after the date of such replacement and (b) the replacement
Administrative Agent shall be an Issuing Lender from and after the date
of such replacement.
"L/C APPLICATION": an application, in form and substance
satisfactory to the Issuing Lender, requesting the Issuing Lender to
issue a Letter of Credit.
"L/C FEE LETTER": the letter agreement dated the date of this
Agreement between NationsBank of Texas, N.A. and the Borrower,
respecting fees payable by the Borrower in connection with Letters of
Credit issued for its account under Section 3.
"L/C FEE PAYMENT DATE": the last day of each March, June,
September and December.
"L/C OBLIGATIONS": at any time, an amount equal to the sum of
(a) the aggregate undrawn and unexpired amount of the then outstanding
Letters of Credit and (b) the aggregate amount of all unpaid
Reimbursement Obligations.
"LENDERS": as defined in the preamble hereto and such term
shall also include the Issuing Lender.
"LETTERS OF CREDIT": as defined in Section 3.1(a).
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<PAGE>
"LEVEL": as of any date of determination, the Level set forth
below then in effect, as determined in accordance with the following
provisions of this definition:
LEVEL TOTAL LEVERAGE RATIO
----- --------------------
I Less than 1.50 to 1.00
II Less than 2.50 to 1.00 but greater or equal
to 1.50 to 1.00
III Less than 3.00 to 1.00 but greater or equal
to 2.50 to 1.00
IV Less than 3.50 to 1.00 but greater or equal
to 3.00 to 1.00
For the purposes of this definition, the Level shall be determined as
at the end of each of the first three fiscal quarters of each fiscal
year of the Borrower and as at the end of each fiscal year of the
Borrower, based on the relevant Financial Statements delivered pursuant
to Section 7.1(a) or 7.1(b); changes in the Level shall become
effective on the date on which such financial statements are delivered
to the Administrative Agent (with sufficient copies for each of the
Lenders) and shall remain in effect until the next change to be
effected pursuant to this definition; PROVIDED, that (a) until the
first such financial statements are delivered after the date hereof,
the Level shall be the Level determined and set forth in the Compliance
Certificate delivered pursuant to Section 6.1(v) and (b) if any
financial statements referred to above are not delivered within the
time periods specified in Section 7.1, then, for the period from and
including the date on which such financial statements are required to
be delivered to but not including the date on which such financial
statements are delivered, the Level as at the end of the fiscal period
that would have been covered thereby shall be deemed to be Level IV.
"LICENSE": as to any Person, any license, registration,
permit, authorization, certification, approval, or grant of rights by
any Governmental Authority or other Person necessary or appropriate for
such Person to own, maintain, or operate its business or property.
"LIEN": with respect to any property or asset (or any
revenues, income or profits therefrom) of any Person (in each case
whether the same is consensual or nonconsensual or arises by contract,
operation of law, legal process or otherwise), (a) any mortgage, lien,
security interest, pledge, attachment, levy or other charge or
encumbrance of any kind thereupon or in respect thereof or (b) any
other arrangement under which the same is transferred, sequestered or
otherwise identified with the intention of subjecting the same to,
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<PAGE>
or making the same available for, the payment or performance of any
liability in priority to the payment of the ordinary, unsecured
creditors of such Person. For the purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any asset that it has acquired
or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention
agreement relating to such asset; PROVIDED, that any financing
statement or filing naming a Person shall not constitute a Lien with
respect to such Person if it does not relate to security for an
obligation of such Person.
"LITIGATION": any case, proceeding, claim, grievance, lawsuit
or investigation or inquiry conducted by or pending before any
Governmental Authority or any arbitration proceeding.
"LOAN": any loan made by any Lender pursuant to this
Agreement.
"LOAN DOCUMENTS": this Agreement, the Notes, the Intercompany
Notes, each Guaranty Agreement or Supplement to Guaranty, the Security
Documents, each L/C Application, the Fee Letter, all agreements between
the Borrower and/or any Subsidiary and any Lender respecting fees
payable in connection with this Agreement or any other Loan Document
hereafter executed between or among any such Persons and all other
written agreements, documents, instruments and certificates now or
hereafter executed and delivered by the Borrower, any Subsidiary or any
other Person to or for the benefit of any Lender pursuant to or in
connection with any of the foregoing, and any and all amendments,
supplements and other modifications thereof and all renewals,
extensions, restatements, rearrangements or substitutions from time to
time of all or any part of the foregoing.
"LOAN PARTIES": the collective reference to the Borrower and
the Subsidiaries and any other Person hereafter executing and
delivering a Security Document or a Guaranty Agreement or Supplement to
Guaranty or any equivalent document for the benefit of the Lenders.
"MAJORITY LENDERS": at any time, Lenders whose respective
Revolving Credit Facility Percentages aggregate 66 2/3% or more.
"MARGIN STOCK": has the meaning assigned to such term in
Regulation U of the Board.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a)
the financial condition, business, operations or prospects of the
Borrower and the Subsidiaries taken as a whole, (b) the ability of any
Loan Party to perform its obligations under the Loan Documents to which
it is a party or (c) the validity or enforceability of this Agreement
or any other Loan Document or the rights or remedies of the
Administrative Agent or the Lenders under this Agreement or any of the
other Loan Documents.
"MFSNT": MFS Network Technologies, Inc. a Delaware
corporation.
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<PAGE>
"MFSNT ACQUISITION": the acquisition by the Borrower of the
Capital Securities of MFSNT.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as
defined in Section 4001 (a)(3) of ERISA.
"NAIC": the collective reference to the National Association
of Insurance Commissioners, and any successor thereto, and all other
similar insurance industry regulatory bodies having regulatory
jurisdiction over insurance companies generally.
"NATIONSBANK EXISTING CREDITS": those two certain credit
facilities, in the original principal amounts of $5,000,000 and
$4,200,000, advanced for the purpose of financing a portion of the
initial costs of the MFSNT Acquisition, payable by Frazier Gaines and
Gideon Taylor, including all principal thereof and all interest thereon
and all fees and other expenses payable in connection therewith.
"NET CASH PROCEEDS": (a) in connection with any Asset Sale
(whether in one transaction or a series of related transactions) or
Recovery Event (whether one such event or a series of related events),
all 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, purchase price
adjustment receivable, escrow termination or otherwise, but only as and
when received), if any, net of reasonable attorneys' fees, accountants'
fees, investment banking fees, amounts required to be applied to the
repayment of Indebtedness secured by a Permitted Lien on any asset
which is the subject of such Asset Sale or Recovery Event (other than
any Lien in favor of the Administrative Agent for the benefit of the
Lenders) and other reasonable fees and expenses actually incurred in
connection therewith and net of taxes paid or reasonably estimated to
be payable as a result thereof, including, without limitation, transfer
and withholding taxes (after taking into account any available tax
credits or deductions and any tax sharing arrangements) and all costs
reasonably estimated to be payable in connection with discontinued
operations or shutdowns resulting from the disposition or loss of the
assets or properties which are the subject of such Asset Sale or
Recovery Event; and (b) in connection with any Specified Offering, the
cash proceeds received therefrom, net of reasonable attorneys' fees,
investment banking fees, accountants' fees, underwriting discounts and
commissions and other reasonable fees and expenses actually incurred in
connection therewith.
"NET INCOME": for any period with respect to any Person, the
net income (or loss) of such Person and its Subsidiaries, determined on
a consolidated basis in accordance with GAAP as in effect on the date
of this Agreement; PROVIDED, HOWEVER, there shall be excluded, without
duplication, (a) income (or loss) of any Subsidiary of such Person
which is not a Wholly Owned Subsidiary of such Person, except to the
extent of the amount of any dividends or other distributions actually
paid to such Person or any Wholly Owned Subsidiary of such Person
during such period, (b) income (or loss) of any Person accrued
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<PAGE>
prior to the date such Person becomes a Subsidiary of such Person or is
merged into such Person or any Subsidiary of such Person or the assets
of any Person are acquired by such Person or any Subsidiary of such
Person, (c) the income of any Subsidiary of such Person during such
period to the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary of such income is not at the
time permitted by operation of the terms of its Charter Documents or
any other agreement binding on such Subsidiary or any Requirement of
Law applicable to such Subsidiary or such Person or any of its other
Subsidiaries, (d) any after-tax gains and after-tax losses attributable
to extraordinary and non-recurring items, including Recovery Events
and Dispositions outside the ordinary course of business and any
after-tax gains on pension reversions received by such Person or its
Subsidiaries and (e) to the extent included in calculating such Net
Income, non-cash revenue and non-cash expenses earned or incurred by
such Person or any of its Subsidiaries.
"NON-EXCLUDED TAXES": as defined in Section 4.10(a).
"NON-U.S. LENDER": as defined in Section 4.10(b).
"NOTES": the Revolving Credit Notes.
"NOTICE OF BORROWING": a written notice substantially in the
form of Exhibit F delivered by the Borrower to the Administrative Agent
in accordance with Section 2.2.
"NOTICE OF CONVERSION/CONTINUATION": a written notice in the
form of Exhibit G, delivered by the Borrower to the Administrative
Agent in accordance with Section 4.5.
"NOTICE OF LETTER OF CREDIT REQUEST": a written notice in the
form of Exhibit H delivered by the Borrower to the Issuing Lender in
accordance with Section 3.2.
"OBLIGATIONS": the unpaid principal of and interest on
(including, without limitation, interest accruing after the maturity of
the Loans 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 Loan Parties
to the Administrative Agent or to any Lender (or, in the case of any
Interest Rate Hedge Agreement, 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, any
Letters of Credit, any Interest Rate 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, without limitation, all fees,
charges and disbursements of counsel to the Administrative Agent, the
Issuing Lender or to any Lender that are required to be paid by any
Loan Party pursuant hereto) or otherwise.
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<PAGE>
"PARTICIPANT": as defined in Section 11.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PERFECTION CERTIFICATE": a certificate of the Borrower and/or
each Subsidiary, substantially in the form of Exhibit I and, with
respect to a newly organized, created or acquired Subsidiary, a
certificate of such Subsidiary substantially in the form of Exhibit I.
"PERMITTED LIENS": as applied to the property or assets of any
Person (or any revenues, income or profits of such Person therefrom):
(a) Liens for Taxes not yet due or payable or (if foreclosure,
distraint, sale or other similar proceedings have not been commenced
or, if commenced, have been stayed) which are being contested in good
faith by appropriate proceedings, PROVIDED, that adequate reserves with
respect thereto are maintained on the books of such Person in
conformity with GAAP; (b) statutory Liens of carriers, warehousemen,
mechanics, materialmen, repairmen or other like Liens arising in the
ordinary course of business for sums not yet due or (if foreclosure,
distraint, sale or other similar proceedings have not been commenced
or, if commenced, have been stayed) which are being contested in good
faith by appropriate proceedings, PROVIDED, that adequate reserves with
respect thereto are maintained by such Person in conformity with GAAP;
(c) Liens (other than pursuant to ERISA or Section 412(n) of the
Code), pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation; (d)(i)
bankers' Liens in respect of deposit accounts, (ii) statutory
landlords' Liens and rights of tenants under leases and subleases
granted by such Person to others, in each case not interfering in any
material respect with the business of such Person and its Subsidiaries
and arising in the ordinary course of business and (iii) deposits to
secure the performance of bids, trade contracts, government contracts,
operating leases, statutory obligations, surety and appeal bonds,
performance and return-of-money bonds or to secure liabilities to
insurance carriers under insurance or self-insurance arrangements and
other obligations of a like nature, so long as, in each case with
respect to this clause (d), such Liens (x) do not secure obligations
constituting Indebtedness and (y) are incurred in the ordinary course
of business; (e) easements, rights-of-way, restrictions (including
zoning restrictions), reservations, permits, servitudes, minor defects
or irregularities of title and other similar encumbrances incurred or
existing on property in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not materially
interfere with the ordinary conduct of the business of the Borrower or
any of its Subsidiaries; (f) to the extent the Indebtedness secured
thereby is permitted under Section 8.2(c), Liens securing obligations
of the Borrower and the Subsidiaries under Capital Leases and Liens
securing other Indebtedness to finance the acquisition of assets,
PROVIDED, that (i) such Liens shall be created substantially
simultaneously with the acquisition of such assets, (ii) such Liens do
not at any time encumber any assets other than the assets financed by
such Indebtedness and proceeds of any such assets, (iii) the principal
amount of Indebtedness secured thereby is not increased and (iv) the
principal amount of Indebtedness secured by any such Lien shall at no
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<PAGE>
time exceed 100% of the original purchase price of such assets; (g)
Liens created pursuant to the Security Documents; (h) Liens arising
from any judgment, decree or other order in existence, PROVIDED, that
any such judgment, decree or order shall have been vacated, discharged
or bonded on or prior to the first to occur of (i) the last day upon
which such judgment or decree becomes final and nonappealable and (ii)
the day which is 60 days after the entry thereof and no Event of
Default has occurred pursuant to Section 9(h); and (i) other Liens, so
long as the obligations secured thereby do not exceed $1,000,000 in the
aggregate at any time.
"PERMITTED LINE OF BUSINESS": as defined in Section 8.17.
"PERSON": an individual, sole proprietorship, partnership,
corporation, limited liability company, business trust, joint stock
company, mutual company, trust, unincorporated association, estate,
joint venture, union, employee organization, Governmental Authority or
other entity of whatever nature.
"PLAN": any employee benefit pension plan which 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) a "contributing sponsor" as
defined in Section 4001(a)(13) of ERISA or a member of such
contributing sponsor's "control group" as defined in Section 4001
(a)(14) of ERISA.
"PLEDGE AGREEMENT": a Pledge Agreement substantially in the
form of Exhibit J-l or J-2, as the same may be amended, supplemented
and otherwise modified from time to time.
"PRIME RATE": as defined in the definition of "ABR."
"PRO FORMA COMPLIANCE CERTIFICATE": a Compliance Certificate
giving effect to the relevant proposed transaction for which the
Compliance Certificate is being delivered and any other transactions
relating thereto (as though such transactions had taken place as of the
beginning of the period or on the date being tested, as applicable)
based on the financial information of the Borrower and the Subsidiaries
set forth in the Financial Statements most recently delivered to the
Lenders pursuant to Section 7.1(a) or (b) and demonstrating that no
Default exists both before and after giving effect to such proposed
transactions.
"PROPERTIES": as defined in Section 5.17(a).
"RECOVERY EVENT": any settlement of or payment in respect of a
condemnation or taking or a property insurance claim or casualty
insurance claim relating to any property or asset or rights therein of
the Borrower or any of the Subsidiaries (other than proceeds from
key-man insurance which are used to repurchase the stock of any
deceased or disabled executive) greater than $1,000,000 individually or
in the aggregate in any fiscal year;
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provided, however, that for purposes of Section 7.7(e) and for
determining Net Income, Recovery Event shall mean any or all of such
settlements or payments regardless of amount.
"REGISTER": as defined in Section 11.6(d).
"REIMBURSEMENT OBLIGATIONS": the obligations of the Borrower
to reimburse the Issuing Lender pursuant to Section 3.4 for amounts
drawn under Letters of Credit.
"REINVESTMENT DEADLINE": as defined in the definition of
"Reinvestment Notice."
"REINVESTMENT DEFERRED AMOUNT": with respect to any
Reinvestment Event, the aggregate Net Cash Proceeds received by the
Borrower or any Subsidiary in connection therewith which are not
applied to prepay the Revolving Credit Loans and to permanently reduce
the Total Revolving Credit Commitment pursuant to Sections 4.2(d)(i)
AND 4.2(d)(ii) as a result of the delivery of a Reinvestment Notice.
"REINVESTMENT EVENT": any Asset Sale, Recovery Event or
Specified Offering in respect of which the Borrower has delivered a
Reinvestment Notice.
"REINVESTMENT NOTICE": a written notice executed by a
Responsible Officer of the Borrower stating that no Default has
occurred and is continuing and that the Borrower (directly or
indirectly through a Wholly Owned Subsidiary), in good faith, intends
and expects to contractually commit to use all or a specified portion
of the Net Cash Proceeds of an Asset Sale, Recovery Event or Specified
Offering to make a Subject Acquisition or, in the case of a Recovery
Event or a Specified Offering, to restore or replace the assets in
respect of which a Recovery Event has occurred on or prior to the
earlier of (a) the date which is 180 days after the date of such Asset
Sale, Recovery Event or Specified Offering and (b) the date on which
such proceeds would be required to be applied, or to be offered to be
applied, to prepay, redeem or defease any Indebtedness of the Borrower
or any Subsidiary (other than Indebtedness under this Agreement) if not
applied as described above (such earlier date, the "REINVESTMENT
DEADLINE").
"REINVESTMENT PREPAYMENT AMOUNT": with respect to any
Reinvestment Event, the Reinvestment Deferred Amount relating thereto,
less any amount expended prior to the relevant Reinvestment Prepayment
Date to make a Subject Acquisition or restore or replace assets in
respect of which a Recovery Event has occurred.
"REINVESTMENT PREPAYMENT DATE": with respect to any
Reinvestment Event, the earliest of (a) the first date occurring after
such Reinvestment Event on which a Default shall have occurred, (b) the
relevant Reinvestment Deadline or Extended Reinvestment Deadline, (c)
the date on which the Borrower shall have made a final determination
not to apply the relevant Net Cash Proceeds in the manner contemplated
by the relevant Reinvestment Notice and (d) 30 days after the
termination or consummation of, or amendment to reduce the
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purchase price under, any definitive acquisition agreement described in
the definition in the definition of Reinvestment Notice.
"RELEASE": any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping,
disposing or depositing, or threat thereof, of any Hazardous Material
in, into, onto or through the environment.
"REMEDIAL ACTION": (a) "remedial action" as such term is
defined in CERCLA, 42 U.S.C. Section 9601(24) and (b) all other actions
required by any Governmental Authority or voluntarily undertaken to (i)
clean up, remove, treat, abate or in any other way address any
Hazardous Material in the environment, (ii) prevent the Release or
threat of Release, or minimize the further Release of any Hazardous
Material so it does not migrate or endanger or threaten to endanger
public health, welfare or the environment or (iii) perform studies and
investigations in connection with, or as a precondition to, actions
described in clauses (i) or (ii) above.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section
4043(b) or (c) of ERISA, other than those events described in Section
4043(b) as to which notice is waived by applicable PBGC regulation or
those events described in Section 4043(c) as to which the thirty-day
notice period is waived under subsection .13, .14, .16, .18, .19 or .20
of PBGC Reg. /section/ 2615.
"REQUIREMENT OF LAW": as to any Person, (a) the Charter
Documents of such Person and (b) any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, writ, edict,
award, authorization or other requirement of any Governmental Authority
or any obligation included in any Authorization or resulting from
binding arbitration, including, without limitation, any requirement
under common law, 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, the
president, the chief financial officer, the chief legal officer or any
vice president of the Borrower or any Subsidiary or any other Loan
Party.
"RESTRICTED PAYMENTS": as defined in Section 8.6.
"RESTRICTED SUBSIDIARY": any Subsidiary of the Borrower other
than those listed on SCHEDULE 1.1 and those additional Subsidiaries of
the Borrower, added by a supplement to such SCHEDULE 1.1 whose assets
either: (i) are not located in, or income attributable to sources other
than, the United States, the pledge of the stock or assets of which
would be treated as
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a repatriation of the earnings or income thereof or taxable dividend to
the Borrower under /section/957 of the Code ("Controlled Foreign
Corporations"); or (ii) consist solely of Capital Securities of
Controlled Foreign Corporations.
"REVOLVING CREDIT COMMITMENT": as to any Lender, its
obligation, if any, to make Revolving Credit Loans to, or issue or
participate in Letters of Credit issued on behalf of, the Borrower in
an aggregate amount not to exceed at any one time outstanding the
amount set forth opposite such Revolving Credit Lender's name in Annex
l under the heading "Revolving Credit Commitment" or, in the case of
any Lender that is an Assignee, the amount of the assigning Lender's
Revolving Credit Commitment assigned to such Assignee pursuant to
Section 11.6(c) and set forth in the applicable Assignment and
Acceptance (in each case, as the same may be increased, reduced or
otherwise adjusted from time to time as provided herein).
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and
including the Effective Date to, but not including, the Revolving
Credit Termination Date.
"REVOLVING CREDIT FACILITY": the credit facility provided for
in Section 2.1.
"REVOLVING CREDIT FACILITY PERCENTAGE": at any time, as to any
Revolving Credit Lender, the percentage of the aggregate outstanding
Revolving Credit Loans and L/C Obligations then constituted by such
Lender's outstanding Revolving Credit Loans and participations in L/C
Obligations (or obligations held by the Issuing Lender in respect of
L/C Obligations, in the case of the Issuing Lender); PROVIDED, if no
Revolving Credit Loans or L/C Obligations are outstanding, the
Revolving Credit Facility Percentage for any Lender shall be the
percentage of the aggregate Revolving Credit Commitments then
constituted by such Lender's Revolving Credit Commitment.
"REVOLVING CREDIT LENDER": each Lender which has a Revolving
Credit Commitment or which has Revolving Credit Loans outstanding.
"REVOLVING CREDIT LOANS": as defined in Section 2.1.
"REVOLVING CREDIT NOTE": a promissory note of the Borrower in
the form of Exhibit A.
"REVOLVING CREDIT TERMINATION DATE": the earliest of (a)
June 30, 2006 and (b) the date on which the Revolving Credit Loans
become due and payable in full, pursuant to acceleration or otherwise.
"SECURED PARTIES": as defined in the Security Documents.
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"SECURITY AGREEMENT": a Security Agreement substantially in
the form of Exhibit L-1 or L-2, as amended, supplemented and otherwise
modified from time to time.
"SECURITY DOCUMENTS": the collective reference to each Pledge
Agreement, the Security Agreement, and any other security documents
hereafter delivered to the Administrative Agent granting a Lien on any
asset or assets of any Person to secure the respective obligations and
liabilities of the Borrower hereunder and the Borrower and the
Subsidiaries under any of the other Loan Documents or to secure any
guaranty of any such obligations and liabilities.
"SENIOR FUNDED DEBT": as of any date of determination with
respect to the Borrower and its Subsidiaries, Total Funded Debt as of
such date, minus Indebtedness that is effectively subordinated in right
of payment and security to the Notes.
"SENIOR LEVERAGE RATIO": as of the last day of any fiscal
quarter, the ratio of (a) Senior Funded Debt as of such day to (b)
EBITDA for the twelve consecutive calendar months ending on such day.
"SENIOR SUBORDINATED NOTES": the Senior Subordinated Notes of
the Borrower in original aggregate principal amount no greater than
$140,000,000, subordinated to the satisfaction of the Administrative
Agent to the Notes (both in right of payment and in security), and
having such other terms, conditions and provisions as may be
satisfactory to the Administrative Agent in its sole discretion.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV
of ERISA, but which 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 "fair value" or
"present fair saleable value" of the assets of such Person (on a
going-concern basis) 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) such fair value or present fair saleable value of the
assets of such Person (on a going-concern basis) 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," (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
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or unmatured, disputed, undisputed, secured or unsecured and (iii)
unliquidated, contingent, disputed and unmatured claims shall be valued
at the amount that can be reasonably expected to be actual and matured.
"SPECIFIED OFFERING": any issuance or sale of Borrower Capital
Securities by the Borrower or any incurrence of Indebtedness by the
Borrower or any Subsidiary, excluding:
(a) any incurrence of Indebtedness of the Borrower or any
Subsidiary which is permitted by Section 8.2;
(b) any issuance or sale of Borrower Capital Securities of the
type described in clause (a) of the definition thereof (i) to
directors, officers or employees of the Borrower or a Subsidiary by
reason of their employment or (ii) the Net Cash Proceeds of which the
Borrower uses to purchase or redeem all or any portion of the 12%
Senior Subordinated Notes;
(c) any issuance or sale of Borrower Capital Securities of the
type described in clause (a) of the definition thereof for the
simultaneous repurchase or redemption of other Borrower Capital
Securities, subject to the provisions of Sections 8.7 OR 8.6.;
(d) the Senior Subordinated Notes; and
(e) the WorldCom Option.
"SPECIFIED TAXES": as defined in Section 4.10.
"STATUS": the existence of Level I Status, Level II Status,
Level III Status on Level IV Status, as the case may be.
"SUBJECT ACQUISITION": a proposed acquisition (including the
entry into an option agreement) by the Borrower, directly or indirectly
through a Wholly Owned Subsidiary, that satisfies, in the reasonable
opinion of the Administrative Agent, the Acquisition Criteria.
"SUBSIDIARY": as to any Person, a corporation, partnership or
other entity 50% or more of the outstanding Voting Stock of which is at
the time owned, or the management or policies of which are 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.
"SUPPLEMENT TO GUARANTY": a Supplement to Guaranty in
substantially the form attached as Exhibit A to the Guaranty Agreement.
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"TAXES": all taxes, assessments, fees, levies, imposts,
duties, deductions, withholdings or other similar charges of any nature
whatsoever from time to time or at any time imposed by any Governmental
Authority.
"TERMINATION DATE": June 11, 2001.
"TOTAL DEBT": as of any date of determination with respect to
the Borrower and its Subsidiaries, the sum of, without duplication, (a)
all Indebtedness for Borrowed Money, (b) all obligations in respect of
Capital Leases and (c) all Guarantee Obligations in respect of
Indebtedness for Borrowed Money of any other Person, all determined on
a consolidated basis in accordance with GAAP as in effect on the date
of this Agreement.
"TOTAL FUNDED DEBT": as of any date of determination with
respect to the Borrower and its Subsidiaries, Total Debt as of such
date having a maturity of not less than one year.
"TOTAL LEVERAGE RATIO": as of the last day of any fiscal
quarter, the ratio of (a) Total Funded Debt as of such day to (b)
EBITDA for the twelve consecutive calendar months ending on such day.
"TOTAL REVOLVING CREDIT COMMITMENT": the aggregate of all
Revolving Lenders (as the same may be increased, reduced or otherwise
adjusted from time to time).
"TRANCHE": the collective reference to Eurodollar Loans made
by the Revolving Credit Lenders, 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.
"TRANSFEREE": as defined in Section 11.6(f).
"TRIGGER DATE": the earlier of (a) the date on which the Loans
and all other Obligations owing under this Agreement shall have become
or been declared to be due and payable pursuant to Section 9 and (b)
the date on which the Majority Lenders shall have notified the
Administrative Agent after the occurrence of an Event of Default that
amounts are to be shared pursuant to Section 11.7(a).
"12% SUBORDINATED NOTES": Borrower's 12% Senior Subordinated
Notes Due January 6, 2005 issued in the original aggregated principal
amount of $10,000,000 pursuant to a Securities Purchase Agreement dated
as of January 6, 1998.
"TYPE": as to any Loan, its nature as an ABR Loan or a
Eurodollar Loan.
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"UNIFORM CUSTOMS": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"VOTING STOCK": with respect to any Person, the Capital
Securities of such Person of the class or classes pursuant to the terms
of which the holders thereof have the general voting power under
ordinary circumstances to elect members of the board of directors,
managers or trustees (or Persons performing equivalent functions) of
such Person, irrespective of whether or not at the time Capital
Securities of such Person of any other class or classes shall have or
might have voting power by reason of the happening of any contingency.
"WHOLLY OWNED SUBSIDIARY": as to any Person, any other Person
100% of the Capital Securities of which (other than directors'
qualifying shares required by law) is owned by such Person directly or
indirectly through one or more other Wholly Owned Subsidiaries.
"WORLDCOM OPTION": the option granted by the Borrower to MFS
Communications Company, Inc. to purchase up to 2,000,000 shares of the
common stock of the Borrower having a cash exercise price of $7.00 per
share, subject to adjustment granted in connection with the MFSNT
Acquisition.
"WORKING CAPITAL": as of any day, the aggregate amount of all
current assets reduced by the aggregate amount of all current
liabilities (other than the current portion of long-term Indebtedness
(including mandatory prepayments with respect to such Indebtedness),
accrued Interest Expense and accrued or deferred income tax expense),
all determined as of such day for the Borrower and the Subsidiaries on
a consolidated basis in accordance with GAAP as in effect on the
Effective Date.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any other Loan Document or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) Unless otherwise specified herein, all accounting terms used herein
(and in any other Loan Document and any certificate or other document made or
delivered pursuant hereto or thereto) shall be interpreted, all accounting
determinations shall be made, and all financial statements required to be
delivered hereunder shall be prepared, in accordance with GAAP as in effect from
time to time; PROVIDED, HOWEVER, that if the Borrower notifies the
Administrative Agent that the Borrower wishes to amend any covenant in Section 8
to eliminate the effect of any change in GAAP on the operation of such covenant
(or if the Administrative Agent notifies the Borrower that the Majority Lenders
wish to amend Section 8 for such purpose), then compliance with such covenant
shall be determined on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such covenant is amended in a manner satisfactory to the Borrower and the
Majority Lenders.
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(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, Annex, 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.
(e) References in this Agreement or any other Loan Document to
knowledge by the Borrower of events or circumstances shall be deemed to refer to
events or circumstances of which a Responsible Officer has actual knowledge or
reasonably should have knowledge.
(f) References in this Agreement or any other Loan Document to
financial statements shall be deemed to include all related schedules and notes
thereto.
(g) Except as otherwise specified herein, all references to any
Governmental Authority or Requirement of Law defined or referred to herein shall
be deemed references to such Governmental Authority or Requirement of Law or any
successor Governmental Authority or Requirement of Law, and any rules or
regulations promulgated thereunder from time to time, in each case as the same
may have been or may be amended or supplemented from time to time.
(h) References herein to a certification or statement of an officer or
other individual shall mean a certification or statement of the Borrower which
is executed on behalf of the Borrower by such individual in his or her capacity
as an officer of the Borrower.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 REVOLVING CREDIT FACILITY. (a) The aggregate amount ofthe Revolving
Credit Commitments on the date of this Agreement equals $35,000,000. Subject to
the terms and conditions hereof, each Revolving Credit Lender severally agrees
to make revolving credit loans ("REVOLVING CREDIT LOANS") to the Borrower from
time to time during the Revolving Credit Commitment Period, PROVIDED, that in no
event shall the sum of the aggregate outstanding (i) Revolving Credit Loans and
(ii) participations in L/C Obligations of any Revolving Credit Lender at any
time exceed such Revolving Credit Lender's Revolving Credit Commitment. During
the Revolving Credit Commitment Period the Borrower may borrow, prepay the
Revolving Credit Loans in whole or in part, and reborrow under this Section 2.1,
all in accordance with the terms and conditions of this Agreement. The Revolving
Credit Loans of each Revolving Credit Lender shall be evidenced by a Revolving
Credit Note payable to its or its nominee's order on or before the Revolving
Credit Termination Date.
(b) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the
Borrower and notified to the Administrative Agent in accordance with Section 2.2
or Section 4.5.
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2.2 PROCEDURE FOR REVOLVING CREDIT BORROWINGS. Subject to the terms and
conditions hereof, the Borrower may borrow under the Revolving Credit Facility
during the Revolving Credit Commitment Period on any Business Day, provided,
that the Borrower shall give the Administrative Agent an irrevocable Notice of
Borrowing (which notice must be received by the Administrative Agent prior to
11:00 A.M., Dallas, Texas time, together with a Pro Forma Compliance
Certificate, giving effect to the requested borrowing, (a) three Business Days
prior to the requested Borrowing Date, if all or any part of the requested
Revolving Credit Loans are to be initially Eurodollar Loans, or (b) one Business
Day prior to the requested Borrowing Date, otherwise), specifying (i) the amount
to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing
is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the respective
amounts of each Tranche and the respective lengths of the initial Interest
Periods therefor. Each borrowing under the Revolving Credit Facility shall be in
an amount equal to (x) in the case of ABR Loans, $1,000,000 or a whole multiple
of $500,000 in excess thereof (or, if the then Available Revolving Credit
Commitments are less than $500,000, such lesser amount) and (y) in the case of
Eurodollar Loans, each Tranche shall be $1,000,000 or a whole multiple of
$500,000 in excess thereof. Upon receipt of any such Notice of Borrowing and
Compliance Certificate from the Borrower, the Administrative Agent shall
promptly notify each Revolving Credit Lender thereof. Each such 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 office of the
Administrative Agent specified in Section 11.2 prior to ll:OO A.M., Dallas,
Texas 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 at the office of the Administrative Agent 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 REPAYMENT OF LOANS. (a) The Borrower hereby unconditionally
promises to pay to the Administrative Agent for the account of each Revolving
Credit Lender, the then unpaid principal amount of each Revolving Credit Loan of
such Lender, on or before the Revolving Credit Termination Date. The Borrower
hereby further agrees to pay interest on the unpaid principal amount of the
Loans from time to time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in Section 4.1.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
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(c) The Administrative Agent shall maintain the Register pursuant to
Section 11.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Loan made hereunder, the Type thereof and each
Interest Period, if any, applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) both the amount of any sum received by the
Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the Register shall, to the extent permitted by
applicable Requirements of Law, be PRIMA FACIE evidence of the existence and
amounts of the obligations of the Borrower therein recorded; PROVIDED, HOWEVER,
that the failure of the Administrative Agent to maintain the Register, or any
error therein, shall not in any manner affect the obligation of the Borrower to
repay (with applicable interest) the Loans made to the Borrower by any Lender in
accordance with the terms of this Agreement and the Notes.
SECTION 3. LETTERS OF CREDIT
3.1 L/C COMMITMENT. (a) Subject to the terms and conditions hereof, the
Issuing Lender, in reliance on the agreements of the other Revolving Credit
Lenders set forth in Section 3.3(a), agrees to issue letters of credit ("LETTERS
OF CREDIT") for the account of the Borrower on any Business Day in such form as
may be approved from time to time by the Issuing Lender; provided, that the
Issuing Lender shall not issue any Letter of Credit if, after giving effect to
such issuance, (i) the outstanding L/C Obligations would exceed $5,000,000 or
(ii) the aggregate amount of all outstanding L/C Obligations and Revolving
Credit Loans would exceed the aggregate Available Revolving Credit Commitments.
Each Letter of Credit shall (i) be denominated in Dollars, (ii) be a standby
letter of credit issued for the account of the Borrower, which finances the
working capital and business needs of the Borrower and the Wholly Owned
Subsidiaries, including, without limitation, good faith deposits in connection
with Subject Acquisitions, and (iii) expire no later than the earlier of (x) the
Revolving Credit Termination Date and (y) the date which is 12 months after its
date of issuance. Any request by the Borrower to renew or extend an existing
Letter of Credit, or any renewal of any existing Letter of Credit pursuant to
the terms thereof, shall be deemed to be, for all purposes of this Agreement,
the issuance of a new Letter of Credit hereunder and each such renewal or
extension shall be subject to, and the Issuing Lender shall be entitled to the
benefits of, this Section 3.
(b) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of Texas.
(c) 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 other Revolving Credit Lender to exceed any limits imposed
by, any applicable Requirement of Law.
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrower may from
time to time request that the Issuing Lender issue a Letter of Credit (or that
an existing Letter of Credit be
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renewed or extended) by delivering to the Issuing Lender and the Administrative
Agent a Notice of Letter of Credit Request, a Compliance Certificate, giving
effect to the requested Letter of Credit, and an L/C Application therefor,
completed to the reasonable satisfaction of the Issuing Lender, and such other
certificates, documents and other papers and information as the Issuing Lender
may reasonably request. Upon receipt of any Notice of Letter of Credit Request,
Compliance Certificate and L/C Application, the Issuing Lender will notify the
Revolving Credit Lenders thereof and process such L/C 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 L/C 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 by the Issuing Lender and the Borrower. The Issuing
Lender shall furnish a copy of such Letter of Credit to the Borrower and each
Revolving Credit Lender promptly following the issuance thereof.
3.3 LETTER OF CREDIT PARTICIPATIONS. (a) The Issuing Lender irrevocably
agrees to grant and hereby grants to each Revolving Credit Lender, and, to
induce the Issuing Lender to issue Letters of Credit hereunder, each Revolving
Credit Lender irrevocably agrees to accept and purchase and hereby accepts and
purchases from the Issuing Lender, on the terms and conditions hereinafter
stated, for such Revolving Credit Lender's own account and risk an undivided
interest equal to such Revolving Credit Lender's Revolving Credit Facility
Percentage in the Issuing Lender's obligations and rights under each Letter of
Credit issued by the Issuing Lender and the amount of each draft paid by the
Issuing Lender thereunder. Each Revolving Credit Lender unconditionally and
irrevocably agrees with the Issuing Lender that, if a draft is paid under any
Letter of Credit issued by the Issuing Lender for which the Issuing Lender is
not reimbursed in full by the Borrower in accordance with Section 3.4(a), such
Revolving Credit Lender shall pay to the Issuing Lender upon demand at the
Issuing Lender's address for notices specified herein an amount equal to such
Revolving Credit Lender's Revolving Credit Facility Percentage of the amount of
such draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any Revolving Credit Lender to
the Issuing Lender pursuant to Section 3.3(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 Revolving Credit Lender shall pay to the Issuing Lender on
demand an amount equal to the product of (i) such amount, times (ii) the daily
average Federal Funds 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 (iii) 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 Revolving Credit Lender
pursuant to Section 3.3(a) is not in fact made available to the Issuing Lender
by such Revolving Credit Lender within three Business Days after the date such
payment is due, the Issuing Lender shall be entitled to recover from such
Revolving Credit Lender, on demand, such amount
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with interest thereon calculated from such due date at a rate per annum equal to
the ABR, plus the Applicable Margin for ABR Loans. A certificate of the Issuing
Lender submitted to any Revolving Credit Lender with respect to any amounts
owing under this Section 3.3 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 Revolving Credit Lender its
pro rata share of such payment in accordance with Section 3.3(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, if such payment is received prior to 12:00 p.m., Dallas,
Texas time, on a Business Day, distribute to such Lender its pro rata share
thereof on the same Business Day or if received later than 12:00 p.m. on the
next succeeding Business Day; 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 Revolving Credit Lender shall return to the Issuing Lender
the portion thereof previously distributed by the Issuing Lender to it.
(d) Notwithstanding anything to the contrary in this Agreement, each
Revolving Credit Lender's obligation to make the Loans referred to in Section
3.4(B) and to purchase and fund participating interests pursuant to Section
3.3(a) shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right which such Revolving Credit Lender or the
Borrower may have against the Issuing Lender, the Borrower or any other Person
for any reason whatsoever; (ii) the occurrence or continuance of a Default or
the failure to satisfy any of the other conditions specified in Section 6; (iii)
any adverse change in the condition (financial or otherwise) of any Loan Party;
(iv) any breach of this Agreement or any other Loan Document by any Loan Party
or any Revolving Credit Lender; or (v) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
3.4 REIMBURSEMENT OBLIGATION OF THE BORROWER. (a) The Borrower agrees
to reimburse the Issuing Lender (it being understood that such reimbursement
shall be effected by means of a borrowing of Loans unless the Administrative
Agent shall determine in its sole discretion that such Loans may not be made for
such purpose as a result of a Default pursuant to Section 9(F)), upon receipt of
notice from the Issuing Lender of the date and amount of a draft presented under
any Letter of Credit and paid by the Issuing Lender, for the amount of (i) such
draft so paid and (ii) 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 Dollars and in immediately available funds, on the date on
which the Borrower receives such notice, if received prior to 11:00 a.m.,
Dallas, Texas time, on a Business Day and otherwise on the next succeeding
Business Day.
(b) Interest shall be payable on any and all amounts remaining unpaid
by the Borrower under this Section 3.4, (i) from the date the draft presented
under the affected Letter of
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Credit is paid to the date on which the Borrower is required to pay such amounts
pursuant to paragraph (a) above at a rate per annum equal to the ABR, plus the
Applicable Margin and (ii) thereafter until payment in full at the rate
specified in Section 4.1(C)(I)(Y). Except as otherwise specified in Section
3.4(a), each drawing under any Letter of Credit shall constitute a request by
the Borrower to the Administrative Agent for a borrowing of Revolving Credit
Loans that are ABR Loans pursuant to Section 2.2 in the amount of such drawing.
The Borrowing Date with respect to such borrowing shall be the date of payment
of such drawing and the proceeds of such Loans shall be applied by the
Administrative Agent to reimburse the Issuing Lender for the amounts paid under
such Letter of Credit.
3.5 OBLIGATIONS ABSOLUTE. Subject to the penultimate sentence of this
Section 3.5, the Borrower's obligations under this Section 3 shall be absolute
and unconditional under any and all circumstances and irrespective of any
set-off, counterclaim or defense to payment which the Borrower may have or have
had against the Issuing Lender, any Revolving Credit Lender or any beneficiary
of a Letter of Credit. The Borrower also agrees with the Issuing Lender that the
Issuing Lender and the Revolving Credit Lenders shall not be responsible for,
and the Borrower's Reimbursement Obligations under Section 3.4(A) shall not be
affected by, among other things, (i) 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 (ii) 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 (iii) any claims whatsoever of the
Borrower against any beneficiary of such Letter of Credit or any such
transferee. The Issuing Lender and the Revolving Credit Lenders 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 caused by such Person's
gross negligence or willful misconduct. 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 Section 5-109 of the Uniform Commercial Code of the State of Texas,
shall be binding on the Borrower and shall not result in any liability of either
the Issuing Lender or any Revolving Credit Lender to the Borrower.
3.6 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 and the Revolving Credit Lenders of the date and amount thereof.
Subject to Section 3.5, 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
appear on their face to be in conformity with such Letter of Credit.
3.7 L/C APPLICATION. To the extent that any provision of any L/C
Application related to any Letter of Credit is inconsistent with the provisions
of this Agreement, the provisions of this Agreement shall apply.
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SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS
4.1 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 lesser of (i) the Highest Lawful Rate and (ii) the
Eurodollar Rate determined for such day, plus the Applicable Margin in effect
for such day.
(b) Each ABR Loan shall bear interest for each day that it is
outstanding at a rate per annum equal to the lesser of (i) the Highest Lawful
Rate and (ii) the ABR for such day, plus the Applicable Margin in effect for
such day.
(c) (i) If an Event of Default shall occur and be continuing, all Loans
and Reimbursement Obligations shall bear interest at a rate per annum which is
equal to (x) in the case of the Loans, the lesser of (A) the Highest Lawful Rate
and (B) the rate that would otherwise be applicable thereto pursuant to the
foregoing provisions of this Section 4.1, plus 2% and (y) in the case of
Reimbursement Obligations, at a rate per annum equal to the lesser of (A) the
Highest Lawful Rate and (B) the ABR, plus the Applicable Margin for ABR Loans,
plus 2% and (ii) if such Event of Default relates to the nonpayment when due
(whether at the stated maturity, by acceleration or otherwise) of any interest
payable on any Loan or any commitment fee or other amount payable hereunder or
under any other Loan Document, to the extent permitted by applicable
Requirements of Law, such overdue amount shall bear interest at the lesser of
(A) the Highest Lawful Rate and (B) the ABR, plus the Applicable Margin for ABR
Loans, plus 2%, in each case, with respect to clauses (i) and (ii) above, from
the date of any such Event of Default until the earliest of (x) the waiver of
such Event of Default by the requisite number of Lenders, (y) the cure of such
Event of Default to the reasonable satisfaction of the requisite Lenders and (z)
the payment in full of the Obligations (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date,
PROVIDED, that interest accruing pursuant to paragraph (c) of this Section 4.1
shall be payable from time to time on demand.
4.2 OPTIONAL AND MANDATORV PREPAVMENTS AND COMMITMENT REDUCTIONS. (a)
The Borrower shall prepay the Loans as and when required by Section 4.2(b),
4.2(c) and 4.2(d), and the Borrower may at any time and from time to time prepay
the Revolving Credit Loans, in whole or in part, without premium or penalty (it
being understood that amounts payable pursuant to Section 4.11 do not constitute
premium or penalty). Each such prepayment shall be made upon at least three
Business Days' irrevocable notice to the Administrative Agent (in the case of
Eurodollar Loans), at least one Business Day's irrevocable notice to the
Administrative Agent (in the case of ABR Loans), specifying the date and amount
of prepayment and whether the prepayment is (i) of Revolving Credit Loans, and
(ii) of Eurodollar Loans, ABR Loans or a combination thereof, and, in each case
if a combination thereof, the principal amount allocable to each; provided,
however, if such prepayment is anticipated to be made from Net Cash Proceeds to
be received at the time of the consummation of any Asset Sale, Specified
Offering or Recovery Event, the Borrower may
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withdraw any such notice of prepayment on or before the proposed date of such
prepayment if for any reason the Borrower's receipt of the proceeds of such
Asset Sale, Specified Offering or Recovery Event has been terminated or
postponed. Upon the receipt of any such notice the Administrative Agent shall
promptly notify each affected Lender thereof. If any such notice is given and
not withdrawn as provided above, the amount specified in such notice shall be
due and payable on the date specified therein, together with (if a Eurodollar
Loan is prepaid other than at the end of the Interest Period applicable thereto)
any amounts payable pursuant to Section 4.11. Partial prepayments of Loans
outstanding under the Revolving Credit Facility not required to be made under
Section 4.2(C), 4.2(D) OR 4.2(E), shall be in an aggregate principal amount of
$500,000 or a whole multiple of $500,000 in excess thereof or such amount as may
then be outstanding under the Revolving Credit Facility.
(b) The Borrower shall have the right, upon not less than three
Business Days' notice to the Administrative Agent (which will promptly notify
the Lenders thereof), to terminate the Commitments or, from time to time, to
reduce the amount of such Commitments; PROVIDED, that no such termination or
reduction of Revolving Credit Commitments shall be permitted if, after giving
effect thereto and to any prepayments of the Revolving Credit Loans made on the
effective date thereof, the sum of the aggregate outstanding Revolving Credit
Loans would exceed the aggregate Revolving Credit Commitments then in effect.
Any such reduction shall be in a minimum amount of $500,000 or a whole multiple
of $500,000 in excess thereof and shall reduce permanently the relevant
Commitments then in effect. Any Commitment reductions under this Section 4.2(B)
shall not affect the amount of the percentage reductions required under Section
4.2(C).
(c) If at any time the sum of the aggregate outstanding Revolving
Credit Loans of all Revolving Credit Lenders exceeds the Total Revolving Credit
Commitment then in effect, the Borrower shall, without notice or demand,
immediately repay the Revolving Credit Loans in an aggregate principal amount
equal to such excess, together with accrued and unpaid interest on the principal
amount so paid or prepaid to the date of such payment or prepayment and any
amounts payable under Section 4.11.
(d) (i) If the Borrower or any Subsidiary shall consummate a
Specified Offering, except to the extent a Reinvestment Notice is
delivered in respect thereof, an amount equal to 100% of the Net Cash
Proceeds thereof shall be applied no later than the date of the
consummation of such Specified Offering toward the prepayment of the
Revolving Credit Loans and a corresponding permanent reduction of the
Total Revolving Credit Commitment as set forth in Section 4.2(e);
PROVIDED, that notwithstanding the foregoing, on each Reinvestment
Prepayment Date, an amount equal to the Reinvestment Prepayment Amount
with respect to the relevant Reinvestment Event shall be applied toward
the prepayment of the Revolving Credit Loans and a corresponding
permanent reduction of the Total Revolving Credit Commitment as set
forth in Section 4.2(e).
(ii) If on any date the Borrower or any Subsidiary shall
receive Net Cash Proceeds from any Asset Sale or from any Recovery
Event then, except to the extent a Reinvestment
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Notice is delivered with respect to all or a specified portion of the
Net Proceeds in respect thereof, an amount equal to 100% of such Net
Cash Proceeds (not so specified in a Reinvestment Notice) shall be
applied no later than the date of such receipt toward the prepayment of
the Revolving Credit Loans and a corresponding permanent reduction of
the Total Revolving Credit Commitment as set forth in Section 4.2(e);
PROVIDED, that notwithstanding the foregoing, on each Reinvestment
Prepayment Date, an amount equal to the Reinvestment Prepayment Amount
with respect to the relevant Reinvestment Event shall be applied toward
the prepayment of the Revolving Credit Loans and a corresponding
permanent reduction of the Total Revolving Credit Commitment as set
forth in Section 4.2(E).
(iii) If, but for this Section 4.2(D)(III), the Borrower or
any Subsidiary would be required to make any payment on account of,
make an offer to purchase or set apart assets for a sinking or other
analogous fund for the purchase, redemption, defeasance, retirement or
other acquisition of, any Indebtedness of the Borrower or any
Subsidiary from the proceeds of any Asset Sale, Recovery Event or
Specified Offering, other than amounts payable in respect of the
Obligations pursuant to this Agreement and amounts required to be
applied to the repayment of Indebtedness secured by a Permitted Lien on
any property or asset which is the subject of such Asset Sale or
Recovery Event (other than any Lien in favor of the Administrative
Agent for the benefit of the Secured Parties), then an amount equal to
100% of such proceeds shall be applied no later than 10 days prior to
the date any such payment, offer to purchase or setting apart of such
assets would be required under the terms of any indenture or other
agreement evidencing, creating or governing such Indebtedness toward
the prepayment of the Revolving Credit Loans and corresponding
permanent reductions of and the Total Revolving Credit Commitment as
set forth in Section 4.2(E).
(e) Amounts to be applied in connection with prepayments and Commitment
reductions required by Sections 4.2(E) shall be applied, pro rata (based on the
then total amount of the Total Revolving Credit Commitment) to reduce
permanently the Total Revolving Credit Commitment. In the case of any reduction
of the Total Revolving Credit Commitment the Borrower shall, if applicable,
comply with the requirements of Section 4.2(D). The application of any
prepayment to the Loans pursuant to this Section 4.2 shall be made first to ABR
Loans and second to Eurodollar Loans. Each prepayment of the Loans under this
Section 4.2 shall be accompanied by accrued and unpaid interest to the date of
such prepayment on the amount prepaid and any amounts payable under Section
4.11.
4.3 FEES. (a) The Borrower agrees to pay to the Administrative Agent
for the account of each relevant Lender, a commitment fee equal to 0.375% of the
average daily amount of the Available Revolving Credit Commitment of such
Lender.
Such commitment fee shall be (i) payable quarterly in arrears on the last
Business Day of each March, June, September and December and on the Revolving
Credit Termination Date and (ii) fully earned and non-refundable upon payment
thereof.
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(b) The Borrower shall pay (without duplication of any fee payable
under Section 4.3(A)) to the Administrative Agent the fees provided for in the
Fee Letter on the dates and in the amounts provided for therein.
(c) The Borrower shall pay to the Administrative Agent, for the account
of each Revolving Credit Lender, a letter of credit fee with respect to each
Letter of Credit, computed for the period from and including the date of
issuance of such Letter of Credit to the date such Letter of Credit is no longer
outstanding, computed at a percentage rate per annum equal to the Applicable
Margin from time to time applicable to Revolving Credit Loans bearing interest
at the Eurodollar Rate, calculated on the basis of a 360-day year, consisting of
twelve 30-day months, of the aggregate average daily amount available to be
drawn under such Letter of Credit for the period as to which payment of such fee
is made, payable on each L/C Fee Payment Date to occur while such Letter of
Credit remains outstanding and on the date such Letter of Credit expires, is
canceled or is drawn upon. Such fee shall be nonrefundable. In addition to the
foregoing fees, the Borrower shall pay to the Issuing Lender the fees provided
for in the L/C Fee Letter, in the amounts and on the dates provided for therein.
4.4 COMPUTATION OF INTEREST AND FEES. Interest (other than interest
based on the Eurodollar Rate) and commitment fees shall be calculated on the
basis of a 365- (or 366-, as the case may be) day year for the actual days
elapsed; and interest based on the Eurodollar Rate shall be calculated on the
basis of a 360-day year, consisting of twelve 30-day months. The Administrative
Agent shall as soon as practicable notify the Borrower and the affected 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 Requirement
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 affected Lenders of the effective date and the
amount of each such change in interest rate. 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.
4.5 CONVERSION AND CONTINUATION OPTIONS. (a) Subject to the terms and
conditions hereof, the Borrower may elect from time to time to convert
Eurodollar Loans to ABR Loans by giving the Administrative Agent an irrevocable
Notice of Conversion/Continuation at least one Business Day prior to the
effective date of such election, which date shall be the last day of the
applicable Interest Period for such Loans. The Borrower may elect from time to
time to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent
an irrevocable Notice of Conversion/Continuation at least three Business Days
prior to the effective date of such election. Any such Notice of
Conversion/Continuation concerning conversions to Eurodollar Loans shall specify
the length of the initial Interest Period or Interest Periods therefor. Upon
receipt of any such Notice, the Administrative Agent shall promptly notify each
relevant Lender thereof. All or any part outstanding Eurodollar Loans and ABR
Loans may be converted as provided herein.
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(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
to the Administrative Agent an irrevocable Notice of Conversion/Continuation,
specifying therein the length of the next Interest Period to be applicable to
such Loans, determined in accordance with the applicable provisions of the term
"Interest Period" set forth in Section l.l; PROVIDED, that if the Borrower
shall fail to give any such Notice, 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 of Conversion/Continuation pursuant to this Section 4.5(b),
the Administrative Agent shall promptly notify each relevant Lender thereof.
4.6 MINIMUM AMOUNTS OF TRANCHES. All borrowings, conversions,
continuations and payments of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Eurodollar Loans comprising each Tranche shall be equal to $500,000 or a
whole multiple of $500,000 in excess thereof. In no event shall there be more
than [5] Tranches outstanding at any time.
4.7 INABILITY TO DETERMINE INTEREST RATE/ILLEGALITY. (a) If prior to
the first day of any Interest Period:
(i) 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
(ii) the Administrative Agent shall have received notice from
the Majority 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 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, unless the Borrower withdraws its
request on or before 2:00 p.m., Dallas, Texas time, on the Business Day next
preceding the first day of the proposed Interest Period, (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 first day of such 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.
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(b) Notwithstanding any other provision of this Agreement, if, after
the date hereof, any change in any Requirement of Law or in the interpretation
thereof by any Governmental Authority charged with the administration or
interpretation thereof shall make it unlawful for any Lender to make or maintain
any Eurodollar Loan or to give effect to its obligations as contemplated hereby
with respect to any Eurodollar Loan, then, by written notice to the Borrower and
to the Administrative Agent such Lender may:
(i) declare that Eurodollar Loans will not thereafter (for the
duration of such unlawfulness) be made by such Lender hereunder (or be
continued for additional Interest Periods and ABR Loans will not
thereafter (for such duration) be converted into Eurodollar Loans),
whereupon any request for Eurodollars (or to convert ABR Loans to
Eurodollar Loans or to continue Eurodollar Loans for an additional
Interest Period) shall, as to such Lender only, be deemed a request for
an ABR Loan (or request to continue an ABR Loan as such for an
additional Interest Period or to convert a Eurodollar Loan into an ABR
Loan, as the case may be), unless such declaration shall be
subsequently withdrawn); and
(ii) require that all outstanding Eurodollar Loans made by
it be converted to ABR Loans, in which event all such Eurodollar Loans
shall be automatically converted to ABR Loans as of the effective date
of such notice as provided below.
In the event any Lender shall exercise its rights under clause (i) or (ii) of
this Section 4.7(B), all payments and prepayments of principal that would
otherwise have been applied to repay the Eurodollar Loans that would have been
made by such Lender or the converted Eurodollar Loans of such Lender shall
instead be applied to repay the ABR Loans made by such Lender in lieu of, or
resulting from the conversion of, such Eurodollar Loans. For purposes of this
Section 4.7(B), a notice to the Borrower by any Lender shall be effective as to
each Eurodollar Loan, if lawful, on the last day of the Interest Period
currently applicable to such Eurodollar Loan; in all other cases such notice
shall be effective on the date of receipt by the Borrower.
4.8 TREATMENT AND PAYMENTS. (a) Each borrowing of Loans by the Borrower
hereunder shall be made, each payment by the Borrower on account of any fees
payable to the Lenders pursuant to Section 4.3(A) shall be allocated by the
Administrative Agent, and any reduction of the Commitments shall be allocated by
the Administrative Agent, according to the respective Revolving Credit Facility
Percentages of the relevant Lenders. Subject only to Section 4.2(E), each
payment (including each prepayment) by the Borrower on account of principal of
and interest on any Revolving Credit Loans shall be allocated by the
Administrative Agent according to the respective outstanding principal amounts
of such Revolving Credit Loans then held by the Revolving Credit Lenders. All
payments (including prepayments) to be made by the Borrower hereunder and under
any Notes, whether on account of principal, interest, fees or otherwise, shall
be made without set-off or counterclaim and shall be made prior to 11:00 a.m.,
Dallas, Texas time, on the due date thereof to the Administrative Agent, for the
account of the Lenders holding the relevant Loans, as the case may be, at the
Administrative Agent's office specified in Section 11.2, in Dollars and in
immediately available funds. Payments received by the Administrative Agent after
such time shall be deemed
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to have been received on the next Business Day. If any payment hereunder becomes
due and payable on a day other than a Business Day, the maturity of such payment
shall be extended to the next succeeding Business Day, (and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension) unless, with respect to payments of Eurodollar Loans
only, 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.
(b) 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. If such Lender's share of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days after such
Borrowing Date, the Administrative Agent shall notify the Borrower of the
failure of such Lender to make such amount available to the Administrative Agent
and the Administrative Agent shall also be entitled to recover from the
Borrower, on demand, such amount with interest thereon at the rate per annum
applicable to ABR Loans.
4.9 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 or the NAIC made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made by
it, or change the basis of taxation of payments to such Lender in
respect thereof;
(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 which is not
otherwise included in the determination of the Eurodollar Rate; 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 which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar
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Loans or to reduce any amount receivable hereunder in respect thereof, then, in
any such case, the Borrower shall promptly pay such Lender such additional
amount or amounts as will compensate such Lender on an after tax basis for such
increased cost or reduced amount receivable.
(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 or the NAIC 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 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, the Borrower shall, within 30 calendar days
after demand by such Lender, pay to such Lender such additional amount or
amounts as will compensate such Lender on an after tax basis for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this Section 4.9, it shall promptly deliver a notice to the Borrower
(with a copy to the Administrative Agent), setting forth in reasonable detail an
explanation of the basis for requesting such compensation. Such notice as to any
additional amounts payable pursuant to this Section 4.9 submitted by such Lender
to the Borrower (with a copy to the Administrative Agent) shall be conclusive in
the absence of manifest error. The Borrower shall pay each Lender the amount
shown as due on any such certificate delivered by it within 30 calendar days
after the Borrower's receipt thereof. Notwithstanding any other provision of
this Section 4.9, each Lender shall be entitled to compensation under this
Section 4.9 for only such costs as are incurred or reductions as are suffered as
to which a certificate has been delivered in accordance with the terms of this
paragraph (c) within six months after such Lender obtained actual knowledge of
such costs or reductions. The agreements in this Section 4.9 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
4.10 TAXES. (a) All payments made by the Borrower under this Agreement
and any Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future Taxes, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes and franchise taxes (imposed with respect to net
income) 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 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
Note). If any such non-excluded Taxes ("NON-EXCLUDED TAXES") are required to be
withheld from any amounts payable to the Administrative Agent or any Lender
hereunder or under any Note, the amounts so payable to the Administrative Agent
or such Lender shall be increased to the extent
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necessary to yield to the Administrative Agent or such Lender (after payment of
all Non-Excluded Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement; PROVIDED, that the
Borrower shall not be required to increase amounts payable to any Non-U.S.
Lender (as defined below) if (i) at the time such Non-U.S. Lender becomes a
party to this Agreement, such Non-U.S. Lender fails or is not legally able to
comply with the requirements of Section 4.10(B) or (ii) after such Non-U.S.
Lender becomes a party to this Agreement such Non- U.S. Lender fails to comply
with the requirements of Section 4.10(B) and is legally able to do so. Whenever
any Non-Excluded 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 such Lender, as the case may be, a certified copy
of an original of ficial receipt (to the extent the relevant taxing authority
issues such receipts) received by the Borrower or other evidence of payment
thereof. If, when the Borrower is required by this Section 4.10(A) to pay any
Non-Excluded Taxes, the Borrower fails to pay such Non-Excluded 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.
(b) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America, or any estate
or trust that is subject to federal income taxation regardless of the source of
its income (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 1001 or Form 4224, or, in the case of a Non-U.S.
Lender claiming exemption from U.S. federal withholding tax under Section 871
(h) or 88 l(c) of the Code with respect to payments of "portfolio interest,"
Form W-8, or any subsequent versions thereof or successors thereto (and, if such
Non-U.S. Lender delivers Form W-8, an annual certificate representing that such
Non-U.S. Lender (i) is not a "bank" for purposes of Section 881(c) of the Code
(and is not subject to regulatory or other legal requirements as a bank in any
jurisdiction, and has not been treated as a bank in any filing with or
submission made to any Governmental Authority or rating agency), (ii) is not a
10-percent shareholder (within the meaning of Section 871 (h)(3)(B) of the Code)
of the Borrower and (iii) is not a controlled foreign corporation related to the
Borrower (within the meaning of Section 864(d)(4) of the Code)), in each case
properly completed and duly executed by such Non-U.S. Lender claiming complete
exemption from, U.S. federal withholding tax on all payments of principal and
interest by the Borrower under this Agreement and the other Loan Documents,
along with such other additional forms as the Borrower or the Administrative
Agent (or, in the case of a Participant, the Lender from which the related
participation shall have been purchased) may reasonably request to establish the
availability of such complete exemption. 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
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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 Section 4.10, a Non-U.S. Lender that
appropriately delivered the requisite forms to the Borrower and the
Administrative Agent pursuant to this Section 4.10(B) at the time it became a
party to this Agreement shall not be required to deliver any other forms
pursuant to this Section 4.10(b) that such Non-U.S. Lender is not thereafter
legally able to deliver.
(c) The agreements in this Section 4.10 shall survive the termination
of this Agreement and the payment of the Loans and all other amounts payable
hereunder.
4.11 INDEMNITY. THE BORROWER AGREES TO INDEMNIFY EACH LENDER AND TO
HOLD EACH LENDER HARMLESS FROM ANY LOSS OR EXPENSE WHICH SUCH LENDER MAY SUSTAIN
OR INCUR AS A CONSEQUENCE OF (A) THE FAILURE OF THE BORROWER TO MAKE 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) THE FAILURE OF THE BORROWER TO MAKE ANY PREPAYMENT OF 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 WHICH IS NOT THE LAST DAY OF AN INTEREST PERIOD WITH RESPECT
THERETO, EXCEPT WHEN SUCH FAILURE OR PREPAYMENT IS REQUIRED BY SECTION 4.7 OR
SECTION 4.9. SUCH INDEMNIFICATION MAY INCLUDE AN AMOUNT EQUAL TO THE EXCESS, IF
ANY, OF (I) THE AMOUNT OF INTEREST WHICH 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,
BUT NOT INCLUDING, 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) WHICH 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. THIS COVENANT SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT AND THE PAYMENT OF THE LOANS AND ALL OTHER AMOUNTS
PAYABLE HEREUNDER; PROVIDED, THAT INVOICES IN RESPECT OF AMOUNTS PAYABLE
PURSUANT TO THIS SECTION 4.11 MUST BE SUBMITTED NO LATER THAN THE DATE WHICH IS
60 DAYS AFTER THE TERMINATION DATE AND THE PAYMENT OF THE LOANS.
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4.12 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes any
demand for payment under Section 4.9 or 4.10, it will use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions and
so long as such efforts would not be legally, regulatorily or economically
disadvantageous to it, as determined by it in good faith) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under Section 4.9 or 4.10 or
would eliminate or reduce the effect of any adoption or change described in
Section 4.9.
4.13 REPLACEMENT OF LENDERS UNDER CERTAIN CIRCUMSTANCES. The Borrower
shall be permitted to replace any Lender which (a) requests reimbursement for
amounts owing pursuant to Section 4.9 or 4.10, (b) fails to fund its pro rata
share of any payment to the Administrative Agent which such Lender is obligated
to fund pursuant to Section 4.8(B) fails to fund its pro rata share (if any) of
any borrowing requested by the Borrower which such Lender is obligated to fund
pursuant to this Agreement, in each case with a replacement lender; PROVIDED
that (i) such replacement does not conflict with any Requirement of Law, (ii) no
Default shall have occurred and be continuing at the time of such replacement,
(iii) prior to any such replacement, such Lender shall not have taken action
under Section 4.12 which is sufficient to eliminate the continued need for
payment of amounts owing pursuant to Section 4.9 or 4.10, (iv) the Borrower
shall repay (or the replacement lender 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 4.11(C) if any Eurodollar Loan owing to such replaced Lender shall be
prepaid (or purchased) other than on the last day of the Interest Period
relating thereto unless such replacement is made under the circumstances
described in clause (b) above, (vi) the replacement lender, 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 11.6(C) (PROVIDED, that the Borrower shall be
obligated to pay the registration and processing fee referred to therein) and
(viii) until such time as such replacement shall be consummated, the Borrower
shall pay all additional amounts (if any) required pursuant to Section 4.9 or
4.10, as the case may be.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and to issue Letters of Credit, the Borrower
hereby represents and warrants to the Administrative Agent and each Lender that:
5.1 FINANCIAL CONDITION. (a) The consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at October 31, 1997 and the
related consolidated statements of operations and of cash flows for the fiscal
years ended on such dates, reported on by Ernst & Young LLP, copies of which
have heretofore been furnished to the Administrative Agent (with copies for each
of the Lenders), present fairly in all material respects the consolidated
financial condition of the Borrower and its consolidated Subsidiaries as at such
dates, and the consolidated results of their operations and their consolidated
cash flows for the fiscal year then ended. The unaudited consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at April 30, 1998 and
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the related unaudited consolidated statements of operations and of cash flows
for the six-month period ended on such date (the "INTERIM STATEMENTS"), copies
of which have heretofore been furnished to the Administrative Agent (with copies
for each of the Lenders), present fairly in all material respects the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the nine-month period then ended (subject
to normal year-end audit adjustments and the absence of complete footnote
disclosure). 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 set forth on Schedule 5.1(a-1),
neither the Borrower nor any of its consolidated Subsidiaries had, at the date
of the balance sheet which is part of the Interim Statements, any material
Guarantee Obligation, contingent liability or liability for Taxes, or any
long-term lease or unusual forward or long-term commitment, including, without
limitation, any interest rate or foreign currency swap or exchange transaction,
which is not reflected in the Interim Statements (including the schedules and
notes thereto) and which would be required by GAAP to be disclosed in any
audited fiscal year-end consolidated financial statements of the Borrower and
its Subsidiaries (including the schedules and notes thereto). Except as set
forth on Schedule 5.1 (a-2), during the period from October 31, 1997 to and
including the date hereof there has been no sale, transfer or other disposition
by the Borrower or any of its consolidated Subsidiaries of any material part of
its business or property and no purchase or other acquisition of any business or
property (including any Capital Security of any other Person) material in
relation to the consolidated financial condition of the Borrower and its
consolidated Subsidiaries at October 31, 1997. The foregoing representation and
warranty is made on the Effective Date only to the knowledge of the Borrower.
(b) (i) The pro forma financial information, budgets and projections
attached hereto as Schedule 5.1(b) furnished to the Administrative Agent or any
Lender by or on behalf of the Borrower or any of their respective Affiliates
prior to the date of this Agreement in connection with this Agreement, the MFSNT
Acquisition and the transactions contemplated hereby and thereby and (ii) all
pro forma financial information, budgets and projections furnished to the
Administrative Agent or any Lender in connection with or pursuant to this
Agreement or any other Loan Document after the date of this Agreement and on or
prior to the date on which this representation and warranty is made or deemed
made, were in each case prepared and furnished to the Administrative Agent or
such Lender in good faith and were based on estimates and assumptions that were
believed by the management of the Borrower to be reasonable in light of the then
current and foreseeable business conditions of the Borrower and the Subsidiaries
and represented the Borrower's management's good faith estimate of the
consolidated projected financial performance of the Borrower and the
Subsidiaries based on the information available to the Responsible Offcers at
the time so furnished. The Administrative Agent and the Lenders recognize that
such pro forma financial information, budgets and projections and the estimates
and assumptions on which they are based may or may not prove to be correct.
(c) All Information made available to the Administrative Agent or any
Lender by or on behalf of the Borrower or any of their respective Affiliates in
connection with or pursuant to this Agreement or any other Loan Document on or
prior to the date on which this representation
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and warranty is made or deemed made did not, as of the date such Information was
made available, contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained therein,
taken as a whole, not materially misleading in light of the circumstances under
which such statements were made.
5.2 FINANCIAL STATEMENTS/NO CHANGE. (a) The Financial Statements
(including in each case the related schedules and notes) delivered to the
Administrative Agent present fairly, in all material respects, the consolidated
financial position of the Borrower and their respective Subsidiaries at the
respective dates of the balance sheets included therein and the consolidated
results of their operations and their consolidated cash flows for the respective
periods set forth therein and have been prepared in accordance with GAAP
(subject, in the case of interim financial statements, to normal year-end
adjustments and the absence of complete footnote disclosure). As of the date of
any balance sheet included in such Financial Statements, none of the Borrower or
any of their respective Subsidiaries had any material Guarantee Obligation,
contingent liability or liability for Taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction, which is not reflected in
such Financial Statements or in the schedules or notes thereto and which, with
respect to any audited Financial Statements, would be required by GAAP to be
disclosed therein (or in the notes and schedules thereto), and which, with
respect to any interim Financial Statements, would be required by GAAP to be
disclosed in any audited fiscal year-end consolidated financial statements of
the Borrower and its Subsidiaries, as the case may be (or in the notes and
schedules thereto).
(b) Since October 31, 1997, except as set out in Schedule 5.6, there
has been no development or event which has had or could reasonably be expected
to have a Material Adverse Effect.
5.3 EXISTENCE; COMPLIANCE WITH LAW. The Borrower and the Subsidiaries
(a) is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (b) has the corporate or partnership 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 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, except where the failure to
so qualify or to be in good standing could not reasonably be expected to have a
Material Adverse Effect, 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.
5.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each Loan Party has
the power and authority, and the legal right, to make, deliver and perform each
of the Loan Documents to which it is a party and to grant any security interests
provided for therein and, in the case of the Borrower, to borrow hereunder, and
has taken all necessary action to authorize the execution, delivery and
performance of each of the Loan Documents to which it is a party and, in the
case of the Borrower, to authorize the borrowings on the terms and conditions of
this Agreement. No action,
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consent or authorization of, registration or filing with, notice to or other act
by or in respect of, any Governmental Authority or any other Person (including,
without limitation, any shareholder of any Loan Party or any Affiliate of any
Loan Party) is required to be obtained or made by any Loan Party or any
Subsidiary of any Loan Party in connection with the borrowings hereunder or with
the execution, delivery, performance, validity or enforceability of the Loan
Documents other than (a) the filings and notices required by the Pledge
Agreements and Security Agreements in the filing offices identified therein or
to the Persons identified therein and (b) such as have been obtained or made and
are in full force and effect. Each Loan Document has been duly executed and
delivered on behalf of each Loan Party thereto. Each Loan Document constitutes a
legal, valid and binding obligation of each Loan Party thereto enforceable
against each such Loan Party in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent transfer or conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law).
5.5 NO LEGAL BAR. The execution, delivery and performance of the Loan
Documents, the borrowings hereunder and the use of the proceeds thereof will not
violate any Requirement of Law or be in conflict with, result in a breach of,
constitute (alone or with notice or lapse of time or both) a default under or
give rise to any right to accelerate any material obligation under any
Contractual Obligation of the Borrower or of any Subsidiary and will not result
in, or require, the creation or imposition of any Lien on any of their
respective properties or any revenues, income or profits therefrom, whether now
owned or hereafter acquired, pursuant to any such Requirement of Law or
Contractual Obligation (other than pursuant to the Security Documents).
5.6 NO MATERIAL LITIGATION. Except as set out in Schedule 5.6, no
Litigation is pending or, to the knowledge of the Borrower, threatened by or
against the Borrower, or any Subsidiary or against any of their respective
properties, revenues, income or profits therefrom (a) with respect to any of the
Loan Documents or any of the transactions contemplated hereby or thereby, or (b)
as to which there is a reasonable possibility of an adverse determination and,
that if adversely determined, could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
5.7 NO DEFAULT. Neither the Borrower nor any Subsidiary is in default
under or with respect to any of its Contractual Obligations in any respect which
could reasonably be expected to have a Material Adverse Effect. No Default has
occurred and is continuing.
5.8 OWNERSHIP OF PROPERTY; INTELLECTUAL PROPERTY. (a) Each of the
Borrower and the Subsidiaries has good record and indefeasible title in fee
simple to, or a valid leasehold interest in, all its real property, and good
title to, a valid leasehold interest in, or a valid right to use, all its other
property and assets which are material to the operations of its businesses, in
each case subject only to Permitted Liens.
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(b) (i) Each of the Borrower and the Subsidiaries has complied with all
obligations under all leases to which it is a party and all such leases are in
full force and effect and (ii) each of the Borrower and the Subsidiaries enjoys
peaceful and undisturbed possession under all such leases under which it is a
tenant, in each case except where the failure to comply or to enjoy such
possession, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.
(c) Each of the Borrower and the Subsidiaries owns, or otherwise has
the right to use, all trademarks, tradenames, copyrights, technology, know-how
and processes (the "INTELLECTUAL PROPERTY") necessary for the conduct of its
business as currently conducted except for those which the failure to own or
have the right to use could not reasonably be expected to have a Material
Adverse Effect. Except for such claims that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect, no claim has
been asserted and is pending by any Person challenging or questioning the use of
any such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does the Borrower know of any valid basis for any
claim. Except for such infringements that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect, to the
knowledge of the Borrower, the use of such Intellectual Property by the Borrower
and the Subsidiaries does not infringe on the rights of any Person.
5.9 NO BURDENSOME RESTRICTIONS. No Contractual Obligation of the
Borrower or any Subsidiary could reasonably be expected to have a Material
Adverse Effect and, since the date of this Agreement, there has been no adoption
of or any change in any Requirement of Law or in the interpretation or
application thereof which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
5.10 TAXES. (a) (i) The Borrower and the Subsidiaries has filed or
caused to be filed all income tax returns which, to the knowledge of the
Borrower, are required to be filed and has paid all Taxes shown to be due and
payable by it on said returns and all other material Taxes (collectively, the
"SPECIFIED TAXES") imposed on it or any of its property or assets due and
payable by it and (ii) to the knowledge of the Borrower, no material claim is
being asserted with respect to any Specified Tax, other than, in each case with
respect to this clause (a), Specified Taxes the amount or validity of which 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 the relevant Subsidiary, as the case may be, and (b) no
Liens have been filed and remain of record with respect to any Taxes aggregating
$1,000,000 or more.
5.11 FEDERAL REGULATIONS. Neither the Borrower nor any Subsidiary is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock. No part
of the proceeds of any Loan has been or will be used by the Borrower or any
Subsidiary, whether directly or indirectly, and whether immediately,
incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend
credit to others for the purpose of purchasing or carrying Margin Stock or to
refund indebtedness originally incurred for
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such purpose, or (ii) for any purpose that entails a violation of, or that is
inconsistent with, the provisions of the regulations of the Board including
Regulations G, U and X. If requested by any Lender or the Administrative Agent,
the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-3 or FR Form U-l referred to in said Regulation G or Regulation U, as the case
may be.
5.12 ERISA. Except as, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect: (a) 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
six-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; (b) no
termination of a Single Employer Plan has occurred, and no Lien in favor of the
PBGC or a Plan has arisen, during such six-year period; (c) 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 Single Employer Plan allocable to such accrued benefits;
(d) neither the Borrower nor any Commonly Controlled Entity has had a complete
or partial withdrawal from any Multiemployer Plan, and neither the Borrower nor
any Commonly Controlled Entity would become subject to any 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; and (e)
no such Multiemployer Plan is in Reorganization or Insolvent.
5.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS. No Loan Party is an
"investment company" which is required to be registered under, or a "person
directly or indirectly controlled by or acting of behalf of " and "investment
company" which is required to be registered under, the Investment Company Act of
1940. No Loan Party is a "holding company" within the meaning of, or subject to
regulation under, the Public Utility Company Act of 1935. No Loan Party is
subject to regulation under any other federal or state statute or regulation
which limits its ability to incur Indebtedness under this Agreement or the other
Loan Documents.
5.14 SUBSIDIARIES. All Subsidiaries of the Borrower (and the respective
direct or indirect ownership interests of the Borrower therein) as of the
Effective Date are listed on Schedule 5.14. Except as permitted by Section
8.15(c), each Subsidiary is a Wholly Owned Subsidiary.
5.15 PURPOSE OF LOANS. The proceeds of the Revolving Credit Loans will
be used by the Borrower to (i) repay all of the Indebtedness outstanding under
(and permanently terminate any commitments thereunder) the Existing Bank
Facility and the NationsBank Existing Credits; (iii) finance working capital,
Capital Expenditures, Subject Acquisitions and other lawful general corporate
purposes and (iv) such other purposes to which the Majority Lenders have given
their prior written consent; PROVIDED, however that not more than $3,500,000 in
the aggregate of Revolving Credit Loans will be used as Investments in, or to
finance working capital or be used for general
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corporate purposes, of Subsidiaries other than Restricted Subsidiaries; and
provided, further, that not more than $5,000,000 in the aggregate of Revolving
Credit Loans may be used to finance Subject Acquisitions.
5.16 CERTAIN REGULATORY MATTERS. Except as, in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect:
(a) the Borrower and the Subsidiaries possess all
Authorizations necessary to own and operate their respective businesses
and are not in violation thereof. All such Authorizations are in full
force and effect and no event has occurred that permits, or after
notice or lapse of time could permit, the revocation, termination prior
to scheduled termination, or material and adverse modification, of any
such Authorizations;
(b) there is not pending or, to the best knowledge of the
Borrower, threatened, any action by the FCC to revoke, cancel, suspend
or refuse to renew any FCC License held by the Borrower or any
Subsidiary. There is not pending or, to the best knowledge of the
Borrower, threatened, any action by the FCC to modify adversely,
revoke, cancel, suspend or refuse to renew any other Authorization held
by the Borrower or any Subsidiary; and
(c) there is not issued or outstanding or, to the best
knowledge of the Borrower, threatened, any notice of any hearing,
violation or complaint against the Borrower or any Subsidiary with
respect to the operation of any portion of the their respective
businesses and Properties and the Borrower has no knowledge that any
Person intends to contest renewal of any Authorization.
5.17 ENVIRONMENTAL MATTERS. (a) The properties now or formerly owned or
operated by the Borrower and the Subsidiaries (the "PROPERTIES") do not, to the
best of the knowledge of the Borrower and its Subsidiaries, contain any
Hazardous Materials in amounts or concentrations which (i) constitute, or
constituted a violation of, or (ii) could give rise to liability under,
Environmental Laws resulting from any Release of Hazardous Materials during the
Borrower's or any Subsidiary's ownership or operation of the properties or, to
the knowledge of the Borrower, at any other time, which violations and
liabilities, in the aggregate, could reasonably be expected to result in a
Material Adverse Effect or (iii) could reasonably be expected to impair
materially the fair saleable value thereof.
(b) The Properties and all operations of the Borrower and the
Subsidiaries are in compliance, and, to the extent the Borrower or any
Subsidiary owned or operated such Properties in the past three years, in the
last three years have been in compliance, with all Environmental Laws and all
necessary Environmental Permits have been obtained are in effect, except to the
extent that such noncompliance or failure to obtain any necessary permits in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
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(c) During the time of the Borrower's or any Subsidiary's ownership or
operation of the properties and, to the knowledge of the Borrower, at any other
time, there have been no Releases or threatened Releases at, from, under or
proximate to the Properties or otherwise in connection with the operations of
the Borrower or any Subsidiary, which Releases or threatened Releases, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
(d) Neither the Borrower nor any Subsidiary has received any
Environmental Claim in connection with the Properties or the operations of the
Borrower or any Subsidiary or with regard to any Person whose liabilities for
environmental matters the Borrower or any Subsidiary has retained or assumed, in
whole or in part, contractually, by operation of law or otherwise, which, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect,
nor do the Borrower or any Subsidiary have reason to believe that any such
notice will be received or is being threatened.
(e) Hazardous Materials have not been transported from the Properties
by the Borrower or any Subsidiary or, to the knowledge of Borrower, any other
party, nor have Hazardous Materials been generated, treated, stored or disposed
of at, on or under any other Properties in a manner that could reasonably be
expected to give rise to liability under any Environmental Law that would
constitute a Material Adverse Effect, nor have the Borrower or any Subsidiary
retained or assumed any liability, contractually, by operation of law or
otherwise, with respect to the generation, treatment, storage or disposal of
Hazardous Materials, which transportation, generation, treatment, storage or
disposal, or retained or assumed liabilities, in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
5.18 SECURITY DOCUMENTS. (a) Each Pledge Agreement is effective to
create in favor of the Administrative Agent, for the ratable benefit of the
Secured Parties named therein, a legal, valid and enforceable security interest
in the Pledged Securities (as defined in the Pledge Agreement) and proceeds
thereof and, when the Collateral is delivered to the Administrative Agent, such
Pledge Agreement shall constitute a fully perfected first priority Lien on, and
security interest in, all right, title and interest of the pledgors thereunder
in such Collateral and the proceeds thereof, in each case prior and superior in
right to any other Person.
(b) Each Security Agreement is effective to create in favor of the
Administrative Agent, for the ratable benefit of the Secured Parties named
therein, a legal, valid and enforceable security interest in the Collateral (as
defined in the Security Agreement) and proceeds thereof and, when financing
statements in appropriate form as filed in the offices specified in the
Perfection Certificates, such Security Agreement shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the grantors thereunder in such Collateral and the proceeds thereof, in each
case prior and superior in right to any other Person, other than with respect to
the rights of Persons pursuant to Liens expressly permitted by Section 8.3.
5.19 SOLVENCY. As of the date on which this representation and warranty
is made or deemed made, each Loan Party is Solvent, both before and after giving
effect to the transactions
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contemplated hereby consummated on such date and to the incurrence of all
Indebtedness and other obligations incurred on such date in connection herewith
and therewith.
5.20 YEAR 2000 MATTERS. (a) The Borrower has (i) begun analyzing the
operations of the Borrower and its Subsidiaries and Affiliates that could be
adversely affected by failure to become Year 2000 compliant (that is, that
computer applications, imbedded microchips and other systems will be able to
perform date-sensitive functions prior to and after December 31, 1999) and (ii)
developed a plan for becoming Year 2000 compliant in a timely manner, the
implementation of which is on schedule in all material respects. The Borrower
reasonably believes that it will become Year 2000 compliant for its operations
and those of its Subsidiaries and Affiliates on a timely basis except to the
extent that a failure to do so could not reasonably be expected to have a
Material Adverse Effect.
(b) The Borrower reasonably believes any suppliers and vendors that are
material to the operations of the Borrower and its Subsidiaries and Affiliates
will be Year 2000 compliant for their own computer applications except to the
extent that a failure to do so could not reasonably be expected to have a
Material Adverse Effect.
(c) The Borrower will promptly notify the Administrative Agent if the
Borrower determines that any computer application which is material to the
operations of the Borrower, its Subsidiaries or any of its material vendors or
suppliers will not be fully Year 2000 compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to have a Material
Adverse Effect.
SECTION 6. CONDITIONS PRECEDENT.
6.1 CONDITIONS TO INITIAL LOANS. The obligation of each Lender to make
the initial Loans requested to be made by it and the obligation of the Issuing
Lender to issue any Letter of Credit are subject to (i) the representations and
warranties contained in Section 5 being true and correct in all material
respects on the date such Loans are made, (ii) receipt by the Administrative
Agent, prior to or concurrently with the making of such Loans, of the documents
described below, each (other than the L/C Fee Letter) in form and substance
satisfactory to the Lenders, and (iii) satisfaction, prior to or concurrently
with the making of such Loans, of the other conditions precedent set forth
below, each in a manner satisfactory to the Lenders:
(a) CREDIT AGREEMENT. This Agreement, duly executed and
delivered by the Borrower.
(b) NOTES. The Revolving Credit Notes, duly executed and
delivered by the Borrower and payable to the order of each Lender,
dated the date of this Agreement.
(c) GUARANTY AGREEMENT. The Guaranty Agreement, duly executed
and delivered by each Restricted Subsidiary.
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(d) SECURITY AGREEMENTS. The Security Agreements, duly
executed and delivered by the Borrower and each Restricted Subsidiary.
(e) PLEDGE AGREEMENTS. The Pledge Agreements and the
Acknowledgment and Consents and Notices to Issuer of Pledged Notes,
duly executed and delivered by the Borrower and each applicable
Restricted Subsidiary.
(f) INTERCOMPANY NOTES. The Intercompany Notes, each duly
executed by the applicable Subsidiary dated as of the date of this
Agreement, and all other promissory notes pledged under the Pledge
Agreements to the Administrative Agent for the benefit of the Secured
Parties, in each case duly endorsed in blank by the payee thereunder.
(g) PLEDGED STOCK; STOCK POWERS. Certificates representing
100% ofthe shares of Capital Securities pledged pursuant to the Pledge
Agreements, together with an undated stock power for each such
certificate executed in blank by a duly authorized officer of the
applicable Loan Party.
(h) UCC FINANCING STATEMENTS. All UCC financing statements
deemed necessary or appropriate by the Administrative Agent to perfect
the Liens in favor of the Administrative Agent for the benefit of the
Secured Parties, duly executed by the appropriate Loan Party, to be
recorded with the appropriate filing offices.
(i) OTHER ACTIONS TO PERFECT LIENS. All other actions
necessary or, in the opinion of the Administrative Agent, desirable to
perfect the Liens in favor of the Administrative Agent for the benefit
of the Secured Parties shall have been completed.
(j) LIEN SEARCHES. The results of a recent search by a Person
satisfactory to the Administrative Agent of the UCC, judgment and tax
lien filings which may have been filed with respect to personal
property of the Borrower or its Subsidiaries in each of the
jurisdictions in which financing statements will be filed to perfect
the security interests granted pursuant to the Loan Documents, and such
search shall reveal that no judgment or state or federal tax Liens have
been filed and remain in effect against any Loan Party or any
Collateral, and that no UCC financing statements or other notifications
or filings have been filed and remain in effect against any Loan Party
or any Collateral, other than (i) those for which the Administrative
Agent has received an appropriate release, termination or satisfaction
or (ii) Permitted Liens.
(k) CANCELLATION OF LIENS. Evidence that all Liens other than
Permitted Liens have been canceled and released, including duly
executed releases and UCC-3 financing statements in recordable form and
otherwise in form and substance satisfactory to the Administrative
Agent.
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(1) EXISTENCE, GOOD STANDING AND AUTHORITY. Original
certificates of existence and good standing, dated not more than 10
days prior to the date hereof, as applicable from appropriate officials
of each Loan Party's respective state of incorporation and certificates
of good standing and authority to do business, dated not more than 10
days prior to Effective Date, from appropriate officials of any and all
jurisdictions where each Loan Party's property or business makes
qualification to transact business therein necessary and where the
failure to be so qualified could reasonably be expected to have a
Material Adverse Effect.
(m) RESOLUTIONS. Copies of resolutions of each Loan Party
approving this Agreement and the other Loan Documents to which such
Loan Party is a party and authorizing the transactions contemplated
herein and therein, duly adopted at a meeting of, or by the unanimous
written consent of, the Board of Directors of such Loan Party.
(n) CHARTER DOCUMENTS. A copy of all Charter Documents
(including, without limitation, all certificates of merger) of each
Loan Party. The articles/certificate of incorporation of each Loan
Party shall be accompanied by an original certificate issued by the
Secretary of the State of incorporation of such Loan Party, dated not
more than 10 days prior to the date hereof, certifying that such copy
is correct and complete.
(o) CLOSING CERTIFICATE. A Closing Certificate of each Loan
Party, dated the date of this Agreement, substantially in the form of
Exhibit N, together with the identified attachments, duly executed by a
Responsible Officer and the Secretary or any Assistant Secretary of the
applicable Loan Party.
(p) INSURANCE. Certificates of insurance naming the
Administrative Agent as loss payee for the benefit of the Lenders and
naming the Administrative Agent and the Lenders as additional insureds,
as required by Section 7.5.
(q) PERFECTION CERTIFICATE. A Perfection Certificate, dated
the date of this Agreement, duly executed by the Loan Parties.
(r) COMPLIANCE CERTIFICATE. A Compliance Certificate, dated
the date of this Agreement, duly executed by a Responsible Officer of
the Borrower, evidencing that no Default exists both before and after
giving effect to the transactions contemplated hereby.
(s) OPINIONS OF COUNSEL. Original executed opinions, dated
the date of this Agreement, (i) from Gunster, Yoakley, Valdes-Fauli &
Stewart, counsel to the Borrower, substantially in the form of Exhibit
O, and (ii) from such local counsel to the Loan Parties as the
Administrative Agent may require in respect of the Security Documents,
each in form and substance satisfactory to the Administrative Agent.
(t) FEES. The Administrative Agent and the Lenders shall have
received (i) all fees and expenses that are due and payable on or
before the date such Loans are made
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pursuant to this Agreement or the Fee Letter and (ii) an amount equal
to the estimated fees and expenses of Baker & Botts, L.L.P. incurred in
connection with the preparation, examination, negotiation, execution
and delivery of this Agreement, the other Loan Documents and the
consummation of the transactions contemplated by the foregoing.
(u) L/C FEE LETTER. The L/C Fee Letter, duly executed and
delivered by the Borrower.
(v) PRO FORMA FINANCIAL STATEMENTS/PRO FORMA COMPLIANCE
CERTIFICATE. The Administrative Agent and the Lenders shall have
received pro forma financial statements for the Borrower based on the
preceding four fiscal quarters of the Borrower and its Subsidiaries,
giving effect to the borrowings requested under this Section 6.1, and
all transactions (including financings and fees and expenses) relating
to the foregoing, consisting of a consolidated balance sheet as at the
end of the most recently ended fiscal quarter of the Borrower and the
related consolidated statements of operations and cash flows for such
period of four fiscal quarters, together with a Pro Forma Compliance
Certificate, giving effect to the borrowings requested under this
Section 6.1 and all transactions relating to the foregoing.
(w) CONSENT AND WAIVER BY HOLDERS OF 12% SUBORDINATED NOTES.
The Administrative Agent shall have received a copy of the written
consent of the holders of the 12% Subordinated Notes to the
transactions contemplated hereby.
(x) REPAYMENT, REPURCHASE, REDEMPTION AND/OR CANCELLATION OF
INDEBTEDNESS. All Indebtedness and all other obligations outstanding
with respect to the Existing Bank Facility, and the NationsBank
Existing Credits and all other Indebtedness not permitted by Section
8.2 shall have been paid or otherwise discharged in full, and all Liens
created in connection therewith shall have been either terminated or
assigned to the Administrative Agent for the benefit of the Secured
Parties.
(y) GOVERNMENTAL AND THIRD PARTY APPROVALS. All material
Authorizations and third-party approvals in connection with the
transactions contemplated by the Loan Documents shall have been
obtained and shall 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 which would restrain, prevent or
otherwise impose materially adverse conditions on the transactions
contemplated by the Loan Documents and copies of all such
Authorizations and third-party approvals shall be delivered to the
Administrative Agent.
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(z) NO MATERIAL LITIGATION. Except as set out in Schedule 5.6,
no Litigation, including, without limitation, any injunction or
restraining order, shall be pending, entered or threatened in writing
which could reasonably be expected to (i) have a Material Adverse
Effect or (ii) materially and adversely affect the issuance of the
Notes or the Borrower's and its Subsidiaries' performance of their
obligations under the Loan Documents.
(aa) NO MATERIAL ADVERSE EFFECT. There shall not have occurred
any change, development or event which could reasonably be expected to
(i) have a Material Adverse Effect or (ii) materially and adversely
affect the issuance of the Notes or the Borrower's and its
Subsidiaries' performance of their obligations under the Loan
Documents.
(bb) NO MATERIAL ADVERSE INFORMATION. The Lenders shall not
have become aware of any previously undisclosed materially adverse
information with respect to the ability of the Loan Parties to perform
their respective obligations under the Loan Documents in any material
respect or the rights and remedies of the Lenders.
(cc) NO MATERIAL DEFAULT UNDER OTHER AGREEMENTS. There shall
exist no event of default (or condition which would constitute such an
event of default with the giving of notice or the passage of time)
under any Capital Security or any lease agreements or other material
Contractual Obligations of the Borrower or any of its Subsidiaries.
(dd) ADDITIONAL DOCUMENTATION. All other documentation,
including, without limitation, any employment agreement, management
compensation arrangement or other financing arrangement of the Borrower
or any Subsidiary shall be reasonably satisfactory in form and
substance to the Lenders.
(ee) ALL PROCEEDINGS SATISFACTORY. All corporate and other
proceedings taken prior to or at the closing in connection with the
transactions contemplated by this Agreement, the other Loan Documents
and all documents and evidences incident thereto shall be satisfactory
in form and substance to the Lenders, and the Lenders shall have
received such copies thereof and such other materials (certified, if
requested) as they may have reasonably requested in connection
therewith.
(ff) FINANCIAL STATEMENTS. A copy of the consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at October
31, 1997 and the related statements of operations, stockholders' equity
(deficit) and cash flows for such year (including consolidating
statements for the Borrower and its consolidated Subsidiaries), setting
forth, in each case in comparative form the figures for the previous
year, and the schedules and notes related thereto, prepared in
accordance with GAAP and reported on without qualification by an
independent certified public accounting firm of nationally recognized
standing.
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(gg) CIBC ASSIGNMENT AND ACCEPTANCE. Canadian Imperial Banking
Corporation (or an affiliate thereof) shall have executed and delivered
an Assignment and Acceptance (in the form attached hereto as Exhibit B)
covering 50% of the Commitments.
6.2 CONDITIONS TO EACH LOAN FOR A SUBJECT ACQUISITION. The obligation
of each applicable Lender to make Loans to finance any Subject Acquisition is
subject to the satisfaction, immediately prior to or concurrently with the
making of such Loans on the applicable funding date, of the following conditions
precedent, each in a manner reasonably satisfactory to the Lenders:
(a) INITIAL CONDITIONS SATISFIED. Each of the conditions set
forth in Section 6.1 shall have been satisfied and shall continue to be
satisfied on the date of such Loans.
(b) PRO FORMA FINANCIAL STATEMENTS/COMPLIANCE CERTIFICATE. The
Lenders (through the Administrative Agent) shall have received (i) pro
forma financial statements for the preceding four fiscal quarters of
the Borrower for which Financial Statements have then most recently
been delivered to the Lenders pursuant to Section 7.1(a) or (b), giving
effect to the Subject Acquisition, consisting of a consolidated balance
sheet as at the end of such four fiscal quarter period and the related
consolidated statements of operations and cash flows for such period of
four fiscal quarters and the notes related thereto, together with a Pro
Forma Compliance Certificate, giving effect to such Subject Acquisition
demonstrating that no Default exists both before and after giving
effect to the Subject Acquisition and the transactions contemplated
thereby and (ii) a "Sources and Uses" table.
(c) GOVERNMENTAL AND THIRD PARTY APPROVALS. All material
Authorizations and third party approvals necessary or appropriate in
connection with the Subject Acquisition 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 which would restrain, prevent or otherwise impose materially
adverse conditions on the Subject Acquisition or the financing thereof.
(d) NO MATERIAL LITIGATION. No Litigation, injunction or
restraining order shall be pending, entered or threatened in writing
which would reasonably be expected to have a material adverse effect on
the Subject Acquisition.
(e) NO MATERIAL ADVERSE EFFECT. There shall not have occurred
any change, development or event which would reasonably be expected to
have a Material Adverse Effect and the applicable Lenders shall not
have become aware of any materially adverse information with respect to
the Subject Acquisition.
(f) ACQUISITION CRITERIA SATISFIED. All Acquisition Criteria
shall have been fully satisfied.
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(g) APPRAISALS. The applicable Lenders shall have copies of
all appraisals made available to the Borrower or conducted by or on
behalf of the Borrower with respect to the Subject Acquisition.
(h) ENVIRONMENTAL AUDITS. The Lenders shall have received
copies of all environmental audits made available to the Borrower or
conducted by or on behalf of the Borrower with respect to the Subject
Acquisition.
(i) CONSUMMATION OF ACQUISITION. The applicable Lenders shall
have received satisfactory evidence that the Subject Acquisition shall
have been consummated prior to or concurrently with the making of the
Revolving Loans or Acquisition Loans, as applicable.
(j) ADDITIONAL LOAN DOCUMENTS. The appropriate Persons shall
have executed and delivered to the Administrative Agent the Loan
Documents required by Section 7.9, together with certificates and
documents of the types described in Section 6.1(f), (g), (h), (i), (j),
(k), (l), (m), (n), (o), (p), (q), (r), (s), (t), (u), (v) and (x), as
applicable, with respect to the enterprise to be acquired and the
applicable Loan Parties.
(k) ALL PROCEEDINGS SATISFACTORY. All corporate and other
proceedings taken prior to or at the closing in connection with the
Subject Acquisition and all documents and evidences incident thereto
shall be reasonably satisfactory in form and substance to the
applicable Lenders, and such Lenders shall have received such copies
thereof and such other materials (certified, if requested) as they may
have reasonably requested in connection therewith.
(l) MAXIMUM UTILIZATION. After giving effect to the Loans to
finance the Subject Acquisition, the aggregate amount of Revolving
Credit Loans made for the purpose of financing Subject Acquisitions
does not exceed $5,000,000.
(m) OTHER CONDITIONS. The satisfaction of such other
conditions as the applicable Lenders may reasonably require, including,
without limitation, evidence satisfactory to the Administrative Agent
that such Indebtedness may be incurred under any debt security,
indenture or other agreement evidencing, creating or governing any
other Indebtedness of the Borrower or any Subsidiary.
6.3 CONDITIONS TO ALL LETTERS OF CREDIT. The agreement of the Issuing
Lender to issue the Letter of Credit requested to be issued by it on any date
(including, without limitation, the initial Letter of Credit) is subject to the
satisfaction of the following conditions precedent:
(a) INITIAL CONDITIONS SATISFIED. Each of the conditions
precedent set forth in Section 6.1 shall have been satisfied and shall
continue to be satisfied on the date of issuance of such Letter of
Credit.
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(b) 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 in all material respects
on and as of such date as if made on and as of such date, after giving
effect to such Letter of Credit and the proposed use thereof.
(c) NO DEFAULT. No Default shall have occurred and be
continuing on such date or would occur after the issuance of such
Letter of Credit on such date and after giving effect to the proposed
use thereof.
Upon the issuance of each Letter of Credit hereunder, the Borrower shall be
deemed to have represented and warranted as of the date of such issuance that
the conditions contained in this Section 6.3 have been satisfied.
6.4 CONDITIONS TO ALL LOANS. The agreement of each Lender to make any
Loan requested to be made by it on any date (including, without limitation, its
initial Loans) is subject to the satisfaction of the following conditions
precedent:
(a) INITIAL CONDITIONS SATISFIED. Each of the conditions set
forth in Section 6.1 shall have been satisfied and shall continue to be
satisfied on the date of such Loans.
(b) 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 in all material respects
on and as of such date as if made on and as of such date, both before
and after giving effect to the extension of credit requested to be made
on such date and the proposed use of the proceeds thereof.
(c) NO DEFAULT. No Default shall have occurred and be
continuing on such date or after the making of the Loans requested to
be made on such date and the proposed use of the proceeds thereof.
(d) NOTICE OF BORROWING/PRO FORMA COMPLIANCE CERTIFICATE. The
Borrower shall have submitted a Pro Forma Compliance Certificate and a
Notice of Borrowing in accordance with Section 2.2 and shall certify in
the Notice of Borrowing to the matters set forth in Section 6.4(A)
THROUGH (C).
Each borrowing by the Borrower hereunder (including the initial Loans) shall
constitute a representation and warranty by the Borrower as of the date such
Loans are made that the conditions contained in this Section 6.4 have been
satisfied.
6.5 CONDITIONS TO CONVERSIONS OR CONTINUATIONS. Eurodollar Loans may be
continued as Eurodollar Loans at the end of the applicable Interest Period and
ABR Loans may be converted to Eurodollar Loans, subject to the satisfaction of
the following conditions precedent (i)
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on the last day of the applicable Interest Period or (ii) on the applicable
conversion date, as applicable:
(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 in all material respects
on and as of such date as if made on and as of such date, after such
conversion or continuation.
(b) NO DEFAULT. No Default shall have occurred and be
continuing on such date.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as any Commitment remains in
effect, any Loan shall be outstanding or any other Obligation is due and payable
to any Lender or under any other Loan Document the Borrower shall and (except in
the case of Sections 7.1, 7.2, 7.7 and 7.10) shall cause each Subsidiary to:
7.1 FINANCIAL STATEMENTS. Furnish to the Administrative Agent (with
copies for each of the Lenders):
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of (i) the
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries and (ii) the consolidated and consolidating balance sheet
of the Borrower and its consolidated Subsidiaries as at the end of such
year and the related statements of operations, stockholders' equity
(deficit) and cash flows for such year (including consolidating
statements for the Borrower and its consolidated Subsidiaries), setting
forth in each case in comparative form the figures for the previous
year, and the schedules and notes related thereto, prepared in
accordance with GAAP and reported on without qualification, by Ernst &
Young LLP or other independent certified public accountants of
nationally recognized standing;
(b) as soon as available, but in any event not later than 45
days after the end of each of the first three fiscal quarters of each
fiscal year of the Borrower, a copy of (i) the unaudited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries and
(ii) the unaudited consolidated and consolidating balance sheets of the
Borrower and its consolidated Subsidiaries as at the end of such
quarter, and, in each case, the related unaudited statements of
operations, stockholders' equity and cash flows for such quarter and
the portion of the fiscal year ended with such quarter (including
consolidating statements for the Borrower and its consolidated
Subsidiaries), setting forth in each case in comparative form the
figures for the previous year, prepared in accordance with GAAP and
certified by the Chief Financial Officer of the Borrower as being
fairly stated in all material respects (subject to normal year-end
audit adjustments and the absence of complete footnote disclosure); and
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(c) as soon as available, but in any event not later than 45
days after the end of each calendar month (other than any January,
April, July and October), a copy of the unaudited consolidated and
consolidating balance sheets ofthe Borrower and its consolidated
Subsidiaries as at the end of such calendar month and the related
unaudited consolidated and consolidating statements of operations,
stockholders' equity and of cash flows for such month and the portion
of the fiscal year then ended with such month, setting forth in each
case in comparative form figures for the previous year, prepared in
accordance with GAAP and certified by the Chief Financial Officer of
the Borrower as being fairly stated in all material respects (subject
to normal year-end audit adjustments and the absence of complete
footnote disclosure).
7.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Administration
Agent (with copies for each of the Lenders):
(a) concurrently with the delivery of the Financial Statements
referred to in Section 7.1(A), a certificate of the independent
certified public accountants reporting on such Financial Statements
stating that in making the examination necessary for such report
nothing has come to their attention that would lead them to believe
that any Default has occurred, except as specified in such certificate;
(b) concurrently with the delivery of the Financial Statements
referred to in Sections 7.1(A) AND (B), a Compliance Certificate
executed by the Chief Financial Of ficer of the Borrower, certifying as
to, among other matters, compliance by the Borrower with Sections 8.1,
8.2, 8.3 AND 8.8;
(c) not later than sixty (60) days after the end of each
fiscal year of the Borrower, a copy of the operating and capital budget
of the Borrower and the Subsidiaries for such fiscal year and a copy of
projections for operating performance and sources and uses of cash of
the Borrower and the Subsidiaries for the next succeeding four fiscal
years;
(d) without duplication of the Financial Statements delivered
pursuant to Section 7.1, within five days after the same are sent,
copies of all financial statements, reports and other materials which
the Borrower sends generally to the holders of any class of its debt or
equity securities in their capacities as such holders, and within five
days after the same are filed, copies of all financial statements,
reports and other materials which the Borrower may make to, or file
with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority; and
(e) promptly, such additional financial and other information
as any Lender may (acting through the Administrative Agent) from time
to time reasonably request.
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7.3 PAYMENT OF OBLIGATIONS AND TAXES. Pay its Indebtedness and other
material obligations promptly and in accordance with their respective terms and
pay and discharge promptly when due all Taxes imposed upon it or upon its
revenues, income or profits or in respect of its property or assets, as well as
all lawful claims for labor, materials and supplies or otherwise that, if
unpaid, might give rise to a Lien upon such properties or any part thereof, in
each case before the same shall become delinquent or in default; PROVIDED,
HOWEVER, that such payment and discharge shall not be required with respect to
any such Tax or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the Borrower shall have
set aside on its books adequate reserves with respect thereto in accordance with
GAAP.
7.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. ETC. (a) Subject
to Section 8.17 and except as otherwise permitted by Section 8.4, (i) continue
to engage in business of the same type as is contemplated to be conducted by it
and other Permitted Lines of Business, (ii) preserve, renew and keep in full
force and effect its organizational existence and (iii) take all reasonable
action to keep and maintain all material rights, privileges and franchises
necessary in the normal conduct of its business except to the extent that the
failure to keep and maintain individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
(b) Comply with all Contractual Obligations and applicable Requirements
of Law, except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
7.5 MAINTENANCE OF PROPERTY; INSURANCE. Cause all properties and assets
necessary for the conduct of its business or the business of any Subsidiary to
be maintained and kept in such condition, repair and working order as is
necessary for the conduct of its business and supplied with all necessary
equipment and cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, as promptly as is reasonably practicable;
PROVIDED, that nothing in this Section shall prevent the Borrower or any
Subsidiary from discontinuing the operation or maintenance of any such
properties if such discontinuance is, as determined by the Borrower or such
Subsidiary in good faith, desirable in the conduct of its business or the
business of any Subsidiary; maintain with financially sound and reputable
insurance companies insurance concerning its property and business in at least
such amounts and against at least such casualties, risks and contingencies as
are usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to the Administrative Agent, upon
written request, such information as to the insurance carried as is requested.
All policies of insurance shall be in such form and with such deductibles as are
satisfactory to the Administrative Agent. The Borrower shall deliver to the
Administrative Agent each year a certificate of insurance for each policy of
insurance and evidence of payment of all premiums therefor. With respect to
property or casualty policies, such policies of insurance and the certificates
evidencing the same shall contain endorsements, in form and substance acceptable
to the Administrative Agent, showing losses payable to the Administrative Agent
for the benefit of the Secured Parties, as its interest may appear. With respect
to liability policies, such policies of insurance and the certificates
evidencing the same shall contain endorsements listing the Administrative Agent
and the Secured Parties as additional insureds, as
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their respective interests may appear. Such endorsements or an independent
instrument furnished to the Administrative Agent shall provide that the
insurance companies providing such insurance will give the Administrative Agent
at least thirty days prior written notice before any such policy or policies of
insurance expire or before a payment is made in the case of loss or damage.
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep and
maintain a system of accounting established and administered in accordance with
good accounting practices and keep and maintain proper books of record and
accounts; and 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
during normal business hours and as often as may reasonably be requested and
upon reasonable notice and to discuss the business, operations, properties and
financial and other condition of the Borrower and its Subsidiaries with of
ficers and employees of the Borrower and its Subsidiaries and with their
independent certified public accountants (PROVIDED, that the Borrower shall have
been given reasonable advance notice of, and an opportunity to have one or more
representatives designated by it participate in, any such discussion with any
such officer or independent accountant).
7.7 NOTICES. Promptly after the Borrower has knowledge thereof, give
notice to the Administrative Agent of:
(a) the occurrence of any Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any Subsidiary, (ii) Environmental Claim
or (iii) Litigation between the Borrower or any Subsidiary and any
Governmental Authority, which in any such case, or when aggregated with
all other such defaults, events of default, Environmental Claims or
Litigation matters, as the case may be, could reasonably be expected to
have a Material Adverse Effect;
(c) any Litigation affecting the Borrower or any Subsidiary
(i) which could reasonably be expected to result in an adverse judgment
of $1,000,000 or more and not covered by insurance or an indemnity
acceptable to the Administrative Agent or (ii) in which injunctive or
similar relief is sought which in the case of this clause (ii) could
reasonably be expected to materially interfere with the ordinary
conduct of business of the Borrower or any Subsidiary;
(d) the following events which individually or in the
aggregate could reasonably be expected to have a Material Adverse
Effect, as soon as possible and in any event within 30 days after the
Borrower knows 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
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Commonly Controlled Entity or any Multiemployer Plan with respect to
the withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan;
(e) any Recovery Event (whether one such event or a series of
related events) involving property and assets of the Borrower or any
Subsidiary having a Fair Market Value in excess of $500,000; and
(f) except for developments or events affecting the
communication network service business generally, any development or
event which could reasonably be expected to have a Material Adverse
Effect.
Each notice pursuant to this Section 7.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action is proposed to be taken with respect thereto.
7.8 ENVIRONMENTAL LAWS. (a) Comply with, and use reasonable efforts to
require compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and use reasonable
efforts to require that all tenants and subtenants obtain and comply with and
maintain, any and all Authorizations required by applicable Environmental Laws
except, in each case, to the extent that failure to do so could not be
reasonably expected to have a Material Adverse Effect.
(b) Comply with all orders and directives of all Governmental
Authorities regarding Environmental Laws, except to the extent that the same are
being contested in good faith by appropriate proceedings.
7.9 COLLATERAL. Execute any and all documents, financing statements,
agreements and instruments, and take all action (including filing Uniform
Commercial Code and other financing statements, mortgages and deeds of trust),
that may be required under any applicable Requirement of Law, or which the
Majority Lenders or the Administrative Agent may reasonably request in order to
effectuate the transactions contemplated by the Loan Documents and in order to
grant, preserve, protect and perfect the validity and first priority of the
security interests and Liens created or purported to be created by the Security
Documents. In addition, the Borrower will cause (i) each subsequently acquired
or organized Subsidiary (contemporaneously with such acquisition or
organization) to execute a Supplement to Guaranty in favor of the Administrative
Agent and (ii) at the cost and expense of the Borrower, cause such newly
acquired or organized Subsidiary and each existing Subsidiary acquiring any
assets or properties to secure the Obligations by pledging or creating, or
causing to be pledged or created, perfected security interests and Liens with
respect to such of its assets and properties as the Administrative Agent or the
Majority Lenders shall designate (it being understood that it is the intent of
the parties and the agreement of the Borrower that the Obligations shall be
secured by, among other things, substantially all the property and assets (now
or hereafter acquired) of the Borrower and the Subsidiaries (now or hereafter
acquired or created), including, without limitation, real and other properties
acquired subsequent to the Effective Date).
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Such security interests and Liens will be created under the Security Documents
and other security agreements, mortgages, deeds of trust and other instruments
and documents in form and substance reasonably satisfactory to the
Administrative Agent, and the Borrower will deliver or cause to be delivered to
the Administrative Agent, for the benefit of the Lenders, all such instruments
and documents (including, without limitation, a Perfection Certificate, legal
opinions, title insurance policies, surveys and lien searches) as the
Administrative Agent shall reasonably request to evidence compliance with this
Section 7.9. The Borrower agrees to provide from time to time such evidence as
the Administrative Agent shall reasonably request as to the perfection and
priority status of each such security interest and Lien.
7.10 COMPLIANCE CERTIFICATES. Any Compliance Certificate or Restricted
Payment Compliance Certificate delivered to the Administrative Agent pursuant to
this Agreement from and after the date of the execution and delivery of an
acquisition agreement for a Subject Acquisition, and prior to the consummation
of such Subject Acquisition (unless such Subject Acquisition has been
abandoned), shall be prepared on a pro forma basis, giving effect to such
Subject Acquisition.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as any Commitment remains in
effect, any Loan is outstanding, or any other Obligation is due and payable to
any Lender or under any other Loan Document, the Borrower shall not, and the
Borrower shall not permit any Subsidiary to, directly or indirectly:
8.1 FINANCIAL COVENANTS.
(a) LEVERAGE RATIOS. (i) Permit the Total Leverage Ratio of
the Borrower and its Subsidiaries at the end of any fiscal quarter of
the Borrower ending during any period set forth below to be greater
than the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Effective Date through 10/30/l998 3.70 to 1.00
10/31/1998 through 04/29/1999 3.50 to 1.00
04/30/1999 through 01/31/2000 3.25 to 1.00
2/01/2000 and thereafter 3.00 to 1.00
</TABLE>
(ii) Permit the Senior Leverage Ratio of the Borrower and its
Subsidiaries at the end of any fiscal quarter of the Borrower ending
during any period set forth below to be greater than the ratio set
forth opposite such period below:
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<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Effective Date through O4/29/1999 3.00 to 1.00
04/30/1999 through 01/31/2000 2.75 to 1.00
02/01/2000 and thereafter 2.50 to 1.00
</TABLE>
(b) INTEREST COVERAGE. Permit the Interest Coverage Ratio of
the Borrower at the end of any fiscal quarter of the Borrower to be
less than 2.00 to 1.00.
(c) FIXED CHARGE RATIO. Permit the Fixed Charge Ratio of the
Borrower and its Subsidiaries at the end of any fiscal quarter of the
Borrower to be less than 1.50 to 1.00.
(d) CURRENT RATIO. Permit the Current Ratio of the Borrower
and its Restricted Subsidiaries at the end of any fiscal quarter of the
Borrower to be less than 2.50 to 1.00.
8.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness of the Borrower or any Subsidiary, except:
(a) Indebtedness under this Agreement and the Guarantee
Obligations of the Subsidiaries with respect thereto;
(b) Indebtedness of the Borrower or any Restricted Subsidiary
to the Borrower or any other Restricted Subsidiary of the Borrower;
PROVIDED, that any such Indebtedness shall (i) not be subordinated to
any other Indebtedness of the Borrower or such Restricted Subsidiary
other than the Obligations and (ii) be evidenced by an Intercompany
Note pledged to the Administrative Agent pursuant to the Borrower's
Pledge Agreement or a Subsidiary's Pledge Agreement, as applicable;
(c) Indebtedness of the Borrower and any Restricted Subsidiary
constituting obligations under Capital Leases or secured by Liens
permitted by clause (f) of the definition of "Permitted Liens"
contained in Section 1, in an aggregate principal amount at any one
time outstanding not to exceed $3,000,000.00.
(d) Interest Rate Hedge Agreements entered into by the
Borrower for the purpose of fixing or hedging interest rate risk with
respect to any floating rate Indebtedness of the Borrower that is
permitted by this Section 8.2; PROVIDED, that the notional principal
amount of the obligations under any such Interest Rate Hedge Agreement
does not exceed the principal amount of the Indebtedness to which such
Interest Rate Hedge Agreement relates;
(e) the 12% Subordinated Notes; and
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(f) other unsecured Indebtedness of the Borrower not in excess
of $1,000,000 outstanding at any time in the aggregate.
8.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for Permitted Liens.
8.4 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution) or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or, except with the prior consent of the Majority Lenders, make any
material change in its method of conducting business as of the Effective Date,
except:
(a) so long as no Default would occur after giving effect
thereto: (i) any Wholly Owned Subsidiary may be merged with or into the
Borrower (PROVIDED, that the Borrower shall be the continuing or
surviving Person) or with or into any other Wholly Owned Subsidiary;
and (ii) any consolidation of any Person with any Wholly Owned
Subsidiary or any merger of any Person with the Borrower or any Wholly
Owned Subsidiary (PROVIDED, that the Borrower or such Wholly Owned
Subsidiary, as the case may be, shall be the continuing or surviving
Person) in connection with the consummation of any Subject Acquisition
made in accordance with Section 8.8;
(b) so long as no Default would occur after giving effect
thereto, any Subsidiary of the Borrower may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) (i) to the Borrower or any Wholly Owned
Subsidiary or (ii) in a transaction permitted by Section 8.5; and
(c) the MFSNT Acquisition.
8.5 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
exchange, transfer or otherwise dispose of (whether in one or a series of
transactions) any of its property, businesses assets or Capital Securities or
any interest in any of them (including, without limitation, any revenues, income
and profits and leasehold interests), whether now owned or hereafter acquired or
enter into any agreement to do any of the foregoing (a "Disposition," it being
understood that collateral assignments shall not constitute "Dispositions"),
except:
(a) the sale in the ordinary course of business of assets held
for resale in the ordinary course of business or the trade-in or
replacement of assets in the ordinary course of business;
(b) the issuance or sale by the Borrower of its Capital
Securities, subject to the provisions of Sections 4.2(D)(I) AND 8.7;
and
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(c) Dispositions pursuant to transactions permitted by Section
8.4 (other than subclause (ii) of clause (b) thereof).
8.6 LIMITATION ON RESTRICTED PAYMENTS. Declare or pay any distribution
in respect of, 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 shares of or interests in any class of
Capital Security of the Borrower or any Subsidiary, whether now or hereafter
outstanding, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary (collectively,"RESTRICTED
PAYMENTS"), except that any Subsidiary may make Restricted Payments to the
Borrower or to such Subsidiary's parent company (so long as, such Subsidiary's
parent company is a Wholly Owned Subsidiary).
8.7 LIMITATION ON ISSUANCES OF CAPITAL SECURITIES. Issue any Capital
Securities, except that (i) so long as no Default exists at the time of such
issuance or (ii) would exist after giving effect to such issuance or (iii) if
such issuance is of a type of Capital Security described in clause (b) of the
definition of "Capital Security" which is convertible, exchangeable or
exercisable prior to ten years after the Effective Date and, on a fully diluted
basis, assuming such Capital Securities were so converted, exchanged or
exercised on the date of issuance thereof, a Default would not occur pursuant to
Section 9(J), then (A) subject to Section 8.15(C), any Subsidiary may issue
Capital Securities to the Borrower or any Wholly Owned Subsidiary; (B) the
Borrower may issue other Borrower Capital Securities, PROVIDED, that the Net
Cash Proceeds from such issuance are applied in accordance with Section
4.2(D)(I), if applicable, and PROVIDED FURTHER that such other Borrower Capital
Securities (l) are not mandatorily redeemable, payable or required to be
repurchased or otherwise retired or extinguished prior to the tenth anniversary
of the Effective Date, (2) are not convertible into any Indebtedness or other
liability of the Borrower or any Subsidiary or (3) do not require the payment of
cash dividends or other cash distributions prior to the Termination Date.
8.8 LIMITATION ON ACQUISITIONS, INVESTMENTS, LOANS AND ADVANCES. Make
any advance, loan, extension of credit or capital contribution to, or purchase
or enter into any agreement or option to purchase any stock, bonds, notes,
debentures or other securities of or any assets of, or of a business unit of, or
make any other investment in, any Person (collectively, "INVESTMENTS"), except:
(a) accounts receivable that arise in the ordinary course of
business and adjustments to account debtors with respect thereto in the
ordinary course of business;
(b) Investments in cash and Cash Equivalents;
(c) (i) Investments of the Borrower and the Subsidiaries in
the Borrower and other Subsidiaries existing on the Effective Date and
listed in the Perfection Certificate and (ii) subject to Sections
8.15(B) AND 8.15(C), Investments after the Effective Date by the
Borrower or any Subsidiary in the Borrower or: (A) any Wholly Owned
Subsidiary; or (B)
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any Subsidiary that is not a Restricted Subsidiary, provided that such
Investments shall not exceed $3,500,000 in the aggregate.
(d) loans and advances to employees of the Borrower or any
Subsidiary for travel, entertainment and relocation expenses in the
ordinary course of business, in an aggregate principal amount for the
Borrower and the Subsidiaries for all loans and advances described in
this clause (d) not to exceed $500,000 at any time outstanding;
(e) Subject Acquisitions; PROVIDED, that (i) no such
acquisition may be made if a Default has occurred and is continuing or
would occur after giving effect thereto, (ii) the consideration for any
Subject Acquisition does not exceed the Fair Market Value of the
property and assets which are the subject thereof and (iii) the
Borrower has delivered to the Administrative Agent the information
required under or has otherwise complied with the provisions of
Sections 6.2(B), (C), (D), (E), (F), (G), (H), (I) AND (J), whether or
not the Borrower is requesting a Loan in connection with such Subject
Acquisition;
(f) the MFSNT Acquisition;
(g) Investments received in connection with the bankruptcy or
reorganization of any customer or supplier of the Borrower or any
Subsidiary or in connection with the settlement of delinquent
obligations;
(h) Investments consisting of promissory notes or Capital
Securities issued to the Borrower or any Wholly Owned Subsidiary in
connection with any Disposition made pursuant to, and to the extent
permitted by, Section 8.5(C);
(i) Investments consisting of Interest Rate Hedge Agreements
permitted by Section 8.2; and
(j) other Investments (not prohibited under Section 8.6 OR 8.9
or otherwise prohibited under any other covenant hereunder) in an
aggregate amount at any time outstanding not to exceed $500,000.
8.9 LIMITATION ON OPTIONAL PAYMENTS OF INDEBTEDNESS. Make any payment
on account of, make any offer to purchase or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any Indebtedness of the Borrower or any Subsidiary other
than (a) the Obligations, (b) in connection with a Disposition, Indebtedness
required by its terms to be paid in connection with such Disposition that is
secured by a Permitted Lien on any asset which is the subject of such
Disposition, (c) with the proceeds of the issuance or sale of Borrower Capital
Securities of the type described in clause (a) of the definition thereof, so
long as the requirements of Sections 4.2(D)(I) AND 8.7 are also satisfied, and
(d) subject to Section 8.6, scheduled payments of principal, interest, fees and
other charges to the holders of such Indebtedness when due in accordance with
its terms.
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8.10 LIMITATION ON MODIFICATIONS OF CERTAIN AGREEMENTS. (a) Amend,
modify or change, or consent or agree to any amendment, modification or change
to, any of the terms of (i) the Bridge Financing, (ii) any Intercompany Notes,
(iii) any other Indebtedness of the Borrower or any Subsidiary having a
principal balance (or a Guarantee Obligation with respect to Indebtedness having
a principal balance) of more than $500,000, or (iv) any indenture or other
agreement evidencing, creating or governing any of the foregoing Indebtedness,
in each case (except for clause (ii)) other than any such amendment,
modification or change which (x) would extend the maturity or reduce the amount
of any payment of principal thereof or which would reduce the rate or extend the
date for payment of interest thereon or (y) is immaterial and not adverse to the
interests of the Lenders, so long as, in each case, no consent fee is payable in
connection therewith.
(b) Amend, modify or change, or consent or agree to any amendment,
modification or change to, any of the terms of the Charter Documents of the
Borrower or any Subsidiary, in each case other than any such amendment,
modification or change which is immaterial and not adverse to the interests of
the Lenders.
8.11 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction (including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service) or series of related
transactions with any Affiliate of the Borrower or any Subsidiary unless (i)
such transaction is otherwise expressly permitted under this Agreement and (ii)
(A) such transaction is in the ordinary course of the Borrower's or such
Subsidiary's business, (B) such transaction is 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 transaction on an arm's length basis with a Person
which is not an Affiliate and (C) with respect to any transaction or series of
related transactions between the Borrower or any Subsidiary and any Affiliate of
the Borrower or any Subsidiary (other than a transaction involving no Person
other than the Borrower or any Wholly Owned Subsidiary) involving aggregate
payments in excess of $1,000,000, such transaction shall be approved in good
faith by a majority of the Board of Directors of the Borrower or the applicable
Subsidiary and evidenced by a Board Resolution from the Borrower or the
applicable Subsidiary, a copy of which shall have been previously delivered to
the Administrative Agent.
8.12 LIMITATION ON 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 which 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, unless the obligations
attributable thereto are treated as purchase money Indebtedness or Capital Lease
obligations, as applicable, and, as so treated, are permitted by Section 8.2(C).
8.13 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
the Borrower to end on a day other than October 31.
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8.14 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into or suffer to
exist any Contractual Obligation which in any way restricts the ability of the
Borrower or any Subsidiary to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, other than (a) this Agreement and the other Loan Documents, (b) any
agreement governing Indebtedness incurred pursuant to Section 8.2(C) (in which
case, any restriction shall only be effective against the assets financed
thereby) and (c) any agreement governing Indebtedness outstanding on the
Effective Date and listed on Schedule 8.14.
8.15 CERTAIN INTERCOMPANY MATTERS. (a) In the case of the Borrower and
the Subsidiaries, (i) fail to satisfy customary formalities with respect to
organizational separateness, including, without limitation, the maintenance of
separate books and records; (ii) fail to act solely in its own name and through
its authorized officers and agents; (iii) in the case of any Subsidiary, make
or agree to make any payment to a creditor of the Borrower; (iv) commingle any
money or other assets of the Borrower with any money or other assets of the
Borrower or any Subsidiary; or (v) take any action, or conduct its affairs in a
manner, which could reasonably be expected to result in the separate
organizational existence of the Borrower and the Subsidiaries being ignored
under any circumstance.
(b) In the case of the Borrower, (i) make any Investment in any
Subsidiary other than in the form of a loan evidenced by an Intercompany Note
pledged to the Administrative Agent pursuant to the Borrower's Pledge Agreement,
except for the capitalization of new Subsidiaries in an amount not to exceed
$10,000, in each case, (ii) permit any Person that is a Subsidiary to make any
Investment in any direct or indirect Subsidiary of such Person other than in the
form of a loan evidenced by an Intercompany Note pledged to the Administrative
Agent pursuant to such Person's Pledge Agreement except for the capitalization
of new Wholly Owned Subsidiaries of such Person in an amount not to exceed
$10,000 in each case, and (iii) cause any Subsidiary to maintain bank accounts
which are not separate and distinct from such accounts of the Borrower.
(c) In the case of the Borrower, (i) create, acquire or suffer to exist
any Subsidiary which is not a Wholly Owned Subsidiary, except Subsidiaries that
are Controlled Foreign Corporations (as such term is used in the definition of
"Restricted Subsidiaries" herein) or in connection with a Subject Acquisition,
or (ii) permit any Wholly Owned Subsidiary to cease to be a Wholly Owned
Subsidiary (other than in connection with (x) a transaction permitted by Section
8.4 or (y) a Disposition of all of the Capital Security of such Wholly Owned
Subsidiary.
8.16 LIMITATION ON RESTRICTIONS ON SUBSIDIARV DISTRIBUTIONS. Enter into
or suffer to exist or become effective any consensual encumbrance or restriction
on the ability of any Subsidiary to (a) pay dividends or make any other
distributions in respect of any Capital Security 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 the Borrower or any other Subsidiary or
(c) transfer any of its assets to the Borrower or any other Subsidiary, except
for such encumbrances or restrictions existing under or by reason of (i) any
restrictions existing under the Loan Documents or
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any other agreements in effect on the date of this Agreement, (ii) any
restrictions with respect to a Subsidiary imposed pursuant to an agreement which
has been entered into in connection with the Disposition of all or substantially
all of the properties or assets of such Subsidiary or all of the Capital
Securities of such Subsidiary owned by the Borrower, directly or indirectly
through a Subsidiary, or (iii) any restrictions existing under any agreement
that amends, refinances or replaces any agreement containing the restrictions
referred to in clause (i) or (ii) above, PROVIDED, that the terms and conditions
of any such agreement are no less favorable to the Lenders than those under the
agreement so amended, refinanced or replaced.
8.17 LIMITATION ON LINES OF BUSINESS. Enter into any business, either
directly or through any Subsidiary, except for (a) those businesses in which the
Borrower and its Subsidiaries are engaged on the Effective Date and (b)
businesses which are reasonably similar or related thereto or reasonable
extensions thereof (each, a "PERMITTED LINE OF BUSINESS").
SECTION 9. 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
when due in accordance with the terms of this Agreement; or the
Borrower shall fail to pay any interest on any Loan, or any other
amount payable hereunder, on or prior to the date which is three
Business Days after any such interest or other amount becomes due and
payable in accordance with the terms of this Agreement; or
(b) Any representation or warranty made or deemed made by the
Borrower or any other Loan Party herein or in any other Loan Document
or which is contained in any Information furnished at any time under or
in connection with this Agreement or any such other Loan Document shall
be false or misleading in any material respect on or as of the date
made or deemed made; or
(c) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in Section 7.6 or
Section 8 or in Section 6(e) of the Security Agreements; or
(d) The Borrower or any other Loan Party shall fail to observe
or perform any other agreement contained in this Agreement or any other
Loan Document (other than as provided in paragraphs (a) through (c) of
this Section 9), and such failure shall continue unremedied for a
period of 30 days after the earlier of (i) a Responsible Officer has
knowledge thereof or (ii) notice thereof to the Borrower by the
Administrative Agent; or
(e) (i) The Borrower or any Subsidiary shall default in making
any payment of any principal of any Indebtedness (including, without
limitation, any Guarantee Obligation, but excluding the Loans) beyond
the period of grace or cure, if any, provided in the instrument
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or agreement under which such Indebtedness was created; or (ii) the
Borrower or any Subsidiary shall default in making any payment of any
interest on any such Indebtedness beyond the period of grace or cure,
if any, provided in the instrument or agreement under which such
Indebtedness was created; or (iii)(A) the Borrower or any Subsidiary
shall 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 prior to the stated maturity of
the primary obligation covered by such Guarantee Obligation) or (B) any
event occurs which gives rise to the right of the holder of any such
Indebtedness to require the Borrower or any Subsidiary to purchase or
offer to purchase any such Indebtedness; PROVIDED that a default, event
or condition described in clause (i), (ii) or (iii) ofthis paragraph
(e) shall not constitute an Event of Default under this Agreement
unless, at the time of such default, event or condition one or more
defaults, events or conditions of the type described in clauses (i),
(ii) and (iii) of this paragraph (e) shall have occurred and be
continuing with respect to Indebtedness the outstanding principal
amount of which exceeds in the aggregate $1,000,000; or
(f) (i) The Borrower or any Subsidiary 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 Subsidiary shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any
Subsidiary any case, proceeding or other action of a nature referred to
in clause (i) above which (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 Subsidiary 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 which results in the entry of an order
for any such relief which 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 Subsidiary 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 Subsidiary shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay
its debts as they become due; or
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(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 Majority
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 or (v) the Borrower or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Majority
Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan; and in each case in clauses (i) through (v) above,
such event or condition, together with all other such events or
conditions, if any, could 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 Subsidiary involving in the aggregate a liability
(not paid or fully covered by insurance) of $1,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged or
stayed or bonded pending appeal on or prior to the first to occur of
(i) the last day upon which such judgment or decree becomes final and
nonappealable and (ii) the day which is 30 days after the entry
thereof; or
(i) (i) Any provision of the Loan Documents shall cease, for
any reason, to be in full force and effect, or the Borrower or any
other Loan Party shall so assert or (ii) the 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
(j) A Change of Control shall occur;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section 9 with respect to the
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued and unpaid interest thereon) and all other amounts
owing under this Agreement and the other Loan Documents (including, without
limitation, all L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented draw requests 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 Majority Lenders, the Administrative Agent may, or upon the
request of the Majority Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Commitments to be terminated forthwith, whereupon such
Commitments shall immediately terminate; and (ii) with the consent of the
Majority Lenders, the Administrative Agent may, or upon the request of the
Majority Lenders, the Administrative Agent shall, by notice to the Borrower,
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declare the Loans hereunder (with accrued and unpaid interest thereon) and all
other Obligations owing under this Agreement and the other Loan Documents
(including, without limitation, all L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented
draw requests thereunder) to be due and payable forthwith, whereupon the same
shall immediately become due and payable. With respect to all outstanding
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 (and maintained under its sole dominion and control) 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, all Loans shall have been
paid in full and no other Obligations shall be due and payable, 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 9, presentment,
demand, protest and all other notices of any kind are hereby expressly waived by
the Borrower.
SECTION 10. THE ADMINISTRATIVE AGENT
10.1 APPOINTMENT. (a) 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.
(b) Notwithstanding any provision to the contrary elsewhere in this
Agreement or any other Loan Document, 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.
10.2 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.
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10.3 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 for 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 the Borrower 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 the Borrower 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 the Borrower.
10.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any Note,
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, without limitation, 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 Majority Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which 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
Majority 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.
10.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default hereunder unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such 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 as
shall be reasonably directed by the Majority 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
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action, or refrain from taking such action, with respect to such Default as it
shall deem advisable in the best interests of the Lenders.
10.6 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
the Borrower, 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 Borrower 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 Borrower. 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 or assets, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
10.7 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 REVOLVING CREDIT FACILITY PERCENTAGES IN EFFECT ON THE DATE ON
WHICH INDEMNIFICATION IS SOUGHT (OR, IF INDEMNIFICATION IS SOUGHT AFTER THE DATE
UPON WHICH THE LOANS SHALL HAVE BEEN PAID IN FULL, RATABLY IN ACCORDANCE WITH
THEIR REVOLVING CREDIT FACILITY 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 WHICH MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, AT ANY
TIME FOLLOWING 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
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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 PORTION OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGEMENTS,
SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE
AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE AGREEMENTS IN THIS SECTION
10.7 SHALL SURVIVE THE PAYMENT FO THE LOANS AND ALL OTHER AMOUNTS PAYABLE
HEREUNDER.
10.8 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 the Borrower, and Subsidiary
or any of their respective Affiliates as though the Administrative Agent were
not serving in such capacity hereunder and under the other Loan Documents. With
respect to the Loans made 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,
as the case may be, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 30 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 Majority Lenders, and, if
no Default has occurred and is continuing, with the approval of the Borrower
(which shall not be unreasonably withheld), shall appoint from among the Lenders
a successor agent for the Lenders, 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 will be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the other parties to this Agreement or any holders of the Loans. After any
retiring Administrative Agent's resignation as Administrative Agent, the
provisions of this Section 10 shall continue to 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 11. MISCELLANEOUS
11.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor 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 11.1. The
Majority Lenders and each relevant Loan Party may, or, with the written consent
of the Majority Lenders, the Administrative Agent and each relevant Loan Party
may, for 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
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or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and
conditions as the Majority 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 and its consequences; PROVIDED, HOWEVER,
that no such waiver and no such amendment, supplement or modification shall (i)
reduce the amount or extend the scheduled date of final maturity of any Loan or
reduce the stated rate of any interest or fee payable hereunder or increase the
amount or extend the expiration date of any Commitment of any Lender, or make
any change in the method of application of any payment of the Loans or the fees
specified in Section 4.8(a) or amend Section 11.7(a) without the consent of all
Lenders, (ii) reduce the amount of any installment payment on any Loan or extend
the scheduled date of any payment (other than the final maturity date) or
mandatory prepayment of any Loan or waive or extend the date of any mandatory
prepayment of any Loan pursuant to Section 4.2(c), (d) or (e) or waive any
Commitment reduction, pursuant to Section 4.2(b) (c), (d) or (e) or make any
change in the method of application of any payment of the Loans specified in
Section 4.2(e) without the consent of all Lenders, (iii) amend, modify or waive
any provision of this Section 11.1 or reduce any percentage specified in the
definition of Majority Lenders or consent to the assignment or transfer by any
Loan Party of any of its rights and obligations under this Agreement and the
other Loan Documents or release any Subsidiary from its obligations under the
Guaranty Agreement or release all or substantially all of the collateral
security for the Obligations, in each case without the written consent of all
Lenders, (iv) amend, modify or waive any condition precedent to any extension of
credit set forth in Section 6.2 without the written consent of the Majority
Lenders or (v) amend, modify or waive any provision of Section 10 without the
written consent of the Administrative Agent. 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 Notes. In the case of any waiver, the Loan
Parties and 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 waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default, or impair any right
consequent thereon.
11.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, three Business Days after
being deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed, addressed as
follows in the case of the Borrower, the Administrative Agent and the Issuing
Lender, and as set forth in Annex 1 (or, with respect to any Lender that is an
Assignee, in the applicable Assignment and Acceptance) in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
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Borrower: Able Telcom Holding Corp.
1601 Forum Place, Suite 1110
West Palm Beach, Florida 33401
Attention: Mark A. Shain, Chief Financial Officer
Telephone: 561-681-0400
Fax: 561-688-0455
with a copy to:
Gunster, Yoakley, Vales-Fauli & Stewart, P.C.
Phillips Point, Suite 500 East
777 South Flagler Drive
West Palm Beach, Florida 33401-6194
Attention: Steven J. Serling
Administrative
Agent: NationsBank, N.A.
901 Main Street
Dallas, Texas 75202-3714
Attention: Roselyn Reid
Telephone: 214-508-0988
Fax: 214-508-9390
Issuing Lender: NationsBank, N.A.
901 Main Street
Dallas, Texas 75202-3714
Attention: Roselyn Reid
Telephone: 214-508-0988
Fax: 214-508-9390
PROVIDED, any notice, request or demand to or upon the Administrative Agent, the
Issuing Lender or the Lenders pursuant to Section 2 OR 4 shall not be effective
until received.
11.3 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 any
Requirement of Law.
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11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Loan Documents and in any
certificate or other written statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
11.5 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 PREPARATION, NEGOTIATION, EXECUTION
AND DELIVERY AND SYNDICATION OF, THIS AGREEMENT, TOGETHER WITH 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, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF
BAKER & BOTTS, L.L.P., COUNSEL TO THE ADMINISTRATIVE AGENT, OR SUCH OTHER
COUNSEL AS SUCH PERSONS MAY SELECT, AND ANY LOCAL COUNSEL RETAINED BY SUCH
COUNSEL OR SUCH PERSONS IN CONNECTION WITH ANY OF THE FOREGOING, (B) TO PAY OR
REIMBURSE EACH LENDER AND THE ADMINISTRATIVE AGENT FOR ALL THEIR RESPECTIVE
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, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS
OF ANY COUNSEL TO ANY OF THE ADMINISTRATIVE AGENT AND THE LENDERS, (C) WITHOUT
DUPLICATION OF AMOUNTS PAID PURSUANT TO SECTIONS 4.9 AND 4.10, 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,
WHICH 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) WITHOUT DUPLICATION OF AMOUNTS
PAID PURSUANT TO SECTIONS 4.9 AND 4.10, TO PAY, INDEMNIFY, AND HOLD EACH LENDER
AND THE ADMINISTRATIVE AGENT AND THEIR RESPECTIVE OFFICERS, DIRECTORS, TRUSTEES,
EMPLOYEES, AFFILIATES, ADVISORS, AGENTS AND CONTROLLING PERSONS (EACH, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL OTHER LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES OR DISBURSEMENTS OF ANY KIND OR
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NATURE WHATSOEVER WITH RESPECT TO THE EXECUTION, DELIVERY, ENFORCEMENT,
PERFORMANCE AND ADMINISTRATION OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND
ANY SUCH OTHER DOCUMENTS, ANY SUBJECT ACQUISITION OR THE USE OF THE PROCEEDS OF
THE LOANS IN CONNECTION WITH THE MFSNT ACQUISITION, ANY SUBJECT ACQUISITION OR
OTHERWISE (ALL THE FOREGOING IN THIS CLAUSE (D), COLLECTIVELY, THE "INDEMNIFIED
LIABILITIES"), PROVIDED, THAT THE BORROWER SHALL HAVE NO OBLIGATION HEREUNDER TO
ANY INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES ARISING FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON. THE
AGREEMENTS IN THIS SECTION 11.5 SHALL SURVIVE REPAYMENT OF THE LOANS AND ALL
OTHER AMOUNTS PAYABLE HEREUNDER.
11.6 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 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.
(b) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks or other
entities ("PARTICIPANTS") 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 scheduled maturity of the Loans, in
each case to the extent subject to such participation. The Borrower agrees that
if amounts outstanding under this Agreement 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 11.7(B) as fully as if it
were a Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 4.9, 4.10 AND 4.11 with respect to its
participation in the
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Commitments and the Loans outstanding from time to time, and shall be subject to
the requirements of Section 4.12, as if it were a Lender; PROVIDED, that in the
case of Section 4.10, such Participant shall have complied with the requirements
of said Section; 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 may, in the ordinary course of its business and in
accordance with applicable law, at any time and from time to time assign to any
Person (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 and such assigning Lender and delivered to the
Administrative Agent for its acceptance and recording in the Register (with a
copy to the Borrower); PROVIDED, (i) except in the case of an assignment of all
of a Lender's interests under this Agreement and the Notes, no such assignment
(other than to any Lender or any affiliate thereof) shall be in an aggregate
principal amount of less than $5,000,000 and (ii) each such assignment shall be
subject to the prior written consent of the Borrower and the Administrative
Agent (which consent in each case shall not be unreasonably withheld or
delayed), except that no consent of the Borrower shall be required in the case
of an assignment to any other Lender or any affiliate thereof or an assignment
consummated while an Event of Default shall have occurred and be continuing.
Such assignment need not be ratable as among any Revolving Credit Commitments
and/or Revolving Credit Loans of the assigning Lender. 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 as set
forth therein, and (y) the assigning Lender 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 or the remaining portion of an assigning Lender's rights and obligations
under this Agreement, such assigning Lender shall cease to be a party hereto).
(d) The Administrative Agent, on behalf of the Borrower, shall maintain
at the address of the Administrative Agent referred to in Section 11.2 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/or any
nominees thereof and the Commitments of, and principal amounts 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, the
Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of a Loan or other obligation hereunder as
the owner thereof for all purposes of this Agreement and the other Loan
Documents. Any assignment of any Loan or other obligation hereunder shall be
effective only upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
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(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee, together with payment to the Administrative
Agent of a registration and processing fee of $1,500 if such Assignee is a
Lender or an affiliate of a Lender, and, in all other cases, $3,000, the
Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any Participant
or Assignee (each, a "TRANSFEREE") and any prospective Transferee any and all
financial information in such Lender's possession concerning the Borrower and
its Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Agreement, subject to Section 11.14(E).
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section 11.6 concerning assignments of Loans and
Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including, without limitation,
any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve
Bank in accordance with applicable Requirements of Law.
11.7 APPLICATION OF PROCEEDS AFTER DEFAULT; ADJUSTMENTS; SET-OFF. (a)
Notwithstanding Section 4.8, from and after the Trigger Date (so long as any
Event of Default is continuing), all payments in respect of the Obligations and
all proceeds of any collateral security for or guaranty of the Obligations
received by the Administrative Agent shall be applied by the Administrative
Agent to the Obligations, as follows: (i) first, to pay interest on and the
principal of any Loan which the Administrative Agent has advanced on behalf of
any Lender for which the Administrative Agent has not then been reimbursed by
any Lender or the Borrower; (ii) second, to the reasonable out-of-pocket costs
and expenses of the Administrative Agent in connection with the retaking,
holding, preparing for sale or lease, selling or leasing or other disposition of
any collateral security for the Obligations, including, without limitation, all
court costs and the reasonable fees and expenses of its agents and legal
counsel; (iii) third, to the payment in full of the Obligations or in the event
that such proceeds are insufficient to pay in full the Obligations, equally and
ratably in accordance with each Lender's respective amounts owing to it under or
pursuant to this Agreement or under or pursuant to any Interest Rate Hedge
Agreement (as to each Lender, applied first to fees and expense reimbursements
then due to such Lender, then to interest due to such Lender, then to pay or
prepay principal of the Loans owing to, or to reduce the "credit exposure" of,
such Lender under such Interest Rate Hedge Agreement, as the case may be); (iv)
fourth, without duplication of any amounts paid pursuant to clause (iii) above,
to the Indemnified Persons to the extent of any amounts owing pursuant to
Section 11.5; (v) fifth, to any Persons entitled to such amounts pursuant to
Section 9-504(a)(c) of the Uniform Commercial Code; and (vi) sixth, to the
Borrower, or its successors and assigns, or as a court of competent jurisdiction
may direct, of any surplus then remaining. For purposes of this Agreement, the
"credit exposure" at any time of any Lender under
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an Interest Rate Hedge Agreement to which such Lender is a party shall be
determined at such time in accordance with the customary methods of calculating
credit exposure under similar arrangements by the counterparty to such
arrangements, taking into account potential interest rate movements and the
respective termination provisions and notional principal amount and term of such
Interest Rate Hedge Agreement. The Borrower shall remain liable to the
Administrative Agent the Lenders for any deficiency. If the Administrative Agent
has funds available to apply to a portion of, but not all of, one of the amounts
described in clauses (i) through (iv) above, then the Administrative Agent shall
apply such funds to the applicable parties in proportion to the amounts to which
such parties would have been entitled if the entire amount described in any such
clause had been available.
(b) Except to the extent that this Agreement specifies provisions for
scheduled payments and optional and mandatory payments to be allocated to
Revolving Credit Loans, if any Lender (a "BENEFITTED LENDER") shall at any time
receive any payment of all or part of its Loans, or interest thereon, 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
9(F), or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans, or interest thereon, such Benefitted Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender's Loan, or shall provide such other Lenders with the benefits
of any such collateral, or the proceeds thereof, as shall be necessary to cause
such Benefitted Lender to share the excess payment or benefits of such
collateral or proceeds 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.
(c) In addition to any rights and remedies of the Lenders provided by
law (including, without limitation, other rights of set-off), 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 Obligation becoming due and payable by the Borrower (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount, to the extent permitted by applicable law, 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, whether or not the
Administrative Agent or any Lender has made any demand for payment. Each Lender
agrees promptly to notify the Borrower, as applicable, and the Administrative
Agent after any such set-off and application made by such Lender, provided that,
to the extent permitted by applicable law, the failure to give such notice shall
not affect the validity of such set-off and application.
11.8 COUNTERPARTS; WHEN EFFECTIVE. This Agreement may be executed by
one or more of the parties to this Agreement on any number of separate
counterparts (including by facsimile transmission), and all of said counterparts
taken together shall be deemed to constitute one and the
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same instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Administrative Agent. This Agreement
shall become effective when the Administrative Agent has received counterparts
hereof executed by the Borrower, the Administrative Agent and each Lender (such
date herein referred to as the "EFFECTIVE DATE").
11.9 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability 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.
11.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, 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.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ITS
CONFLICT OF LAW PRINCIPLES.
11.12 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
judgement in respect thereof, to the non-exclusive general jurisdiction
of the Courts of the State of Texas, the courts of the United States of
America 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) designates and appoints as agent to receive for and on
behalf of Borrower service of process the Person identified with the
Borrower's state of incorporation as its registered agent for service
of process. In the event that such Person resigns or ceases to serve as
the Borrower's agent for service of process hereunder, the Borrower
agrees forthwith (i) to designate another agent for service of process
and (ii) to give prompt written notice to the Administrative Agent of
the name and address of such agent. In addition, the
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Borrower agrees that service of process in any such action or
proceeding may also be effected by mailing a copy thereof by registered
or certified mail (or any substantially similar form of mail), postage
prepaid, to it at its address set forth in Section 11.2 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 11.12 any special, exemplary, punitive or
consequential damages.
11.l3 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;
(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.
11.14 CONFIDENTIALITY. Each of the Lenders agrees that it will use
reasonable efforts not to disclose without the prior consent of the Borrower
(other than to its employees, auditors, counsel or other professional advisors,
affiliates, or other Lenders, if the disclosing Person reasonably determines
that it is appropriate that such other Person have access to such information)
any information with respect to the Borrower or any Subsidiary which is
furnished pursuant to or in connection with this Agreement or any other Loan
Document; PROVIDED, that any Lender may disclose any such information (a) as has
become generally available to the public, (b) as may be required or appropriate
in any report, statement or testimony submitted to the NAIC or any Governmental
Authority having or claiming to have jurisdiction over such Lender (including
the Board and the Federal Deposit Insurance Corporation or any similar
organization (whether in the United States or elsewhere) and their respective
successors), (c) as may be required or appropriate in response to any summons or
subpoena or in connection with any litigation, (d) to comply with any
Requirement of Law applicable to it, or (e) to any prospective Transferee which
is not at the time a Lender, if such prospective Transferee has agreed in
writing to be bound by the provisions of this Section 11.14 to the same extent
as the disclosing Person.
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11.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND
THE LENDERS HEREBY KNOWINGLY AND INTENTIONALLY 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.
11.16 MAXIMUM INTEREST RATE. Regardless of any provision contained in
any of the Loan Documents, no Lender shall ever be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on the Obligations, or any
part thereof, any amount in excess of the Highest Lawful Rate, and, in the event
any Lender ever contracts for, charges, takes, reserves, receives, or applies as
interest any such excess, it shall be deemed a partial prepayment of principal
and treated hereunder as such and any remaining excess shall be refunded to the
Borrower.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW.]
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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.
ABLE TELCOM HOLDING CORP.
By: /S/ FRAZIER L. GAINES
-------------------------------------
Frazier L. Gaines
President
THE ADMINISTRATIVE AGENT
AND THE LENDERS:
NATIONSBANK, N.A.,
as Administrative Agent, the Issuing Lender
and as a Lender
By: /S/ ROSELYN REID
------------------------------------
Roselyn Reid
Vice President
EXHIBIT 10.28
ABLE TELCOM
HOLDING CORP.
EMPLOYMENT AGREEMENT
Agreement dated this 27th day of April, 1998, by and between Able Telcom Holding
Corp., with its address at 1601 Forum Place, Suite 1110, West Palm Beach,
Florida, 33401, ("Employer"), and Mark A. Shain, 1830 Embassy Drive #T14, West
Palm Beach, Florida, 33401, ("Employee").
WITNESSETH:
WHEREAS, Employer is engaged in the telephone and telecommunication installation
and service, and manufacture sale and installation of highway signs and traffic
control products.
WHEREAS, Employer desires to employ Employee as the Chief Financial Officer of
Employer.
WHEREAS, Employer desires to avail itself of the services of the Employee in
order that his knowledge and ability may be utilized in the conduct and
development of the business and affairs of Employer.
WHEREAS, Employee has evidenced his willingness to enter into an employment
agreement with respect to his employment by Employer, pursuant to the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing and mutual promises and
covenants herein contained, it is agreed as follows:
1. EMPLOYMENT: DUTIES
Employer hereby employs Employee as the Chief Financial Officer of Employer.
Subject at all times to the direction of the Board of Directors and C.E.O. of
Employer, Employee shall be in charge of the overall business operations of the
Employer and the performance of such services and duties as the board of
Directors and President shall determine. However, the duties and
responsibilities assigned to the Employee during the term of employment shall be
substantially similar in type and character to those ordinarily assigned to and
performed by persons employed as Chief Financial Officer by corporations
carrying on a business similar to Employer.
2. FULL TIME EMPLOYMENT
Employee hereby accepts employment by Employer upon the terms and conditions
contained herein and agrees that during the term of this Agreement, Employee
shall devote all of his business time, attention and energies to the business of
Employer.
3. TERM
Employee's employment thereunder shall be for a term of one (1) year to commence
on the date hereof. This Agreement may be extended for an additional three (3)
one year terms after the initial term of one (1) year. The Employee/Employer
must give a minimum of ninety (90) days prior written notice to the
Employee/Employer that either party elects to have the Agreement terminate
effective at the end of any term. If Employer violates a major provision of this
Agreement, Employee may terminate this Agreement and receive the remainder of
the base salary due under any of the one year terms.
<PAGE>
2
4. TERMINATION FOR CAUSE
Notwithstanding any other provision of this Agreement, Employee may be
terminated on thirty (30) days notice without further benefits or compensation
for any of the following reasons: a) misuse, misappropriation or embezzlement of
any Employer property or funds; b) conviction of a felony, c) breach of any
material provision of this agreement.
5. TERMINATION WITHOUT CAUSE
Termination without cause can only be affected by an action by the Board of
Directors representing a majority of the members approving such termination. In
the event of the termination without cause, the Employee will be paid the
remainder of the base salary due under each one year contract period and with a
minimum of 90 days severence pay (base salary only). All unexercised stock
options shall be accelerated.
6. COMPENSATION
As full compensation for the performance of his duties on behalf of Employer,
Employee shall be compensated as follows:
i) BASE SALARY. Employer during the term hereof shall pay Employee a base salary
at the rate of one hundred fifteen thousand dollars ($115,000) per annum,
payable no less frequently than in monthly installments. Upon the successful
closing of the MFS deal the base salary will be increased to one hundred and
fifty thousand dollars ($150,000) per annum, payable no less frequently than in
monthly installments.
ii) REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for the
expenses incurred by Employee in connection with his duties hereunder, including
travel and entertainment, such reimbursement to be made in accordance with
regular Employer policy and upon presentation by Employee of the details of, and
vouchers for, such expenses.
iii) SALARY ADJUSTMENTS. Prior to the expiration of each contract year, the
Board of Directors will review Employee's salary and benefits and if appropriate
in its sole and absolute discretion will increase such salary and benefits for
the next succeeding year.
iv. AUTOMOBILE ALLOWANCE. Employer shall provide Employee with an allowance of
Five Hundred Dollars ($500) per month.
7. OPTIONS
Upon six (6) months of service Employee will be reviewed and considered for
stock option grants under the company stock option plan.
8. FRINGE BENEFITS
During the term of this Agreement, Employer shall provide at its sole expense to
the Employee, hospitalization, major medical, life insurance and other fringe
benefits on the same terms and conditions as it shall afford other management
employees.
<PAGE>
3
9. UPON TERMINATION OF EMPLOYMENT
Subsequent to the termination of the employment of Employee, Employee will not
interfere with or disrupt or attempt to disrupt Employer's business relationship
with its customers or suppliers. Further, Employee will not solicit any of the
employees of Employer to leave the Employer for a period of two (2) years
following such termination. In addition, Employee agrees that all information
received from principals and agents of Employer will be held in total confidence
for a period of two (2) years following termination of employment.
10. INCAPACITY
In the event that Employee shall become incapacitated or unable to perform the
duties of his employment hereunder for the balance of the current one year
Contract Period (hereinafter referred to as the "Disability Period"), the
Employee nevertheless shall be entitled to full salary and other payments not
including bonus or stock options, provided for hereunder during the Disability
Period; provided, however, that any amount paid to the Employee under any
Employer provided disability insurance will be subtracted from payments to be
made to the Employee by the Employer. In the event that Employee is
incapacitated for a period which exceeds the Disability Period. Employee shall
not be entitled to receive the compensation and other payments provided for
hereunder for any time after the end of the Disability Period. In no event shall
the disability payment period exceed the period of this Contract. Employee shall
be considered to be incapacitated when he is unable to perform the normal duties
required of him hereunder. Incapacity shall be determined by two (2) medical
doctors assigned by Employer.
11. NOTICES
All notices hereunder shall be in writing and shall be sent to the parties at
the respective addresses above set forth. All notices shall be delivered in
person or given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when delivered in person or deposited in the United
States mail. Either party may designate any other address to which notice shall
be given, by giving notice to the other such change of address in the manner
herein provided. Employer, or its management, directors, representatives,
employees or affiliates will not make any public announcements or any other
information related to Employer, directly or indirectly, without the expressed
written consent of Employee.
12. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provision shall be deemed dependent
upon any other covenant or provision unless expressed herein.
13. ENTIRE AGREEMENT: MODIFICATION
All prior agreements with respect to the subject matter hereof between the
parties are hereby canceled. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof, and the parties hereto have made
no agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein. No modification of this Agreement
shall be valid unless made in writing and signed by the parties hereto.
<PAGE>
4
14. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall inure
to, and be binding upon, the Employer, its successors and assigns, and upon the
Employee and his legal representatives, heirs and legatees. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.
15. NON-WAIVER
The failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed as a
waiver or relinquishment of this Agreement, shall not be construed as a waiver
or relinquishment of future compliance therewith, and said terms, conditions and
provisions shall remain in full force and effect. No waiver of any term or
condition of this Agreement on the part of either party shall be effective for
any purpose whatsoever unless such waiver is in writing and signed by such
party.
16. GOVERNING LAW
This Agreement shall be construed and governed by the laws of the State of
Florida.
17. ARBITRATION
Any controversy or claim arising under, out of, or in connection with this
Agreement or any breach or claimed breach thereof, shall be settled by
arbitration before the American Arbitration Association, in Palm Beach County,
Florida, before a panel of three arbitrators, in accordance with its rules, and
judgment upon any award rendered may be entered in any court having jurisdiction
thereof.
18. CONTRACT
This contract supersedes all previous contracts between Employee and employer.
19. READINGS
The headings of the paragraphs herein are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF the parties have set their hands and seals this 20th day of
May, 1998.
Witness: Employer: ABLE TELCOM HOLDING CORP.
By: /s/ GIDEON TAYLOR By: /s/ FRAZIER GAINES
-------------------- ----------------------------------
Frazier Gaines
Chief Executive Officer & Director
Witness: Employee: Mark A. Shain
By: By: /s/ MARK A. SHAIN
---------------- ----------------------------------
EXHIBIT 10.29
ABLE TELCOM
HOLDING CORP.
EMPLOYMENT AGREEMENT
Agreement dated this 27th day of April, 1998, by and between Able Telcom Holding
Corp., with its address at 1601 Forum Place, Suite 1110, West Palm Beach,
Florida, 33401, ("Employer"), and Jesus G. Dominguez, ("Employee").
WITNESSETH:
WHEREAS, Employer is engaged in the telephone and telecommunication installation
and service, and manufacture sale and installation of highway signs and traffic
control products.
WHEREAS, Employer desires to employ Employee as the Chief Accounting Officer of
Able Telcom Holding Corp.
WHEREAS, Employer desires to avail itself of the services of the Employee in
order that his knowledge and ability may be utilized in the conduct and
development of the business and affairs of Employer.
WHEREAS, Employee has evidenced his willingness to enter into an employment
agreement with respect to his employment by Employer, pursuant to the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing and mutual promises and
covenants herein contained, it is agreed as follows:
1. EMPLOYMENT: DUTIES
Employer hereby employs Employee as the Chief Accounting Officer of Employer.
Subject at all times to the direction of the Board of Directors and C.E.O. of
Employer, Employee shall be in charge of the overall business accounting
operations of the Employer and the performance of such services and duties as
the Board of Directors and President shall determine. However, the duties and
responsibilities assigned to the Employee during the terms of employment shall
be substantially similar in type and character to those ordinarily assigned to
and performed by persons employed as Chief Accounting Officer by corporations
carrying on a business similar to Employer.
2. FULL TIME EMPLOYMENT
Employee hereby accepts employment by Employer upon the terms and conditions
contained herein and agree that during the term of this Agreement, Employee
shall devote all of his business time, attention and energies to the business of
Employer.
3. TERM
Employee's employment thereunder shall be for a term of three (3) years to
commence on the date hereof.
In the event employee voluntarily resigns, employer's obligations are limited to
payment of base salary through the last day of employee's employment. Stock
options are exercisable per the stock option plan provisions and no acceleration
of unvested shares will be made to employee.
4. TERMINATION FOR CAUSE
Notwithstanding any other provision of this Agreement, Employee may be
terminated on ninety (90) days notice without further benefits or compensation
for any of the following reasons: a) misuse, misappropriation or embezzlement of
any Employer property or funds; b) conviction of a felony, c) breach of any
material provision of this agreement.
<PAGE>
5. TERMINATION WITHOUT CAUSE
Termination without cause can only be affected by an action by the Board of
Directors representing a majority of the members approving such termination. In
the event of the termination without cause, the Employee will be paid the
remainder of the base salary due under each one year contract period and with a
minimum of one hundred eighty (180) days severance pay (base salary only). All
unexercised stock options shall be accelerated.
6. COMPENSATION
As full compensation for the performance of his duties on behalf of Employer,
Employee shall be compensated as follows:
i) BASE SALARY. Employer during the term hereof shall pay Employee a base salary
at the rate of one hundred thousand dollars ($100,000) per annum, payable no
less frequently than in monthly installments. Upon successful completion of the
MFS Network Technologies and World Com deal, the base salary will be increased
to one hundred twenty-five thousand dollars ($125,000) per annum, payable no
less frequently than in monthly installments.
ii) REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for the
expenses incurred by Employee in connection with his duties hereunder, including
travel and entertainment, such reimbursement to be made in accordance with
regular Employer policy and upon presentation by Employee of the details of, and
vouchers for, such expenses.
iii) SALARY ADJUSTMENTS. Prior to the expiration of each contract year, the
Board of Directors will review Employee's salary and benefits and if appropriate
in its sole and absolute discretion will increase such salary and benefits for
the next succeeding year.
iv) AUTOMOBILE ALLOWANCE. Employer shall provide Employee with an allowance of
Five Hundred Dollars ($500) per month.
7. OPTIONS
Will automatically vest if Able Telcom Holding Corp. is sold or there is a
change in control of Able Telcom Holding Corp. Employee will receive
50,000-share stock option at $3.00 per share, which vests after one year of
employment, pending Board of Directors approval.
8. FRINGE BENEFITS
During the term of this Agreement, Employer shall provide at its sole expense to
the Employee, hospitalization, major medical, life insurance and other fringe
benefits on the same terms and conditions as it shall afford other management
employees.
9. UPON TERMINATION OF EMPLOYMENT
Subsequent to the termination of the employment of Employee, Employee will not
interfere with or disrupt or attempt to disrupt Employer's business relationship
with its customers or suppliers. Further, Employee will not solicit any of the
employees of Employer to leave the Employer for a period of one (1) year
following such termination. In addition, Employee agrees that all information
received from principals and agents of Employer will be held in total confidence
for a period of one (1) year following termination of employment. To the extent
such information is proprietary and not generally available to the public or
sources outside Employers Company.
<PAGE>
10. INCAPACITY
In the event that Employee shall become incapacitated or unable to perform the
duties of his employment hereunder for the balance of the current one year
Period (hereinafter referred to as the "Disability Period"), the Employee
nevertheless shall be entitled to full salary and other payments not including
bonus, provided for hereunder during the Disability Period; provided, however,
that any amount paid to the Employee under any Employer provided disability
insurance will be subtracted from payments to be made to the Employee by the
Employer. In the event that Employee is incapacitated for a period which exceeds
the Disability Period. Employee shall not be entitled to receive the
compensation and other payments provided for hereunder for any time after the
end of the Disability Period. In no event shall the disability payment period
exceed the period of this Contract. Employee shall be considered to be
incapacitated when he is unable to perform the normal duties required of him
hereunder. Two (2) medical doctors assigned by Employer shall determine
incapacity.
11. NOTICES
All notices hereunder shall be in writing and shall be sent to the parties at
the respective addresses above set forth. All notices shall be delivered in
person or given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when delivered in person or deposited in the United
States mail. Either party may designate any other address to which notice shall
be given, by giving notice to the other such change of address in the manner
herein provided. Employer, or its management, directors, representatives,
employees or affiliates will not make any public announcements or any other
information related to Employer, directly or indirectly, without the expressed
written consent of Employee.
12. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provision shall be deemed dependent
upon any other covenant or provision unless expressed herein.
13. ENTIRE AGREEMENT: MODIFICATION
All prior agreements with respect to the subject matter hereof between the
parties are hereby canceled. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof, and the parties hereto have made
no agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein. No modification of this Agreement
shall be valid unless made in writing and signed by the parties hereto.
14. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall inure
to, and be binding upon, the Employer, its successors and assigns, and upon the
Employee and his legal representatives, heirs and legatees. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.
15. NON-WAIVER
The failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed as a
waiver or relinquishment of this Agreement, shall not be construed as a waiver
or relinquishment of future compliance therewith, and said terms, conditions and
provisions shall remain in full force and effect. No waiver of any term or
condition of this Agreement on the part of either party shall be effective for
any purpose whatsoever unless such waiver is in writing and signed by such
party.
<PAGE>
16. GOVERNING LAW
This Agreement shall be construed and governed by the laws of the State of
Florida.
17. ARBITRATION
Any controversy or claim arising under, out of, or in connection with this
Agreement or any breach or claimed breach thereof, shall be settled by
arbitration before the American Arbitration Association, in Palm Beach County,
Florida, before a panel of three arbitrators, in accordance with its rules, and
judgment upon any award rendered may be entered in any court having jurisdiction
thereof.
18. CONTRACT
This contract supersedes all previous contracts between Employee and Employer.
19. HEADINGS
The headings of the paragraphs herein are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF the parties have set their hands and seals this 27th day of
April, 1998.
Witness: Employer: ABLE TELCOM HOLDING CORP.
By: /s/ CURTIS A. DALE By: /s/ FRAZIER GAINES
--------------------- ----------------------------------
Frazier Gaines
Chief Executive Officer & Director
Witness: Employee:
By: /s/ BILLY V. RAY By: /s/ JESUS G. DOMINGUEZ
--------------------- ----------------------------------
EXHIBIT 10.30
EMPLOYMENT AGREEMENT
Agreement dated this 16th day of July, 1998, by and between Able Telcom Holding
Corp., with its address at 1601 Forum Place, Suite 1110, West Palm Beach,
Florida, 33401, ("Employer"), and Stacy Jenkins, 3610 Becker Court, Plattsmouth,
NE, 68048, ("Employee").
WITNESSETH:
WHEREAS, Employer is engaged in the telephone and telecommunication installation
and service, and manufacture sale and installation of highway signs and traffic
control products.
WHEREAS, Employer desires to employ Employee as the President of MFSNT.
WHEREAS, Employer desires to avail itself of the services of the Employee in
order that his knowledge and ability may be utilized in the conduct and
development of the business and affairs of Employer.
WHEREAS, Employee has evidenced his willingness to enter into an employment
agreement with respect to his employment by Employer, pursuant to the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing and mutual promises and
covenants herein contained, it is agreed as follows:
1. EMPLOYMENT: DUTIES
Employer hereby employs Employee as the President of MFS Network Technologies,
Inc., an operating company of Employer. Subject at all times to the direction of
the Board of Directors of Employer, Employee shall be in charge of the overall
business operations of MFSNT Employer and the performance of such services and
duties as the Board of Directors shall determine. However, the duties and
responsibilities assigned to the Employee during the term of employment shall be
substantially similar in type and character to those ordinarily assigned to and
performed by persons employed as President by corporations carrying on a
business similar to Employer.
2. FULL TIME EMPLOYMENT
Employee hereby accepts employment by Employer upon the terms and conditions
contained herein and agrees that during the term of this Agreement, Employee
shall devote all of his business time, attention and energies to the business of
Employer.
3. TERM
Employee's employment thereunder shall be for a term of three (3) years to
commence on the date hereof.
<PAGE>
2
In the event employee voluntarily resigns, employer's obligations are limited to
payment of base salary through the last day of employee's employment. Stock
options are exercisable per the stock option plan provisions and no acceleration
of unvested shares will be made to employee.
4. TERMINATION FOR CAUSE
Notwithstanding any other provision of this Agreement, Employee may be
terminated on thirty (30) days notice without further benefits or compensation
for any of the following reasons: a) misuse, misappropriation or embezzlement of
any Employer property or funds; b) conviction of a felony, c) breach of any
material provision of this agreement.
5. TERMINATION WITHOUT CAUSE
Termination without cause can only be affected by an action by the Board of
Directors representing a majority of the members approving such termination. In
the event of the termination without cause, the Employee will be paid the
remainder of the base salary due under each one year contract period and with a
minimum of 90 days severence pay (base salary only). All unexercised stock
options shall be accelerated.
6. COMPENSATION
As full compensation for the performance of his duties on behalf of Employer,
Employee shall be compensated as follows:
i) BASE SALARY. Employer during the term hereof shall pay Employee a base salary
at the rate of two hundred thousand dollars ($200,000) per annum, payable no
less frequently than in monthly installments.
ii) REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for the
expenses incurred by Employee in connection with his duties hereunder, including
travel and entertainment, such reimbursement to be made in accordance with
regular Employer policy and upon presentation by Employee of the details of, and
vouchers for, such expenses.
iii) SALARY ADJUSTMENTS. Prior to the expiration of each contract year, the
Board of Directors will review Employee's salary and benefits and if appropriate
in its sole and absolute discretion will increase such salary and benefits for
the next succeeding year.
iv. AUTOMOBILE ALLOWANCE. Employer shall provide Employee with an allowance of
Five Hundred Dollars ($500) per month.
7. OPTIONS
Will automatically vest if Networks is sold or there is a change in control of
Able Telcom, Inc. Employee will receive 100,000 share stock option at $14.00 per
share, that are exercisable after one year of employment.
8. FRINGE BENEFITS
During the term of this Agreement, Employer shall provide at its sole expense to
the Employee, hospitalization, major medical, life insurance and other fringe
benefits on the same terms and conditions as it shall afford other management
employees.
<PAGE>
3
9. UPON TERMINATION OF EMPLOYMENT
Subsequent to the termination of the employment of Employee, Employee will not
interfere with or disrupt or attempt to disrupt Employer's business relationship
with its customers or suppliers. Further, Employee will not solicit any of the
employees of Employer to leave the Employer for a period of two (2) years
following such termination. In addition, Employee agrees that all information
received from principals and agents of Employer will be held in total confidence
for a period of two (2) years following termination of employment. To the extent
such information is proprietary and not generally available to the public or
sources outside employers company.
10. INCAPACITY
In the event that Employee shall become incapacitated or unable to perform the
duties of his employment hereunder for the balance of the current one year
Contract Period (hereinafter referred to as the "Disability Period"), the
Employee nevertheless shall be entitled to full salary and other payments not
including bonus, provided for hereunder during the Disability Period; provided,
however, that any amount paid to the Employee under any Employer provided
disability insurance will be subtracted from payments to be made to the Employee
by the Employer. In the event that Employee is incapacitated for a period which
exceeds the Disability Period, Employee shall not be entitled to receive the
compensation and other payments provided for hereunder for any time after the
end of the Disability Period. In no event shall the disability payment period
exceed the period of this Contract. Employee shall be considered to be
incapacitated when he is unable to perform the normal duties required of him
hereunder. Incapacity shall be determined by two (2) medical doctors assigned by
Employer.
11. NOTICES
All notices hereunder shall be in writing and shall be sent to the parties at
the respective addresses above set forth. All notices shall be delivered in
person or given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when delivered in person or deposited in the United
States mail. Either party may designate any other address to which notice shall
be given, by giving notice to the other such change of address in the manner
herein provided. Employer, or its management, directors, representatives,
employees or affiliates will not make any public announcements or any other
information related to Employer, directly or indirectly, without the expressed
written consent of Employee.
12. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provision shall be deemed dependent
upon any other covenant or provision unless expressed herein.
13. ENTIRE AGREEMENT: MODIFICATION
All prior agreements with respect to the subject matter hereof between the
parties are hereby canceled. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof, and the parties hereto have made
no agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein. No modification of this Agreement
shall be valid unless made in writing and signed by the parties hereto.
<PAGE>
4
14. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall inure
to, and be binding upon, the Employer, its successors and assigns, and upon the
Employee and his legal representatives, heirs and legatees. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.
15. NON-WAIVER
The failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed as a
waiver or relinquishment of this Agreement, shall not be construed as a waiver
or relinquishment of future compliance therewith, and said terms, conditions and
provisions shall remain in full force and effect. No waiver of any term or
condition of this Agreement on the part of either party shall be effective for
any purpose whatsoever unless such waiver is in writing and signed by such
party.
16. GOVERNING LAW
This Agreement shall be construed and governed by the laws of the State of
Florida.
17. ARBITRATION
Any controversy or claim arising under, out of, or in connection with this
Agreement or any breach or claimed breach thereof, shall be settled by
arbitration before the American Arbitration Association, in Palm Beach County,
Florida, before a panel of three arbitrators, in accordance with its rules, and
judgment upon any award rendered may be entered in any court having jurisdiction
thereof.
18. CONTRACT
This contract supersedes all previous contracts between Employee and employer.
19. READINGS
The headings of the paragraphs herein are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF the parties have set their hands and seals this 17th day of
July, 1998.
Witness: Employer: ABLE TELCOM HOLDING CORP.
By: /s/ [Illegible] By: /s/ FRAZIER GAINES
---------------- ----------------------------------
Frazier Gaines
Chief Executive Officer & Director
Witness: Employee: Stacy Jenkins
By: /s/ [Illegible] By: /s/ STACY JENKINS
---------------- ----------------------------------
EXHIBIT 10.31
EMPLOYMENT AGREEMENT
Agreement dated this 28th day of July, 1998, by and between Able Telcom Holding
Corp., with its address at 1601 Forum Place, Suite 1110, West Palm Beach,
Florida, 33401, ("Employer"), and MIKE BRESLIN, ("Employee").
WITNESSETH:
WHEREAS, Employer is engaged in the telephone and telecommunication installation
and service, and manufacture sale and installation of highway signs and traffic
control products.
WHEREAS, Employer desires to employ Employee as the PRESIDENT/COO of MFS
Transportation Systems.
WHEREAS, Employer desires to avail itself of the services of the Employee in
order that his knowledge and ability may be utilized in the conduct and
development of the business and affairs of Employer.
WHEREAS, Employee has evidenced his willingness to enter into an employment
agreement with respect to his employment by Employer, pursuant to the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing and mutual promises and
covenants herein contained, it is agreed as follows:
1. EMPLOYMENT: DUTIES
SUMMARY
Plans, develops, establishes policies and objectives of business
organization in accordance with the President and Board directives and
corporation charter, manages and directs the organization toward its
primary objectives, based on profit and return on capital, by
performing the following duties personally or through subordinate
managers.
ESSENTIAL DUTIES AND RESPONSIBILITIES include the following. Other
duties may be assigned.
Confers with company officials to plan business objectives, to develop
organizational policies, to coordinate functions and operations between
divisions and departments, and to establish responsibilities and
procedures for attaining objectives.
Reviews activity reports and financial statements to determine progress
and status in attaining objectives and revises objectives and plans in
accordance with current conditions.
Directs and coordinates formulation of financial programs to provide
funding for new or continuing operations to maximize returns on
investments and to increase productivity.
<PAGE>
Plans and develops industrial, labor, and public relations policies
designed to improve company's image and relations with customers,
employees, stockholders, and public.
Evaluates performance of executives for compliance with established
policies and objectives of firm and contributions in attaining
objectives.
Presides over Board of Directors for MFS Trans Tech.
Serves as chairman of committees such as management, executive,
engineering, and sales.
QUALIFICATIONS
To perform this job successfully, an individual must be able to perform
each essential duty satisfactorily. The requirements listed below are
representative of the knowledge, skill, and/or ability required.
Reasonable accommodations may be made to enable individuals with
disabilities to perform the essential functions.
PHYSICAL DEMANDS
The physical demands described here are representative of those that
must be met by an employee to successfully perform the essential
functions of this job. Reasonable accommodations may be made to enable
individuals with disabilities to perform the essential functions.
WORK ENVIRONMENT
The work environment characteristics described here are representative
of those an employee encounters while performing the essential
functions of this job. Reasonable accommodations may be made to enable
individuals with disabilities to perform the essential functions.
2. FULL TIME EMPLOYMENT
Employee hereby accepts employment by Employer upon the terms and conditions
contained herein and agrees that during the term of this Agreement, Employee
shall devote all of his business time, attention and energies to the business of
Employer.
3. TERM
Employee's employment thereunder shall be for a term of three (3) years to
commence on the date hereof and will be renewed annually, subject to Board of
Directors approval.
In the event employee voluntarily resigns, employer's obligations are limited to
payment of base salary through the last day of employee's employment and
approved accrued vacation days. Stock options are exercisable per the stock
option plan provisions and no acceleration of unvested shares will be made to
employee.
4. TERMINATION FOR CAUSE
Notwithstanding any other provision of this Agreement, Employee may be
terminated on thirty (30) days notice without further benefits or compensation
for any of the following reasons: a) misuse, misappropriation or embezzlement of
any Employer property or funds; b) conviction of a felony, c) breach of any
material provision of this agreement.
<PAGE>
5. TERMINATION WITHOUT CAUSE
Termination without cause can only be affected by an action by the Board of
Directors representing a majority of the members approving such termination. In
the event of the termination without cause, the Employee will be paid the
remainder of the base salary due under each one-year contract period and with a
minimum of 90 days severence pay (base salary only). All unexercised stock
options shall be accelerated. Upon sale or divestiture, the entire remaining
portion of this contract will be paid.
6. COMPENSATION
As full compensation for the performance of his duties on behalf of Employer,
Employee shall be compensated as follows:
i) BASE SALARY. Employer during the term hereof shall pay Employee a base salary
at the rate of ONE HUNDRED SEVENTY FIVE THOUSAND DOLLARS ($175,000) per annum,
payable no less frequently than in monthly installments.
ii) REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for the
expenses incurred by Employee in connection with his duties hereunder, including
travel and entertainment, such reimbursement to be made in accordance with
regular Employer policy and upon presentation by Employee of the details of, and
vouchers for, such expenses.
iii) SALARY ADJUSTMENTS. Prior to the expiration of each contract year, the
Board of Directors will review Employee's salary and benefits and if appropriate
in its sole and absolute discretion will increase such salary and benefits for
the next succeeding year.
iv. AUTOMOBILE ALLOWANCE. Employer shall provide Employee with an allowance of
Five Hundred Dollars ($500) per month.
7. OPTIONS
Will automatically vest if Transportation Systems is sold or there is a change
in control of Able Telcom, Inc. Employee will receive 50,000 share stock option
at $14.00 per share, which vests after one year of employment.
8. FRINGE BENEFITS
During the term of this Agreement, Employer shall provide at its sole expense to
the Employee, hospitalization, major medical, life insurance and other fringe
benefits on the same terms and conditions as it shall afford other management
employees.
9. UPON TERMINATION OF EMPLOYMENT
Subsequent to the termination of the employment of Employee, Employee will not
interfere with or disrupt or attempt to disrupt Employer's business relationship
with its customers or suppliers. Further, Employee will not solicit any of the
employees of Employer to leave the Employer for a period of two (2) years
following such termination. In addition, Employee agrees that all information
received from principals and agents of Employer will be held in total confidence
for a period of two (2) years following termination of employment. To the extent
such information is proprietary and not generally available to the public or
sources outside employers company.
<PAGE>
10. INCAPACITY
In the event that Employee shall become incapacitated or unable to perform the
duties of his employment hereunder for the balance of the current one year
Period (hereinafter referred to as the "Disability Period"), the Employee
nevertheless shall be entitled to full salary and other payments not including
bonus, provided for hereunder during the Disability Period; provided, however,
that any amount paid to the Employee under any Employer provided disability
insurance will be subtracted from payments to be made to the Employee by the
Employer. In the event that Employee is incapacitated for a period which exceeds
the Disability Period, Employee shall not be entitled to receive the
compensation and other payments provided for hereunder for any time after the
end of the Disability Period. In no event shall the disability payment period
exceed the period of this Contract. Employee shall be considered to be
incapacitated when he is unable to perform the normal duties required of him
hereunder. Two (2) medical doctors assigned by Employer shall determine
incapacity.
11. NOTICES
All notices hereunder shall be in writing and shall be sent to the parties at
the respective addresses above set forth. All notices shall be delivered in
person or given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when delivered in person or deposited in the United
States mail. Either party may designate any other address to which notice shall
be given, by giving notice to the other such change of address in the manner
herein provided. Employer, or its management, directors, representatives,
employees or affiliates will not make any public announcements or any other
information related to Employer, directly or indirectly, without the expressed
written consent of Employee.
12. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provision shall be deemed dependent
upon any other covenant or provision unless expressed herein.
13. ENTIRE AGREEMENT: MODIFICATION
All prior agreements with respect to the subject matter hereof between the
parties are hereby canceled. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof, and the parties hereto have made
no agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein. No modification of this Agreement
shall be valid unless made in writing and signed by the parties hereto.
14. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall inure
to, and be binding upon, the Employer, its successors and assigns, and upon the
Employee and his legal representatives, heirs and legatees. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.
<PAGE>
15. NON-WAIVER
The failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed as a
waiver or relinquishment of this Agreement, shall not be construed as a waiver
or relinquishment of future compliance therewith, and said terms, conditions and
provisions shall remain in full force and effect. No waiver of any term or
condition of this Agreement on the part of either party shall be effective for
any purpose whatsoever unless such waiver is in writing and signed by such
party.
16. GOVERNING LAW
This Agreement shall be construed and governed by the laws of the State of
Florida.
17. ARBITRATION
Any controversy or claim arising under, out of, or in connection with this
Agreement or any breach or claimed breach thereof, shall be settled by
arbitration before the American Arbitration Association, in Palm Beach County,
Florida, before a panel of three arbitrators, in accordance with its rules, and
judgment upon any award rendered may be entered in any court having jurisdiction
thereof.
18. CONTRACT
This contract supersedes all previous contracts between Employee and employer.
19. READINGS
The headings of the paragraphs herein are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF the parties have set their hands and seals this 28th day of
July, 1998.
Witness: Employer: ABLE TELCOM HOLDING CORP.
By: /s/ JESUS DOMINGUEZ By: /s/ FRAZIER GAINES
--------------------- ----------------------------------
Frazier Gaines
Chief Executive Officer & Director
Witness: Employee:
By: /s/ CURTIS A. DALE By: /s/ MIKE BRESLIN
---------------- ----------------------------------
EXHIBIT 10.32
AMENDMENT NO. 1 TO CREDIT AGREEMENT
This AMENDMENT NO. 1, dated as of June 30, 1998 (this "AMENDMENT"), to the
Credit Agreement dated as of June 11, 1998 (as the same may be amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among ABLE TELCOM HOLDING CORP., a Florida corporation (the "BORROWER"), the
several lenders from time to time parties thereto (collectively, the "LENDERS,"
and each individually, a "LENDER") and NATIONSBANK, N.A., as Administrative
Agent (in such capacity, the "AGENT"), collectively the "PARTIES".
WITNESSETH:
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make
certain loans and other extensions of credit to the Borrower; and
WHEREAS, the Parties have agreed that certain provisions of the Credit
Agreement be amended in the manner provided for in this Amendment;
NOW, THEREFORE, the Parties hereby agree:
1. that the Credit Agreement is amended as follows:
(a) the front cover page is amended to read in its entirety as set out in
Exhibit A hereto;
(b) the introductory provisions (commencing and ending at page 1 of the Credit
Agreement) are amended to read in their entirety as follows:
"CREDIT AGREEMENT, dated June 11, 1998, among ABLE TELCOM HOLDING CORP., a
Florida corporation (the "BORROWER"), the several lenders from time to time
parties to this Credit Agreement (the "LENDERS"), NATIONSBANK, N.A., as
Administrative Agent for the Lenders hereunder and CIBC Inc., as documentation
agent (the "DOCUMENTATION AGENT").";
(c) Section 1.1 is hereby amended as follows:
(i) The definition of "Indebtedness" is revised to read in its entirety as
follows:
-1-
<PAGE>
""INDEBTEDNESS": with respect to any Person, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, including
obligations incurred in connection with the acquisition of property, assets or
businesses, (c) all obligations of such Person under conditional sale or other
title retention agreements relating to property or assets purchased by such
Person, (d) all obligations of such Person issued or assumed as the deferred
purchase price of property, assets or services (excluding trade accounts
payable, and accrued expenses incurred or arising in the ordinary course of
business, payable in accordance with customary practices and not more than 90
days past due), (e) all Indebtedness of other Persons secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien on property or assets (including revenues, income and
profit) owned or acquired by such Person, whether or not the obligations secured
thereby have been assumed, (f) all Guarantee Obligations of such Person, (g) all
obligations in respect of Capital Leases of such Person, (h) all obligations of
such Person with respect of Interest Rate Hedge Agreements (i) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such Person
and (j) Disqualified Stock PROVIDED HOWEVER THAT the MFSNT Note will not
constitute "Indebtedness" of the Borrower. The Indebtedness of any Person shall
included the Indebtedness of any partnership or joint venture in which such
Person is a general partner or member, other than to the extent that the
instrument or agreement evidencing such Indebtedness expressly limits the
liability of such Person in respect thereof pursuant to provisions and terms
reasonable satisfactory to the Administrative Agent";
(ii) The definition of "Restricted Subsidiary" is revised to read in its
entirety as follows:
""RESTRICTED SUBSIDIARY": (a) any Subsidiary of the Borrower other than
those listed on SCHEDULE 1.1 and (b) those additional Subsidiaries of the
Borrower, added by a supplement to such SCHEDULE 1.1 whose assets either: (i)
are not located in, or income attributable to sources other than, the United
States, the pledge of the stock or assets of which would be treated as a
repatriation of the earnings or income thereof or taxable dividend to the
Borrower under ss. 957 of the Code ("Controlled Foreign Corporations"); or (ii)
consist soley of Capital Securities of Controlled Foreign Corporations;"; and
(iii) The following definitions are added:
""MFSNT NOTE": that certain promissory note dated July ____, 1998, a copy
of which is attached as Exhibit P hereto.";
""MFSNT SUBSIDIARIES": MFS Network Technologies, Inc. (being the successor
by merger to MFS Acquisition Corp.) and the Subsidiaries of MFSNT as of the date
of the MFSNT Acquisition, the stock of which is acquired in the MFSNT
Acquisition, namely: MFS Transportation Systems, Inc., a Delaware corporation,
MFS Network Technologies of the District of Columbia, Inc., a District of
Columbia corporation and MFS TransTech, a Delaware corporation";
-2-
<PAGE>
(d) Section 8.1 is amended to read in its entirety as follows:
"8.1 FINANCIAL COVENANTS.
(a) LEVERAGE RATIOS. (i) Permit the Total Leverage Ratio of the Borrower
and its Restricted Subsidiaries at the end of any fiscal quarter of
the Borrower ending during any period set forth below to be greater
than the ratio set forth opposite such period below:
PERIOD RATIO
Effective Date through 10/30/1998 3.70 to 1.00
10/31/1998 through 04/29/1999 3.50 to 1.00
04/30/1999 through 01/31/2000 3.25 to 1.00
02/01/2000 and thereafter 3.00 to 1.00
(ii) Permit the Senior Leverage Ratio of the Borrower and its
Restricted Subsidiaries at the end of any fiscal quarter of the Borrower
ending during any period set forth below to be greater than the ratio set
forth opposite such period below:
PERIOD RATIO
Effective Date through 04/29/1999 3.00 to 1.00
04/30/1999 through 01/31/2000 2.75 to 1.00
02/01/2000 and thereafter 2.50 to 1.00
(b) INTEREST COVERAGE. Permits the Interest Coverage Ratio of the
Borrower and its Restricted Subsidiaries at the end of any fiscal quarter
of the Borrower to be less than 2.00 to 1.00.
(c) FIXED CHARGE RATIO. Permit the Fixed Charge Ratio of the
Borrower and its Restricted Subsidiaries at the end of any fiscal quarter
of the Borrower to be less than 1.50 to 1.00.
(d) CURRENT RATIO. Permit the Current Ratio of the Borrower and its
Restricted Subsidiaries at the end of any fiscal quarter of the Borrower to
be less than 2.50 to 1.00.";
(e) Section 8.2 is hereby amended to read in its entirety as follows:
"8.2 LIMITATIONS ON INDEBTEDNESS. Create, incur, assume or suffer to exist
any Indebtedness of the Borrower or any Restricted Subsidiary, except:
-3-
<PAGE>
(a) Indebtedness under this Agreement and the Guarantee Obligations of the
Subsidiaries with respect thereto;
(b) Indebtedness of the Borrower or any Restricted Subsidiary to the
Borrower or any other Restricted Subsidiary of the Borrower; PROVIDED,
that any such Indebtedness shall (i) not be subordinated to any other
Indebtedness of the Borrower or such Restricted Subsidiary other than
the Obligations and (ii) be evidenced by an Intercompany Note pledged
to the Administrative Agent pursuant to the Borrower's Pledge Agreement
or a Subsidiary's Pledge Agreement, as applicable;
(c) Indebtedness of the Borrower and any Restricted Subsidiary constituting
obligations under Capital Leases or secured by Liens permitted by
clause (f) of the definition of "Permitted Liens" contained in Section
1, in an aggregate principal amount at any one time outstanding not to
exceed $3,000,000.00.
(d) Interest Rate Hedge Agreements entered into by the Borrower for the
purpose of fixing or hedging interest rate risk with respect to any
floating rate Indebtedness of the Borrower that is permitted by this
Section 8.2; PROVIDED, that the notional principal amount of the
obligations under any such Interest Rate Hedge Agreement does not
exceed the principal amount of the Indebtedness to which such Interest
Rate Hedge Agreement relates;
(e) the 12% Subordinated Notes; and
(f) other unsecured Indebtedness of the Borrower not in excess of
$1,000,000 outstanding at any time in the aggregate.";
(f) Section 8.8 is hereby amended to read in its entirety as follows:
"8.8 LIMITATION ON ACQUISITIONS, INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to, or purchase or
enter into any agreement or option to purchase any stock, bonds, notes,
debentures or other securities of or any assets of, or of a business unit of, or
make any other investment in, any Person (collectively, "INVESTMENTS"), except:
(a) accounts receivable that arise in the ordinary course of business and
adjustments to account debtors with respect thereto in the ordinary
course of business;
(b) Investments in case and Cash Equivalents;
-4-
<PAGE>
(c) Investments of the Borrower and the Subsidiaries in the Borrower and
other Subsidiaries existing on the Effective Date and listed in the
Perfection Certificate and (ii) subject to Sections 8.15(b) and
8.15(c), Investments after the Effective Date by the Borrower or any
Restricted Subsidiary in the Borrower or: (A) any Wholly Owned
Subsidiary that is a Restricted Subsidiary; or (B) any Subsidiary that
is not a Restricted Subsidiary, provided that all such Investments in
Subsidiaries described in clause (b) of the definition of "Restricted
Subsidiary" shall not exceed $3,500,000 in the aggregate.
(d) loans and advances to employees of the Borrower or any Restricted
Subsidiary for travel, entertainment and relocation expenses in the
ordinary course of business, in an aggregate principal amount for the
Borrower and the Restricted Subsidiaries for all loans and advances
described in this clause (d) not to exceed $500,000 at any time
outstanding;
(e) Subject Acquisitions; PROVIDED, that (i) no such acquisition may be
made if a Default has occurred and is continuing or would occur after
giving effect thereto, (ii) the consideration for any Subject
Acquisition does not exceed the Fair Market Value of the property and
assets which are the subject thereof and (iii) the Borrower has
delivered to the Administrative Agent the information required under or
has otherwise complied with the provisions of Sections 6.2(b), (c),
(d), (e), (f), (g), (h), (i) and (j), whether or not the Borrower is
requesting a Loan in connection with such Subject Acquisition;
(f) Capital Securities of Kanas Telcom, Inc., an Alaskan corporation not
exceeding 25% of the Capital Securities of such corporation outstanding
at any time;
(g) Capital Securities of SIRIT Technologies, Inc., a Canadian corporation,
provided that such Capital Securities shall not exceed 2% of the
Capital Securities of such corporation outstanding at any time;
(h) Investments received in connection with the bankruptcy or
reorganization of any customer or supplier of the Borrower or any
Subsidiary or in connection with the settlement of delinquent
obligations;
(i) Investments consisting of promissory notes or Capital Securities issued
to the Borrower or any Wholly Owned Subsidiary in connection with any
Disposition made pursuant to, and to the extent permitted by, Section
8.5(c);
-5-
<PAGE>
(j) Investments consisting of Interest Rate Hedge Agreements permitted by
Section 8.2; and
(k) other Investments (not prohibited under Section 8.6 or 8.9 or otherwise
prohibited under any other covenant hereunder) in an aggregate amount
at any time outstanding not to exceed $500,000.";
(g) Section 8.14 is hereby amended to read in its entirety as follows:
8.14 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into or suffer to exist
any Contractual Obligation which in any way restricts the ability of the
Borrower or any Restricted Subsidiary to create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now
owned or hereafter acquired, other than (a) this Agreement and the other
Loan Documents, (b) any agreement governing Indebtedness incurred pursuant
to Section 8.2(c) (in which case, any restriction shall only be effective
against the assets financed thereby) and (c) any agreement governing
Indebtedness outstanding on the Effective Date and listed on Schedule 8.14.
(h) Section 8.15 is hereby amended to read in its entirety as follows:
"8.15 CERTAIN INTERCOMPANY MATTERS. (a) In the case of the Borrower and the
Subsidiaries, (i) fail to satisfy customary formalities with respect to
organizational separateness, including, without limitation, the maintenance
of separate books and records; (ii) fail to act soley in its own name and
through its authorized officers and agents; (iii) in the case of any
Subsidiary, make or agree to make any payment to a creditor of the
Borrower; (iv) commingle any money or other assets of the Borrower with any
money or other assets of the Borrower or Subsidiary; or (v) take any
action, or conduct its affairs in a manner, which could reasonably by
expected to result in the separate organizational existence of the Borrower
and the Subsidiaries being ignored under any circumstance.
(b) In the case of the Borrower, (i) make any Investment in any Restricted
Subsidiary other than in the form of a loan evidenced by an Intercompany
Note pledged to the Administrative Agent pursuant to the Borrower's Pledge
Agreement, except for the capitalization of new Subsidiaries in an amount
not to exceed $10,000, in each case, (ii) permit any Restricted Subsidiary
to make any Investment in any direct or indirect Subsidiary of such Person
other than in the form of a loan evidenced by an Intercompany Note pledged
to the Administrative Agent pursuant to such Restricted Subsidiary's Pledge
Agreement except for the capitalization of new Wholly Owned Subsidiaries of
such Person in an amount not to exceed $10,000 in each case, and (iii)
cause any Subsidiary to maintain bank accounts which are not separate and
distinct from such accounts of the Borrower.
-6-
<PAGE>
(c) In the case of the Borrower, (i) create, acquire or suffer to exist any
Subsidiary which is not a Wholly Owned Subsidiary, except Subsidiaries that
are Controlled Foreign Corporations (as such term is used in the definition
of "Restricted Subsidiaries" herein) or in connection with a Subject
Acquisition or the MFSNT Acquisition, or (ii) permit any Wholly Owned
Subsidiary to cease to be a Wholly Owned Subsidiary (other than in
connection with (x) a transaction permitted by Section 8.4 or (y) a
Disposition of all of the Capital Security of such Wholly Owned
Subsidiary.";
(h) Section 8.16 is hereby amended to read in its entirety as follows:
"8.16 LIMITATION ON RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS. Enter into or
suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) pay
dividends or make any other distributions in respect of any Capital
Security of such Subsidiary of the Borrower, (b) make loans or advances to
the Borrower or any other Subsidiary or (c) transfer any of its assets to
the Borrower or any other Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (i) any restrictions existing
under the Loan Documents or any other agreements in effect on the date of
this Agreement, (ii) any restrictions with respect to a Subsidiary imposed
pursuant to an agreement which has been entered into in connection with the
Disposition of all or substantially all of the properties or assets of such
Subsidiary or all of the Capital Securities of such Subsidiary owned by the
Borrower, directly or indirectly through Subsidiary, or (iii) any
restrictions existing under any agreement that amends, refinances or
replaces any agreement containing the restrictions referred to in clause
(i) or (ii) above, PROVIDED, that the terms and conditions of any such
agreement are no less favorable to the Lenders than those under this
agreement so amended, refinanced or replaced.";
(i) New section 10.10 is added, to read in its entirety as follows:
"10.10 OTHER AGENTS. The Documentation Agent shall have no duties or
responsibilities hereunder nor any fiduciary relationship with any Lender,
and no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or otherwise exist against
any such Agent in its capacity as such.";
(j) Schedule 1.1 attached hereto is substituted for existing Schedule 1.1 to the
Credit Agreement;
(k) that page A-1 of the Revolving Credit Note in the form attached as Exhibit A
to the Credit Agreement be amended to read in its entirety as set out in Exhibit
B hereto; and
(l) that a new Exhibit P, in the form of Exhibit P hereto, be added following
the last Exhibit to the Credit Agreement.
-7-
<PAGE>
2. that all references in the Loan Documents to calculations based on a
year of 360 days consisting of 30 day months are hereby modified to refer to
calculations based on a year of 360 days for the actual number of days elapsed.
3. that all references in the Loan Documents (as that term is defined in
the Credit Agreement) to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby and as may be amended from time to time
hereafter.
4. that the Lenders, the Administrative Agent, and the Documentation Agent
are third party beneficiaries of the subordination provisions of the MFSNT Note
attached as Exhibit P hereto.
The Borrower represents to the Lenders, the Administrative Agent and the
Documentation Agent, that all representations and warranties set out in the
Credit Agreement, as amended hereby, remain true and correct as of the date
hereof, and that no Default or Event of Default (in each case, as defined in the
Credit Agreement) exists on the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
ABLE TELCOM HOLDING CORP.
By: /s/ FRAZIER L. GAINES
-----------------------
Frazier L. Gaines
President
THE ADMINISTRATIVE AGENT
AND THE LENDERS:
NATIONSBANK, N.A.,
as Administrative Agent
and as a Lender
By: /s/ ROSELYN REID
--------------------
Roselyn Reid
Vice President
-8-
<PAGE>
CIBC Inc.,
as a Lender
By: E.L. GORDON
-----------------------
[Name] E.L. Gordon
[Title] EXECUTIVE DIRECTOR
CIBC OPPENHEIMER CORP., AS AGENT
AGREED AND ACCEPTED BY
DOCUMENTATION AGENT:
CIBC INC.
By: /s/ E.L. GORDON
--------------------------
Name: E.L. GORDON
------------------------
Title: EXECUTIVE DIRECTOR
-----------------------
CIBC OPPENHEIMER CORP., AS AGENT
-8-
EXHIBIT 21
SUBSIDIARIES OF ABLE TELCOM HOLDING CORP.
TRAFFIC MANAGEMENT GROUP, INC.
TRANSPORTATION SAFETY CONTRACTORS, INC.
TRANSPORTATION SAFETY CONTRACTORS OF VIRGINIA, INC.
GEORGIA ELECTRIC COMPANY
TELECOMMUNICATION SERVICES GROUP, INC.
ABLE COMMUNICATIONS SERVICES, INC.
ABLE INTEGRATED SYSTEMS, INC.
DIAL COMMUNICATIONS, INC.
H.C. CONNELL, INC.
COMMUNICATIONS DEVELOPMENT GROUP, INC.
ABLE TELCOM INTERNATIONAL, INC.
NEUROTECHNOLOGY, INC.
ABLE WIRELESS, INC.
ABLE TELCOM/TTI C.A.
SEIMA TELECOMMUNICATIONS, LTDA.
INVERSIONES ABLE TELCOM, S.A.
PATTON MANAGEMENT CORPORATION
BLACK INDUSTRIES, INC. (inactive)
INLAND AIR LINES, INC.
PRESSURE CONCRETE CONSTRUCTION CO.
WRIGHT & LOPEZ, INC.
WRIGHT & LOPEZ OF ALABAMA, INC.
WRIGHT & LOPEZ OF FLORIDA, INC. (inactive)
POWER UTILITIES CONTRACTORS, INC. (inactive)
MFS NETWORK TECHNOLOGIES, INC.
MFS TRANSPORTATION SYSTEMS, INC.
MFS TRANSTEC, INC.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ABLE TELCOM
HOLDING CORP. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1997
<PERIOD-END> JUL-31-1998
<CASH> 5,078,750
<SECURITIES> 0
<RECEIVABLES> 59,696,806
<ALLOWANCES> 0
<INVENTORY> 22,016,046
<CURRENT-ASSETS> 189,289,735
<PP&E> 40,135,969
<DEPRECIATION> (12,250,931)
<TOTAL-ASSETS> 234,596,747
<CURRENT-LIABILITIES> 100,316,075
<BONDS> 55,932,136
0
14,690,000
<COMMON> 10,058
<OTHER-SE> 35,066,378
<TOTAL-LIABILITY-AND-EQUITY> 234,596,747
<SALES> 0
<TOTAL-REVENUES> 114,524,482
<CGS> 0
<TOTAL-COSTS> 106,812,234
<OTHER-EXPENSES> 55,789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,600,991
<INCOME-PRETAX> 5,055,468
<INCOME-TAX> 1,669,721
<INCOME-CONTINUING> 2,629,252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,629,252
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
