<PAGE>
As filed with the Securities and Exchange Commission on September 11, 1998.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 25, 1998
ECO SOIL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
NEBRASKA 0-21975 47-0709577
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
10890 THORNMINT ROAD, SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices, including zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 675-1660
Exhibit Index on Page 4
<PAGE>
This Current Report on Form 8-K is filed by Eco Soil Systems,
Inc., a Nebraska corporation (the "Company"), in connection with the matters
described herein.
ITEM 5. OTHER EVENTS.
On August 25, 1998, the Company completed two transactions
providing the Company with $15 million in gross proceeds and the right to
borrow up to an additional $20 million. First, the Company issued an
aggregate of $15 million principal amount of the Company's 12.00% Senior
Subordinated Notes due 2003 (the "Notes") and warrants to purchase 262,500
shares of the Company's common stock (the "Warrants") pursuant to Note and
Warrant Purchase Agreements dated as of August 25, 1998 between the Company
and Albion Alliance Mezzanine Fund and between the Company and Paribas
Capital Funding LLC. The Notes are due in 2003 and bear interest at a rate
of 12% per annum, which is due quarterly beginning November 25, 1998. The
Warrants may be exercised on or after February 25, 2000 and on or prior to
August 25, 2003. The Warrants have an exercise price of $.01 per share and
carry piggyback registration rights.
The Company has applied the proceeds from the sale of Notes
and Warrants to (i) the repayment in full of the Company's existing revolving
credit facility, term loan and other bank debt and certain promissory notes,
in the aggregate amount of approximately $12.1 million, (ii) the payment of
fees and expenses incurred in connection with the offering and sale of the
Notes and Warrants and the establishment of the Credit Facility and (iii)
working capital.
Second, the Company entered into a Credit Agreement dated as
of August 25, 1998 with The Provident Bank, which provides for a $20 million
secured revolving line of credit (the "Line of Credit"). The lending formula
for the Line of Credit is based on eligible accounts receivable and inventory.
The Line of Credit has a three-year term during which borrowings will bear
interest at floating rates of interest tied to prime or LIBOR rates and is
secured by all of the Company's and certain of its subsidiaries' tangible and
intangible assets.
The foregoing summary of the terms of the Credit Agreement,
the Purchase Agreement and the Warrants does not purport to be complete and
is qualified in its entirety by reference to the full text of such agreements,
copies of which are attached hereto as Exhibits 10.1, 10.2 and 10.3 and
incorporated herein by reference.
On August 26, 1998, Eco Soil issued a press release announcing the
financings described above. A copy of the press release is attached hereto as
Exhibit 99.1 and incorporated herein reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
<TABLE>
<CAPTION>
(c) EXHIBITS.
<S> <C>
10.1 Credit Agreement dated as of August 25, 1998.
10.2 Note and Warrant Purchase Agreement dated as of August 25,
1998.*
10.3 12.00% Senior Subordinated Note Due August 25, 2003.*
10.4 Common Stock Purchase Warrant Expiring August 25, 2003.*
99.1 Press Release, dated August 26, 1998, issued by Eco Soil
Systems, Inc.
</TABLE>
*Includes Schedule I showing additional party to and differing terms of
substantially identical document.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: September 11, 1998 Eco Soil Systems, Inc.
By: /s/ L. Jean Dunn, Jr.
-------------------------------
L. Jean Dunn, Jr.
Chief Financial Officer
3
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EXHIBIT INDEX
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EXHIBIT NO. PAGE
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10.1 Credit Agreement dated as of August 25, 1998.
10.2 Note and Warrant Purchase Agreement dated as of August 25,
1998.*
10.3 12.00% Senior Subordinated Note Due August 25, 2003.*
10.4 Common Stock Purchase Warrant Expiring August 25, 2003.*
99.1 Press Release, dated August 26, 1998, issued by Eco Soil
Systems, Inc.
</TABLE>
*Includes Schedule I showing additional party to and differing terms of
substantially identical document.
4
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CREDIT AGREEMENT
BY AND AMONG
ECO SOIL SYSTEMS, INC.,
ASPEN CONSULTING COMPANIES, INC.,
TURF SPECIALTY, INC.,
TURF ACQUISITION SUB., INC.,
ECO TURF PRODUCTS, INC.,
AGRICULTURAL SUPPLY, INC. (F.K.A. AGRICULTURAL ACQUISITION SUB., INC.),
MITIGATION SERVICES, INC.,
BENHAM CHEMICAL CORPORATION,
YUMA ACQUISITION SUB, INC.
BORROWERS,
THE PROVIDENT BANK,
AGENT
AND
VARIOUS LENDERS DESCRIBED HEREIN
AUGUST 25, 1998
-----------------------------------
-----------------------------------
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TABLE OF CONTENTS
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Page
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ARTICLE 1
INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 PROVISIONS PERTAINING TO DEFINITIONS.. . . . . . . . . . 1
Section 1.2 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.1 COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.2 MAKING THE LOANS . . . . . . . . . . . . . . . . . . . . 29
Section 2.3 DRAWS, ADVANCES AND SETTLEMENT OF PAYMENTS AND ADVANCES. 29
Section 2.4 THE NOTES. . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.5 INTEREST PAYABLE ON THE LOANS. . . . . . . . . . . . . . 31
Section 2.6 REPAYMENTS AND PREPAYMENTS OF PRINCIPAL. . . . . . . . . 33
Section 2.7 PAYMENTS AND COMPUTATIONS. . . . . . . . . . . . . . . . 35
Section 2.8 PAYMENTS TO BE FREE OF DEDUCTIONS. . . . . . . . . . . . 37
Section 2.9 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 38
Section 2.10 LIBOR BREAKAGE COST. . . . . . . . . . . . . . . . . . . 38
Section 2.11 ADDITIONAL COSTS, ETC. . . . . . . . . . . . . . . . . . 38
Section 2.12 AGENT AND LENDER STATEMENTS. . . . . . . . . . . . . . . 39
Section 2.13 ALLOCATION OF LIABILITY. . . . . . . . . . . . . . . . . 39
Section 2.14 LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . 40
ARTICLE 3
SECURITY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.1 SECURITY INTEREST. . . . . . . . . . . . . . . . . . . . 43
Section 3.2 FINANCING STATEMENTS; ADDITIONAL DOCUMENTS . . . . . . . 43
Section 3.3 ACCOUNTS; CHATTEL PAPER; LEASE AGREEMENTS. . . . . . . . 44
Section 3.4 PLEDGE OF STOCK. . . . . . . . . . . . . . . . . . . . . 44
Section 3.5 RELEASE OF COLLATERAL. . . . . . . . . . . . . . . . . . 45
ARTICLE 4
CONDITIONS PRECEDENT TO DISBURSEMENTS . . . . . . . . . . . . . . . . . 45
Section 4.1 CONDITIONS PRECEDENT TO INITIAL CLOSING. . . . . . . . . 45
Section 4.2 CONDITIONS PRECEDENT TO SUBSEQUENT LOANS . . . . . . . . 48
ARTICLE 5
GENERAL REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 49
Section 5.1 EXISTENCE, ETC . . . . . . . . . . . . . . . . . . . . . 49
Section 5.2 AUTHORITY, ETC . . . . . . . . . . . . . . . . . . . . . 50
Section 5.3 BINDING EFFECT OF DOCUMENTS, ETC . . . . . . . . . . . . 51
</TABLE>
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Section 5.4 NO EVENTS OF DEFAULT, ETC. . . . . . . . . . . . . . . . 52
Section 5.5 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 52
Section 5.6 CHANGES; NONE ADVERSE. . . . . . . . . . . . . . . . . . 52
Section 5.7 TITLE TO ASSETS; MATERIAL LEASES . . . . . . . . . . . . 52
Section 5.8 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . 53
Section 5.9 INDEBTEDNESS FOR BORROWED MONEY. . . . . . . . . . . . . 53
Section 5.10 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5.11 NO MATERIALLY ADVERSE CONTRACTS. . . . . . . . . . . . . 54
Section 5.12 TAXES AND TAX RETURNS, ETC . . . . . . . . . . . . . . . 54
Section 5.13 CONTRACTS WITH AFFILIATES, ETC . . . . . . . . . . . . . 54
Section 5.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . 55
Section 5.15 GOVERNMENTAL REGULATION. . . . . . . . . . . . . . . . . 55
Section 5.16 SECURITIES ACTIVITIES. . . . . . . . . . . . . . . . . . 55
Section 5.17 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . 56
Section 5.18 NO MATERIAL DEFAULT. . . . . . . . . . . . . . . . . . . 56
Section 5.19 ENVIRONMENTAL CONDITIONS . . . . . . . . . . . . . . . . 56
Section 5.20 LICENSES AND PERMITS . . . . . . . . . . . . . . . . . . 57
Section 5.21 SPECIAL FLOOD HAZARD DETERMINATION . . . . . . . . . . . 57
Section 5.22 GENERAL COLLATERAL REPRESENTATION. . . . . . . . . . . . 58
ARTICLE 6 AFFIRMATIVE COVENANTS OF BORROWERS . . . . . . . . . . . . . . . . 59
Section 6.1 REPORTS AND OTHER INFORMATION. . . . . . . . . . . . . . 59
Section 6.2 MAINTENANCE OF PROPERTY; AUTHORIZATION; INSURANCE. . . . 63
Section 6.3 KEY MAN LIFE INSURANCE . . . . . . . . . . . . . . . . . 64
Section 6.4 CORPORATE EXISTENCE. . . . . . . . . . . . . . . . . . . 64
Section 6.5 INSPECTION RIGHTS. . . . . . . . . . . . . . . . . . . . 64
Section 6.6 PAYMENT OF TAXES AND CLAIMS. . . . . . . . . . . . . . . 64
Section 6.7 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . 65
Section 6.8 NOTICE OF OTHER EVENTS.. . . . . . . . . . . . . . . . . 65
Section 6.9 INSPECTIONS AND AUDITS . . . . . . . . . . . . . . . . . 66
Section 6.10 PAYMENT OF INDEBTEDNESS. . . . . . . . . . . . . . . . . 66
Section 6.11 PAYMENT OF FEES. . . . . . . . . . . . . . . . . . . . . 66
Section 6.12 PERFORMANCE OF OBLIGATIONS UNDER CERTAIN DOCUMENTS . . . 66
Section 6.13 GOVERNMENTAL CONSENTS AND APPROVALS. . . . . . . . . . . 67
Section 6.14 EMPLOYEE BENEFIT PLANS AND GUARANTEED PENSION PLANS. . . 67
Section 6.15 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . 68
Section 6.16 BORROWERS' DEPOSITORY ACCOUNTS.. . . . . . . . . . . . . 68
Section 6.17 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 68
Section 6.18 YEAR 2000 COMPATIBILITY. . . . . . . . . . . . . . . . . 68
ARTICLE 7
FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 7.1 SENIOR SECURED INDEBTEDNESS RATIO. . . . . . . . . . . . 69
Section 7.2 INTEREST COVERAGE RATIO. . . . . . . . . . . . . . . . . 69
Section 7.3 TOTAL INDEBTEDNESS RATIO . . . . . . . . . . . . . . . . 69
Section 7.4 FIXED CHARGE COVERAGE. . . . . . . . . . . . . . . . . . 70
</TABLE>
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Section 7.5 CURRENT RATIO. . . . . . . . . . . . . . . . . . . . . . 70
Section 7.6 LIMITATION ON CAPITAL EXPENDITURES . . . . . . . . . . . 70
ARTICLE 8
NEGATIVE COVENANTS OF BORROWERS . . . . . . . . . . . . . . . . . . . . 71
Section 8.1 LIMITATION ON NATURE OF BUSINESS . . . . . . . . . . . . 71
Section 8.2 LIMITATION ON FUNDAMENTAL CHANGES. . . . . . . . . . . . 71
Section 8.3 RESTRICTED PAYMENTS. . . . . . . . . . . . . . . . . . . 72
Section 8.4 MANAGEMENT COMPENSATION. . . . . . . . . . . . . . . . . 73
Section 8.5 LIMITATION ON DISPOSITION OF ASSETS. . . . . . . . . . . 73
Section 8.6 LIMITATION ON INVESTMENTS. . . . . . . . . . . . . . . . 74
Section 8.7 ACQUISITION OF MARGIN SECURITIES . . . . . . . . . . . . 75
Section 8.8 LIMITATION ON MORTGAGES, LIENS AND ENCUMBRANCES. . . . . 75
Section 8.9 NO ADDITIONAL NEGATIVE PLEDGES . . . . . . . . . . . . . 76
Section 8.10 NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO BORROWERS 76
Section 8.11 LIMITATION ON INDEBTEDNESS . . . . . . . . . . . . . . . 76
Section 8.12 LIMITATION ON SALES AND LEASEBACKS . . . . . . . . . . . 77
Section 8.13 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . 77
Section 8.14 CHANGES RELATING TO SUBORDINATED INDEBTEDNESS. . . . . . 77
Section 8.15 NO ADDITIONAL BANK ACCOUNTS. . . . . . . . . . . . . . . 77
ARTICLE 9 EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . 78
Section 9.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . 78
(a) PRINCIPAL AND INTEREST . . . . . . . . . . . . . . . . . 78
(b) REPRESENTATION AND WARRANTIES. . . . . . . . . . . . . . 78
(c) CERTAIN COVENANTS. . . . . . . . . . . . . . . . . . . . 78
(d) OTHER COVENANTS. . . . . . . . . . . . . . . . . . . . . 78
(e) LOAN DOCUMENTS . . . . . . . . . . . . . . . . . . . . . 78
(f) LITIGATION . . . . . . . . . . . . . . . . . . . . . . . 78
(g) DEFAULT BY BORROWERS UNDER OTHER AGREEMENTS. . . . . . . 79
(h) INSOLVENCY . . . . . . . . . . . . . . . . . . . . . . . 79
(i) JUDGMENT . . . . . . . . . . . . . . . . . . . . . . . . 79
(j) ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 80
(k) CHANGE OF CONTROL. . . . . . . . . . . . . . . . . . . . 80
(l) MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . 80
Section 9.2 TERMINATION OF COMMITMENTS AND ACCELERATION OF
OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . 80
Section 9.3 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 9.4 NO IMPLIED WAIVER; RIGHTS CUMULATIVE . . . . . . . . . . 83
Section 9.5 SET-OFF; PRO RATA SHARING. . . . . . . . . . . . . . . . 83
ARTICLE 10
CONCERNING THE AGENT AND THE LENDERS. . . . . . . . . . . . . . . . . . 84
Section 10.1 APPOINTMENT OF THE AGENT . . . . . . . . . . . . . . . . 84
Section 10.2 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . 84
Section 10.3 ACCEPTANCE OF APPOINTMENT. . . . . . . . . . . . . . . . 84
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Section 10.4 COLLATERAL MATTERS . . . . . . . . . . . . . . . . . . . 85
Section 10.5 AGENCY FOR PERFECTION. . . . . . . . . . . . . . . . . . 86
Section 10.6 APPLICATION OF MONEYS. . . . . . . . . . . . . . . . . . 86
Section 10.7 RELIANCE BY THE AGENT. . . . . . . . . . . . . . . . . . 86
Section 10.8 EXCULPATORY PROVISIONS . . . . . . . . . . . . . . . . . 87
Section 10.9 ACTION BY THE AGENT. . . . . . . . . . . . . . . . . . . 87
Section 10.10 AMENDMENTS, WAIVERS AND CONSENTS . . . . . . . . . . . . 88
Section 10.11 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . 88
Section 10.12 REIMBURSEMENT OF THE AGENT . . . . . . . . . . . . . . . 89
Section 10.13 SHARING OF FUNDS RECEIVED. . . . . . . . . . . . . . . . 89
Section 10.14 DEALING WITH LENDERS . . . . . . . . . . . . . . . . . . 89
Section 10.15 AGENT AS LENDER. . . . . . . . . . . . . . . . . . . . . 90
Section 10.16 DUTIES NOT TO BE INCREASED . . . . . . . . . . . . . . . 90
Section 10.17 LENDER CREDIT DECISIONS. . . . . . . . . . . . . . . . . 90
Section 10.18 RESIGNATION OF AGENT . . . . . . . . . . . . . . . . . . 90
Section 10.19 ASSIGNMENT OF NOTES; PARTICIPATION . . . . . . . . . . . 90
ARTICLE 11
PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . . . . . . . . 91
Section 11.1 TERM OF AGREEMENT. . . . . . . . . . . . . . . . . . . . 92
Section 11.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 11.3 SURVIVAL OF REPRESENTATIONS. . . . . . . . . . . . . . . 93
Section 11.4 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . 93
Section 11.5 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . 93
Section 11.6 COSTS, EXPENSES, TAXES AND INDEMNIFICATION . . . . . . . 94
Section 11.7 LANGUAGE . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 11.8 BINDING EFFECT; ASSIGNMENT . . . . . . . . . . . . . . . 95
Section 11.9 GOVERNING LAW; JURISDICTION AND VENUE. . . . . . . . . . 95
Section 11.10 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . 96
Section 11.11 WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.12 INTERPRETATION AND PROOF OF LOAN DOCUMENTS . . . . . . . 96
Section 11.13 INTEGRATION OF SCHEDULES AND EXHIBITS. . . . . . . . . . 97
Section 11.14 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 11.15 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . 97
Section 11.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . 97
Section 11.17 ONE GENERAL OBLIGATION . . . . . . . . . . . . . . . . . 97
Section 11.18 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . 97
</TABLE>
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SCHEDULES
ANNEX I
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1 Lenders
1.1 Depository Accounts
1.2 Excluded Property
1.3 Principal Account Debtors
3.1 Mortgaged Property and Leasehold Interests
3.2 Required Post-Closing Consents to the Assignment of Patents and Trademarks
5.1(a) Jurisdictions where qualified to do business
5.1(b) Capital Stock
Part I: Authorized Capital Stock
Part II: Outstanding Options, Rights or Warrants
5.1(c) Subsidiaries
5.7 Title to Assets; Material Leases of Property
5.8 Intellectual Property
5.9 Permitted Indebtedness
5.10 Litigation
5.11 Material Contracts
5.12(a) Tax Returns
5.12(c) Deficiencies for Taxes and Audits
5.18 Notice of Default
5.22 UCC Filing Offices
8.8(f) Liens
</TABLE>
<PAGE>
EXHIBITS
Exhibit A Form of Assignment of Patents
Exhibit B Form of Assignment of Trademarks
Exhibit C Form of Blocked Account Agreement
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Compliance Certificate
Exhibit F Form of Leasehold Mortgage
Exhibit G Form of Pledge Agreement
Exhibit H Form of Revolving Credit Promissory Note
Exhibit I Form of Notice of Election
Exhibit J Form of Borrowers' Counsel Opinion Letter
Exhibit K Form of Lenders Assignment and Assumption Agreement
<PAGE>
THIS CREDIT AGREEMENT dated as of August 25, 1998 ("Credit Agreement"), is
by and among ECO SOIL SYSTEMS, INC., a Nebraska corporation ("Holdings"), ASPEN
CONSULTING COMPANIES, INC., a Colorado corporation ("ACI"), TURF SPECIALTY,
INC., a Delaware corporation ("TSI"),TURF ACQUISITION SUB., INC., a Delaware
corporation ("TAS"), ECO TURF PRODUCTS, INC., a Delaware corporation ("ETP"),
AGRICULTURAL SUPPLY, INC. (f.k.a. AGRICULTURAL ACQUISITION SUB., INC.), a
Delaware corporation ("ASI"), MITIGATION SERVICES, INC., a Delaware corporation
("MSI"), and BENHAM CHEMICAL CORPORATION, a Michigan corporation ("BCC") and
YUMA ACQUISITION SUB., INC., a Delaware corporation ("Yuma") (Holdings, ACI,
TSI, TAS, ETP, ASI, MSI, BCC and Yuma hereinafter, together with their
respective successors in title and assigns called "Borrowers" and each of which
is a "Borrower"), the banks and lending institutions set forth on Schedule 1
hereto (the "Lenders") and THE PROVIDENT BANK, an Ohio banking corporation
("Provident"), executing this Agreement in its capacity of Agent for the Lenders
under this Agreement (hereinafter called "Provident" or "Agent").
ARTICLE 1
INTERPRETATION
Section 1.1 PROVISIONS PERTAINING TO DEFINITIONS. For all purposes of
this Credit Agreement (except where such interpretations would be inconsistent
with the context or the subject matter):
(a) The expression "this Agreement" shall mean this Credit
Agreement (including all of the Schedules and Exhibits annexed hereto) as
originally executed, or, if supplemented, amended or restated from time to time,
as so supplemented, amended or restated;
(b) Where appropriate, words importing the singular only shall
include the plural and vice versa, and all references to dollars shall be United
States Dollars; and
(c) Accounting terms not otherwise defined herein shall have the
meanings customarily given in accordance with Generally Accepted Accounting
Principles (as hereinafter defined) and all financial computations or
determinations to be made under this Credit Agreement shall, unless otherwise
specifically provided herein, be made in accordance with the financial
statements delivered pursuant to Section 4.1(t) and shall be made on a
Consolidated basis, PROVIDED, HOWEVER, that if Borrowers notice the Agent that
Borrowers wish to amend any covenant in Article 7 or any related financial or
accounting definition to eliminate the effect of any material change in GAAP on
the operation of such covenant or definition (or if the Agent notifies Borrowers
that the Requisite Lenders wish to amend Article 7 or any related definition for
such purpose), then the
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Borrowers' compliance with such covenant or the determination of "Excess Cash
Flow" or any related definition, as the case may be, 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 or
definition is amended in a manner satisfactory to the Borrowers and the
Requisite Lenders.
Section 1.2 DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms shall have the following meanings in this
Agreement:
"ACCOUNTANTS" mean Ernst & Young, LLP, or such other nationally recognized
firm of certified public accountants selected by Holdings and acceptable to
Agent and Lenders.
"ACCOUNT DEBTOR" means any Person obligated for the payment of an Account.
"ACCOUNTS" mean, with respect to any Person, such Person's accounts, rental
agreements and other contract rights, rights to payment and other forms of
obligation for the payment of money, whether now existing or existing in the
future, including, without limitation, all (i) accounts receivable (whether or
not specifically listed on schedules furnished to the Agent), all accounts
created by or arising from all of such Person's sales of goods, financial
instruments, documents, permits or other items, or rendition of services,
including funds transfer services, made under any of such Person's trade names
or styles, or through any of such Person's subsidiaries or divisions, and all
accounts acquired by assignment in the ordinary course of business; (ii) unpaid
seller's rights (including rescission, replevin, reclamation and stopping in
transit) relating to the foregoing or arising therefrom; (iii) rights to any
goods represented by any of the foregoing, including returned or repossessed
goods; (iv) reserves and credit balances held by such Person with respect to any
such accounts receivable or account debtors; (v) guarantees or collateral for
any of the foregoing; and (vi) insurance policies or rights relating to any of
the foregoing.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person acquired in a
Permitted Acquisition outstanding on the date such Person was acquired by
Holdings or one of its Subsidiaries.
"ADJUSTED PRIME RATE" means the rate of interest per annum equal to the sum
of the Prime Rate plus the Applicable Margin.
"ADJUSTED PRIME RATE LOANS" means a Loan which bears interest at the
Adjusted Prime Rate.
"AFFILIATE" means, in relation to any Person (in this definition called
"AFFILIATED PERSON"), any Person (i) which (directly or indirectly) controls or
is controlled by or is under common control with such Affiliated Person; (ii)
which (directly or indirectly) owns or holds ten percent (10%) or more
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of any equity interest in any Borrower; or (iii) ten percent (10%) or more of
whose voting stock or other equity interest is directly or indirectly owned or
held by any Borrower. For the purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession (directly or indirectly) of the power to direct or to cause the
direction of the management or the policies of such Person, whether through the
ownership of shares of any class in the capital or any other voting securities
of such Person or by contract or otherwise.
"AGENT" means Provident acting in the capacity as Agent for the Lenders
under the Loan Documents and includes (where the context so admits) any other
Person or Persons succeeding to the functions of Agent under such documents.
"AGENT DEPOSIT ACCOUNT" has the meaning set forth in Section 2.3(e) hereof.
"AGENT DISBURSEMENT ACCOUNT" has the meaning set forth in Section 2.3(b)
hereof.
"APPLICABLE MARGIN" shall mean 1.00 for Adjusted Prime Rate Loan and 3.00
for Libor Rate Loans, unless increased upon the conditions set forth in
Section 3.2.
"ASSIGNMENT OF PATENTS" means the Assignment of Patents from Borrowers to
Agent substantially in the form of Exhibit A hereto.
"ASSIGNMENT OF TRADEMARKS" means the Assignment of Trademarks from
Borrowers to Agent substantially in the form of Exhibit B hereto.
"AUDIT FEE" means such amount as separately agreed to in writing by the
parties hereto together with all reasonable incidental out of pocket expenses
associated with or incurred by Agent in connection with the audits contemplated
by Section 6.1(e).
"BLOCKED ACCOUNT AGREEMENT" shall mean the Blocked Account Agreement
between a Borrower and Agent in the form of Exhibit C hereto, acknowledged by
each depository institution with which any Borrower maintains deposits, pursuant
to which such financial institutions shall agree not to permit funds in such
bank accounts to be disbursed except to the Agent Disbursement Account, or any
other account maintained at or controlled by the Agent, provided, however, that
such depository institutions shall be permitted to maintain balances up to the
amount set forth in Section 6.16, which such amount may be disbursed
notwithstanding the Blocked Account Agreement so long as no Event of Default has
occurred and is continuing.
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"BORROWER'S KNOWLEDGE" or other similar phrase means the actual knowledge
of the Management Officers.
"BORROWING BASE" means, as of any date of determination, the sum of (a) an
amount equal to eighty percent (80%) of Eligible Accounts, PLUS (b) an amount
equal to the lesser of Ten Million and 00/100 Dollars ($10,000,000.00) and
sixty-five percent (65%) of Eligible Inventory.
"BORROWING BASE CERTIFICATE" means a certificate substantially in the form
of Exhibit D hereto, or such other form as the Agent may from time to time
direct, setting forth the calculation of Eligible Inventory and Eligible
Accounts and computing the Borrowing Base.
"BUSINESS DAY" means any day other than a Saturday or Sunday on which
commercial banking institutions are open for business in Cincinnati, Ohio.
"CAPITAL EXPENDITURE" means any amount paid or incurred in connection with
the purchase of real estate, plant, machinery, equipment or other similar
expenditure (including all renewals, improvements and replacements thereto, and
all obligations under any lease of any of the foregoing) which would be required
to be capitalized and shown on the Consolidated balance sheet of Borrowers in
accordance with GAAP; PROVIDED, HOWEVER, amounts paid or incurred in connection
with Permitted Acquisitions, and amounts paid or incurred pursuant to the San
Diego Property Acquisition Agreement, shall be excluded from Capital
Expenditures.
"CAPITAL LEASE" means any lease of Property which has been or is required
to be capitalized on a Borrower's financial statements in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means any obligation to pay rent or other
amounts under a Capital Lease and, for the purpose of this Agreement, the amount
of such obligation at any date shall be the capitalized amount thereof at such
date, determined in accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations, rights
or other equivalents (however designated) or corporate stock, whether common or
preferred, including, without limitation, partnership interests.
"CASH ACQUISITION CONSIDERATION" means, with respect to any Permitted
Acquisition, the aggregate amount of consideration paid by Holdings or a
Subsidiary of Holdings in connection therewith, including, without limitation
(but without duplication):
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(i) the aggregate amount of cash paid, the aggregate fair market
value of non-cash property delivered and the aggregate amount of
Indebtedness incurred by Holdings or a Subsidiary in connection with such
acquisition;
(ii) Acquired Indebtedness; and
(iii) the aggregate amount of Indebtedness for Borrowed Money issued
or incurred by Holdings or such Subsidiary to the extent not included in
clause (ii) above,
but in any event excluding (x) Capital Stock of Holdings issued in connection
with such acquisition; (y) Earn Out Obligations incurred in connection with a
Permitted Acquisition and (z) liabilities for which Holdings or a Subsidiary of
Holdings have received full indemnification or other financial assurances from
or on behalf of the transferee (so long as the obligors on such indemnification
or other financial assurances are, in the reasonable opinions of the Agent and
Holdings, creditworthy).
"CASH EQUIVALENTS" mean: (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within three (3) months from the date of acquisition thereof;
(ii) investments in certificates of deposit or bankers' acceptances maturing
within three (3) months from the date of acquisition issued by any Lender or any
commercial bank organized under the laws of the United States or any state
thereof having capital surplus and undivided profits aggregating at least Two
Hundred Fifty Million and 00/100 Dollars ($250,000,000.00); (iii) investments in
commercial paper of any Lender or of any other Person which, at the time of
issuance, have a rating of at least A-1 from Standard & Poor's Corporation or at
least P-1 from Moody's Investors Service, Inc. and maturing not more than 270
days from the date of acquisition thereof; (iv) obligations of the type
described in (i), (ii) or (iii) above purchased pursuant to a repurchase
agreement obligating the counterparty to repurchase such obligations not later
than thirty (30) days after the purchase thereof, secured by a fully perfected
security interest in any such obligation, and having a market value at the time
such repurchase agreement is entered into of not less than one hundred percent
(100%) of the repurchase obligation of the issuing bank; (v) time deposits or
Eurodollar time deposits maturing no more than thirty (30) days from the date of
creation with commercial banks having membership in the Federal Deposit
Insurance Corporation in amounts not exceeding the lesser of One Hundred
Thousand and 00/100 Dollars ($100,000.00) or the maximum insurance applicable to
the aggregate amount of such Person's deposits in such institution; and (vi)
Investments, classified in accordance with GAAP as current assets, in money
market investment programs registered under the Investment Company Act of 1940,
as amended, which are administered by reputable financial institutions having
capital of at least $500,000,000 and the portfolios of which are limited to
Investments primarily of the character described in the foregoing subdivisions
(i), (ii) and (iii), and (iv) other investments approved, in writing, by the
Agent
<PAGE>
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in its sole and absolute discretion and offered by financial institutions
with combined capital surplus and undivided profits greater that $250,000,000.
"CASH FLOW" means, for any period, the following, each calculated for such
period, without duplication: (i) EBITDA, LESS (ii) income and franchise taxes
actually paid by a Borrower (net of any refunds received) (including decreases
in deferred income taxes resulting from tax payments actually made), LESS (iv)
Capital Expenditures (to the extent actually made in cash by a Borrower and
excluding the non-current portion of Capital Expenditures which have been
financed).
"CASH INTEREST EXPENSE" means the Consolidated aggregate amount of all
interest expense of the Borrowers on Indebtedness for Borrowed Money (net of
interest income) paid but excluding such interest expense accrued but not paid.
"CASUALTY LOSS" means any occurrence or event pursuant to which any asset
or property owned or used by Borrowers is, in a material respect, (i) damaged
or destroyed, or suffers any other loss, or (ii) condemned, confiscated or
otherwise taken, in whole or in part, or the use thereof is otherwise diminished
so as to render impracticable or unreasonable the use of such asset or property
for the purposes to which such asset or property were used immediately prior to
such condemnation, confiscation or taking, by exercise of the powers of
condemnation or eminent domain or otherwise.
"CHANGE OF CONTROL" means the time at which (i) any Person (including a
Person's Affiliates and associates) or group (as that term is understood under
Section 13(d) of the Exchange Act and the rules and regulations thereunder),
other than Management Shareholders and Affiliates thereof (the "CONTROL GROUP")
or a group controlled by the Control Group, has become the beneficial owner of a
percentage (based on voting power, in the event different classes of stock shall
have different voting powers) of the voting stock of Holdings equal to at least
thirty percent (30%), (ii) except as otherwise permitted herein, there shall be
consummated any consolidation or merger of any Borrowers or Holdings pursuant to
which such Borrower's or Holdings' common stock (or other capital stock) would
be converted into cash, securities or other property, other than a merger or
consolidation of such Borrower or Holdings in which the holders of such common
stock (or such other capital stock) immediately prior to the merger have the
same proportionate ownership, directly or indirectly, of common stock of the
surviving corporation immediately after the merger as they had of such
Borrower's or Holdings' common stock immediately prior to such merger, (iii)
except as otherwise permitted herein, all or substantially all of the assets of
Holdings and the Borrowers shall be sold, leased, conveyed or otherwise disposed
of as an entirety or substantially as an entirety to any Person (including an
Affiliate of a Borrower or Holdings, other than a Borrower or a Subsidiary of a
Borrower) in one or a series of transactions, (iv) William B. Adams shall cease
to perform his duties as Chairman and Chief Executive Officer of Holdings, or
(v) the first day on which a majority of the members of the Board of Directors
of Holdings are not Continuing Directors.
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"CHATTEL PAPER" means any "chattel paper" as such term is defined in
Section 9-105(1)(b) of the UCC, now owned or hereafter acquired.
"CLOSING DATE" means August 25, 1998.
"CLOSING FEE" means such amount as separately agreed to in writing by the
parties hereto.
"CODE" means the United States Internal Revenue Code of 1986, as amended
from time to time, or any successor federal tax code, and any reference to any
statutory provision shall be deemed to be a reference to any successor provision
or provisions.
"COLLATERAL" means all Accounts, Inventory, Equipment, General Intangibles,
fixtures, Goods, motor vehicles, leasehold improvements, Documents, Instruments,
Chattel Paper, Intellectual Property, Inventory subject to leases and rights
under lease agreements for the leasing of inventory, money, deposit accounts,
rights to draw on letters of credit, permits, licenses and the cash or noncash
Proceeds (including insurance or other rights to receive payment with respect
thereto) of any of the foregoing and all accessions and additions to and
replacements of the foregoing, and all books and records (including, without
limitation, customer lists, credit files, computer programs, printouts and other
computer materials and records of each Borrower) pertaining to any of the
foregoing or any of the Premises herein, together with the real property,
leasehold interests, buildings and fixtures described in the Mortgages, and all
other property and rights assigned by a Borrower to Agent, on behalf of the
Lenders, to secure Borrowers' obligations under the Loan Documents.
Notwithstanding the foregoing, the term "Collateral" shall not include any
Excluded Property, except and until such Excluded Property shall be required to
become Collateral pursuant to Section 3.2.
"COMMITMENT FEE" means a fee equal to one-half of one percent (0.5%) per
annum (computed on the basis of a 360-day year for the actual number of days
elapsed) on the average daily unused amount of the Maximum Revolving Commitment,
unless increased upon the conditions set forth in Section 3.2.
"COMMON STOCK" means, with respect to any Person, any and all shares,
interests, participations and other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the date of this Credit Agreement, and includes, without
limitation, all series and classes of such common stock.
"COMPLIANCE CERTIFICATE" means a certificate, substantially in the form of
Exhibit E hereto, which certificate evidences the compliance by Borrowers with
the covenants of this Agreement.
"COMPUTATION DATE" means the last day of each March, June, September and
December.
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"CONSOLIDATED" means, with respect to any accounting matter or amount, such
matter or amount computed on a consolidated basis and without duplication for
Holdings and any Subsidiaries in accordance with GAAP.
"CONTINGENT OBLIGATION" means any direct or indirect liability, contingent
or otherwise, with respect to any Indebtedness, lease, dividend, letter of
credit, banker's acceptance or other obligation of another if the primary
purpose or intent thereof in incurring the Contingent Obligation is to provide
assurance to the obligee of such obligation of another that such obligation of
another will be paid or discharged, or that any agreements relating thereto will
be complied with, or that the holders of such obligation will be protected (in
whole or in part) against loss in respect thereof. Contingent Obligations shall
include, without limitation, (i) the direct or indirect guaranty, endorsement
(otherwise than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of the
obligation of another; (ii) any liability for the obligations of another through
any agreement (contingent or otherwise) (A) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise), (B) to maintain the
solvency of any balance sheet item, level of income or financial condition of
another, or (C) to make take-or-pay, pay-or-play or similar payments if required
regardless of nonperformance by any other party or parties to an agreement, if
in the case of any agreement described under subclauses (A), (B) or (C) of this
sentence the primary purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall, at any given time, be
deemed to be equal to the amount of the obligation so guaranteed or otherwise
supported. Notwithstanding the foregoing, the term "Contingent Obligations"
shall not include Earn Out Obligations.
"CONTINUING DIRECTOR" means as of any date of determination, any member of
the Board of Directors of Holdings who (i) was a member of the Board of
Directors of Holdings on the date hereof or (ii) was nominated for election or
elected to the Board of Directors of Holdings with the approval of a majority of
the Continuing Directors who were members of such Board at the time of such
nomination or election.
"CREDIT COMMITMENT" means, in relation to any particular Lender, the
maximum amount with respect to the Revolving Credit Loan to be loaned by such
Lender to Borrowers as set forth on Schedule 1 hereof.
"CURRENT ASSETS" and "CURRENT LIABILITIES" mean at any time, all assets or
liabilities, respectively, that, in accordance with GAAP should be classified as
current assets or current liabilities, respectively, on a Borrower's balance
sheet.
<PAGE>
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"CURRENT RATIO" means the ratio of Current Assets (excluding cash, Cash
Equivalents, and any amounts due from Affiliates) to Current Liabilities
(excluding from Current Liabilities for the purpose of this definition of
Current Ratio, the current portion of any long term Indebtedness for Borrowed
Money and any amounts due from Affiliates).
"DEFAULT" means any event or occurrence which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default.
"DEFAULT INTEREST RATE" means an annual rate of interest which shall (to
the extent permitted by applicable law) at all times be equal to two percent
(2.0%) above the applicable interest rate for a Loan.
"DEPOSITORY ACCOUNTS" means each bank account of Borrowers listed on
Schedule 1.1.
"DOCUMENTS" mean any "documents," as such term is defined in
Section 9-105(l)(f) of the UCC, now owned or existing or hereafter arising or
acquired.
"DRAW DATE" means in relation to any Revolving Credit Loan, the day on
which such Loan is made or to be made to Borrowers pursuant to this Agreement.
"EARN OUT OBLIGATIONS" means (a) the obligations of Holdings under the
agreements referenced in Schedule 5.1(b), part II, and (b) any obligations of
Holdings or a Subsidiary of Holdings incurred in connection with a Permitted
Acquisition and the amount of which is based upon post-acquisition performance
of the business or assets acquired in connection with the Permitted Acquisition,
a Subsidiary acquiring the business or assets in connection with the Permitted
Acquisition and/or Holdings.
"EBITDA" for any period shall mean, without duplication, (i) Net Income;
PLUS (ii) for such period any Interest Expense deducted in the determination of
Net Income; PLUS (iii) any income, ad valorem, and franchise taxes paid in cash
and deducted in the determination of Net Income; PLUS (iv) amortization and
depreciation and other non-cash charges deducted in determining Net Income for
such period; PLUS (v) immaterial extraordinary losses, losses on sales of assets
(other than sales of inventory in the ordinary course of business) and
unrealized gains from changes in currency; plus (vi) non-recurring charges of
Holdings or its Subsidiaries for Permitted Acquisitions; minus (vi) the sum for
such period of interest income, extraordinary gains, gains from sales of assets
(other than sales of inventory in the ordinary course of business), unrealized
losses from changes in currency; provided, that, if Holdings or any of its
Subsidiaries completes a Permitted Acquisition during any Reference Period,
EBITDA for such Reference Period shall be determined on a pro forma basis,
reasonably acceptable to Agent, as if such Permitted Acquisition was completed
on the first day
<PAGE>
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thereof; PROVIDED, FURTHER, that if Holdings or any of its Subsidiaries
completes a Specified Disposition during any Reference Period, than EBITDA
attributable ACI shall be excluded from the calculation of EBITDA for Holdings
on a pro forma basis.
"ELIGIBLE ACCOUNTS" mean, as at any date of determination, the aggregate of
all Accounts of Holdings and/or its Subsidiaries (determined on a consolidated
basis and without duplication) consisting of trade accounts receivable arising
in the ordinary course of business; EXCEPT that the following Accounts shall not
be considered "Eligible Accounts":
(a) Accounts which remain unpaid for more than ninety (90) days
after invoice date;
(b) Accounts due from an Account Debtor whose principal place of
business is located outside the United States of America unless such
Account is backed by a letter of credit issued or confirmed by a bank that
is organized under the laws of the United States of America or a State
thereof and has capital and surplus acceptable to Agent or other security
acceptable to Agent is provided therefor (in each case as determined by
Agent in its discretion exercised in a commercially reasonably manner
consistent with industry practices); PROVIDED, that such letter of credit
has been delivered to Agent as additional collateral under the Security
Documents;
(c) Accounts due from an Account Debtor which Agent has notified
Borrowers does not have a satisfactory credit standing (as determined in
the discretion of Agent in a commercially reasonable manner consistent with
industry practices);
(d) Accounts with respect to which the Account Debtor is the
United States of America or any department, agency or instrumentality
thereof unless Borrowers have, with respect to such Accounts, complied with
the Federal Assignment of Claims Act (31 U.S.C. Section 3727);
(e) Accounts with respect to which the Account Debtor is an
Affiliate of Borrowers or a director, officer, agent, stockholder or
employee of any Borrower or any of its Affiliates (except that the
foregoing shall not deem ineligible Accounts with respect to which the
Account Debtor is a stockholder of Holdings but not an Affiliate);
(f) Accounts due from an Account Debtor if more than fifty percent
(50%) of the aggregate amount of Accounts of such customer have at the time
remained unpaid for more than ninety (90) days after invoice date;
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(g) Accounts with respect to which the Account Debtor is also a
Borrower's creditor or supplier, or as to which the Account Debtor has
disputed liability, or where the Account otherwise has become the subject
of any right of set-off or counterclaim (but only to the extent of such
contra-account, disputed amount, claim, counterclaim or right of set-off);
(h) Accounts evidenced by an instrument or Chattel Paper (in each
case, as defined in Article 9 of the UCC) not in the possession of Agent;
(i) Accounts with respect to which Agent does not have a valid,
first priority and fully perfected security interest and Accounts subject
to any Lien except those in favor of Agent on behalf of the Lenders and
Permitted Liens;
(j) Accounts with respect to which the Account Debtor is the
subject of any bankruptcy or other insolvency proceeding;
(k) Accounts due from any single Account Debtor or any affiliated
group of Account Debtors, other than the Principal Account Debtors, to the
extent that such Accounts exceed in the aggregate an amount equal to ten
percent (10%) of the aggregate of all Accounts at said date;
(l) Accounts with respect to which the Account Debtor's obligation
to pay is conditional or subject to a repurchase obligation or right to
return, including bill and hold sales, guaranteed sales, sale or return
transactions, sales on approval or consignment sales;
(m) Accounts with respect to which the Account Debtor is located
in any state denying creditors access to its courts in the absence of a
Notice of Business Activities Report or other similar filing, unless such
Borrower has either qualified as a foreign corporation authorized to
transact business in such state or has filed a Notice of Business
Activities Report or similar filing with the applicable state agency for
the then current year;
(n) Accounts with respect to which any covenant, representation or
warranty contained in this Agreement, in the Security Agreement or in any
other Loan Document has been breached (unless waived by Agent or cured);
(o) Accounts with respect to which the inventory giving rise to
such Account has not been shipped and delivered to the Account Debtor (or,
if shipped or delivered, as to which a Borrower has received knowledge or
notice of its loss in transit, misdelivery or nonacceptance); or
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(p) Any other Accounts which from time to time Agent, in the
exercise of its discretion in a commercially reasonable manner consistent
with industry practices, may declare to be ineligible, for purposes hereof.
"ELIGIBLE ASSIGNEE" means any Person approved by the Agent and Holdings,
such approval not to be unreasonably withheld or delayed, provided, however,
that if an Event of Default shall have occurred, no such approval of Holdings
shall be required.
"ELIGIBLE INVENTORY" means, as at any date of determination, the value
(determined at the lower of cost or market on a first-in, first-out basis) of
all Inventory consisting of goods held for sale in the ordinary course of a
business of Holdings and/or its Subsidiaries, owned by and in the possession of
such Person and located in the United States of America, EXCEPT that the
following Inventory shall not be considered "Eligible Inventory":
(a) Inventory with respect to which Agent does not have a valid,
first priority and fully perfected security interest;
(b) Inventory with respect to which there exists any Lien (other
than Permitted Liens) in favor of any Person other than Agent on behalf of
Lenders;
(c) Inventory produced in violation of the Fair Labor Standards
Act and subject to the so-called "hot goods" provisions contained in Title
29 U.S.C. 215(a);
(d) Finished goods which do not meet the specifications of the
purchase order for such goods if Agent notifies such Borrower in writing
that, in the discretion of Agent (determined in a commercially reasonable
manner consistent with industry practices), such finished goods are not
otherwise readily marketable;
(e) Inventory consisting of promotional items, supplies and
novelties;
(f) Inventory of finished goods which are over one hundred eighty
(180) days old or which is obsolete, unmerchantable or otherwise not in
good and saleable condition;
(g) Inventory with respect to which any covenant, representation
or warranty contained in this Agreement, in the Security Agreement or in
any other Loan Document has been breached (unless waived by Agent or
cured);
(h) Inventory which was purchased by a Borrower in or as part of a
"bulk" transfer of assets of the seller (unless the seller and such
Borrower have complied with all
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applicable "bulk" transfer laws or such Borrower has been provided an
indemnity agreement acceptable to, and assigned to, Agent), excluding
Inventory purchased by a Borrower in a Permitted Acquisition, provided that
for purposes hereof, such Inventory is valued at the lesser of (i) the
purchase price paid therefor or (ii) the book value of such Inventory as
reflected on the books of such Borrower;
(i) From and after the 45th day after the date of this Agreement,
Inventory located at any leased location, or public warehouse (unless such
Borrower has provided Agent with an agreement, in form and substance
acceptable to Agent, from the lessor or warehouseman of such location
waiving any lien on the Inventory, whether arising by contract, statute or
otherwise);
(k) Inventory which is consigned; or
(l) Any other Inventory which from time to time Agent, in its sole
discretion may declare to be ineligible, for purposes hereof.
"EMPLOYEE BENEFIT PLAN" means an "employee benefit plan" as defined in
Section 3(3) of ERISA which (i) a Borrower or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or, within the last
six years, maintained, administered, contributed to or was required to
contribute to, or under which a Borrower or any ERISA Affiliate may incur any
liability and (ii) covers any employee or former employee of a Borrower or any
ERISA Affiliate (with respect to their relationship with such entities).
"ENVIRONMENTAL LAWS" mean individually or collectively any local, state or
federal law, any applicable statute, rule, regulation, order, ordinance, common
law, permit or license term or condition, or state superlien or environmental
clean-up or disclosure statutes pertaining to the environment or to
environmental contamination, regulation, management, control, treatment,
storage, disposal, containment, removal, clean-up, reporting, or disclosure,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as now or hereafter amended
(including, but not limited to, the Superfund Amendments and Reauthorization Act
("SARA")); the Resource Conservation and Recovery Act ("RCRA"), as now or
hereafter amended (including, but not limited to, the Hazardous and Solid Waste
Amendments of 1984); the Toxic Substances Control Act ("TSCA"), as now or
hereafter amended; the Clean Water Act, as now or hereafter amended; the Safe
Drinking Water Act, as now or hereafter amended; or the Clean Air Act, as now or
hereafter amended.
"EQUIPMENT" means any "equipment," as such term is defined in
Section 9-109(2) of the UCC, now owned or hereafter acquired and shall include,
without limitation, any and all additions,
<PAGE>
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substitutions, and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts and accessories installed
thereon or affixed thereto.
"EQUITY INTERESTS" mean Capital Stock and all warrants, options or other
rights to acquire Capital Stock or that are measured by the value of Capital
Stock (but excluding any debt security that is convertible into, or exchangeable
for Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974 and
regulations issued thereunder, as amended from time to time and any successor
statute.
"ERISA AFFILIATE" means, in relation to any Person, any trade or business
(whether or not incorporated) which is a member of a group of which that Person
is a member and which is under common control within the meaning of the
regulations promulgated under Section 414 of the Internal Revenue Code of 1986,
as amended.
"ERISA LIABILITIES" mean the aggregate of all unfunded vested benefits
under any employee pension benefit plan, within the meaning of Section 3(2) of
ERISA, of a Borrower or any ERISA Affiliate of such Borrower under any Plan
covered by ERISA that is not a Multiemployer Plan and all potential withdrawal
liabilities of any thereof under all Multiemployer Plans.
"EVENT OF DEFAULT" means any event or condition described in Section 9.1 of
this Agreement.
"EXCLUDED PROPERTY" means (a) such Intellectual Property owned by Holdings
or its Subsidiaries listed on Schedule 1.2 attached hereto; (b) interests in
real property to the extent the same have not yet been assigned to the Lenders
pursuant to a Mortgage; (c) any property subject to a negative pledge permitted
by Section 8.9 hereof; (d) Capital Stock of any Foreign Subsidiary unless Agent
determines otherwise in accordance with Section 3.4 herein; (e) property owned
by any Foreign Subsidiary unless Agent determines otherwise in accordance with
Section 3.4 herein and (f) any Capital Stock of Holdings acquired by Holdings
and held as treasury stock.
"EXTRAORDINARY DISPOSITION" means, with respect to a Borrower, the sale,
lease, transfer or other disposition of assets, other than assets transferred or
disposed in the ordinary course of business, whether by way of the sale of
assets or the sale of stock or other rights in which a Borrower has any
ownership interest, and whether in one transaction or a series of related or
unrelated transactions; EXCLUDING, HOWEVER, (i) such transactions by and among
Borrowers or their Subsidiaries, (ii) transfers in connection with Permitted
Acquisitions effected by reverse triangular mergers, and (iii) Specified
Dispositions.
<PAGE>
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"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free-market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by a Management Officer acting reasonably and in good faith
and shall be evidenced by a memorandum certified by such officer and delivered
to the Agent.
"FEMA" means the Federal Emergency Management Agency, or any similar
successor agency of the federal government.
"FIXED CHARGES" mean, for any period, the following, each calculated for
such period, without duplication: (i) Interest Expense paid or accrued, MINUS
(ii) interest income earned or accrued by Holdings or its Subsidiaries as
determined on a consolidated basis without duplication and, in accordance with
GAAP, PLUS (iii) scheduled payments of principal with respect to all
Indebtedness for Borrowed Money of Holdings or its Subsidiaries including the
principal component of any cash payments made on any Capital Lease and (iv) any
amount paid or incurred in connection with a Capital Expenditure.
"FOREIGN SUBSIDIARY" means any Subsidiary that is incorporated or otherwise
formed under the laws of a jurisdiction other than a jurisdiction within the
United States of America and the assets of which do not constitute a material
part of the Consolidated value of Holdings.
"GENERAL INTANGIBLES" means any "general intangibles" as such term is
defined in Section 9-106 of the UCC, now owned or hereafter acquired and, in any
event, shall include, without limitation, all right, title and interest now in
existence or hereafter arising in or to all customer lists, trademarks, patents,
rights in intellectual property, trade names, copyrights, trade secrets,
proprietary or confidential information, inventions and technical information,
procedures, designs, knowledge, know-how, software, data bases, data, processes,
models, drawings, materials, and records now owned or hereafter acquired, and
any and all goodwill and rights of indemnification.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" mean generally
accepted accounting principles in the United States of America in effect from
time to time, consistently applied.
"GOODS" mean any item which qualifies as "goods" as such term is defined
in Section 9-105(h) of the UCC, now owned or hereafter acquired.
"GUARANTEED PENSION PLAN" means any pension plan maintained by a Borrower
or an ERISA Affiliate, or to which a Borrower or an ERISA Affiliate contributes,
some or all of the benefits under which are guaranteed by the United States
Pension Benefit Guaranty Corporation ("PBGC").
<PAGE>
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"HAZARDOUS SUBSTANCES" mean any and all hazardous and toxic substances,
wastes or materials, any pollutants, contaminants, or dangerous materials
(including, but not limited to, polychlorinated biphenyls, friable asbestos,
volatile and semi-volatile organic compounds, oils, petroleum products and
fractions, and any materials which include hazardous constituents or become
hazardous, toxic, or dangerous when their composition or state is changed), or
any other similar substances or materials, which are included under or regulated
by any Environmental Law.
"HEAD OFFICE" means, in relation to the Agent, the head office of The
Provident Bank located at One East Fourth Street, Cincinnati, Ohio 45202, or
such office designated in writing to Borrowers and Lenders by The Provident Bank
or any successor Agent.
"HOLDINGS" means Eco Soil Systems, Inc., a Nebraska corporation, with its
principal place of business at 10890 Thornmint Road, San Diego, California
92127.
"INDEBTEDNESS" means, in relation to any Person, at any particular time,
all of the obligations of such Person which, in accordance with GAAP, would be
classified as indebtedness upon a balance sheet, including any footnote thereto,
of such Person prepared at such time, and in any event shall include, without
limitation, and without duplication:
(i) all indebtedness of such Person arising or incurred
under or in respect of (A) any guaranties (whether direct or indirect) by
such Person of the indebtedness, obligations or liabilities of any other
Person, or (B) any endorsement by such Person of any of the indebtedness,
obligations or liabilities of any other Person (otherwise than as an
endorser of negotiable instruments received in the ordinary course of
business and presented to commercial banks for collection of deposit), or
(C) the discount by such Person, with recourse to such Person, of any of
the indebtedness, obligations or liabilities of any other Person;
(ii) all indebtedness of such Person arising or incurred
under or in respect of any agreement, contingent or otherwise made by such
Person (A) to purchase any indebtedness of any other Person or to advance
or supply funds to the payment or purchase of any indebtedness of any other
Person, or (B) to purchase, sell or lease (as lessee or lessor) Property,
products, materials or supplies or to purchase or sell transportation or
services, primarily for the purpose of enabling any other Person to make
payment of any indebtedness of such other Person or to assure the owner of
such other Person's indebtedness against loss, regardless of the delivery
or non-delivery of the Property, products, materials or supplies or the
furnishing or non-furnishing of the transportation or services, or (C) to
make any loan, advance, capital contribution or other investment in any
other Person for the purpose of assuring a minimum equity, asset base,
working capital or other balance sheet condition for
<PAGE>
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or as at any date, or to provide funds for the payment of any liability,
dividend or stock liquidation payment, or otherwise to supply funds to or
in any manner invest in any other Person;
(iii) all indebtedness, obligations and liabilities secured
by or arising under or in respect of any Lien, upon or in Property owned by
such Person, even though such Person has not assumed or become liable for
the payment of such indebtedness, obligations and liabilities;
(iv) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
Property acquired by such Person, even though the rights and remedies of
the seller or lender (or lessor) under such agreement in the event of
default are limited to repossession or sale of such Property; and
(v) all indebtedness arising or incurred under or in
respect of any Contingent Obligation.
The parties acknowledge and agree, however, that at any given time, the
term "Indebtedness" shall not include Earn Out Obligations, unless and until,
and then only to the extent that, it then is probable that such Earn Out
Obligations will be payable in cash during the immediately following 365-day
period.
"INDEBTEDNESS FOR BORROWED MONEY" means at any particular time, all
Indebtedness, determined on a consolidated basis for Holdings and its
Subsidiaries without duplication, (i) in respect of any money borrowed; (ii)
under or in respect of any Contingent Obligation (whether direct or indirect) of
any money borrowed; (iii) evidenced by any loan or credit agreement, promissory
note, debenture, bond, guaranty or other similar written obligation to pay
money; or (iv) Capital Lease Obligations.
"INSTRUMENTS" mean any "instrument," as such term is defined in
Section 9-105(1)(i) of the UCC, now owned or hereafter acquired.
"INTELLECTUAL PROPERTY" shall mean all Patents and Trademarks, together
with (a) all inventions, processes, production methods, proprietary information,
know-how and trade secrets; (b) all licenses or user or other agreements granted
to any obligor with respect to any of the foregoing, in each case whether now or
thereafter owned or used including, without limitation, the licenses or other
agreements with respect to the Patents or Trademarks, on Schedule 5.8; (c) all
information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials
<PAGE>
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standards, processing standards, performance standards, catalogs, computer and
automatic machinery software and programs; (d) all field repair data, sales data
and other information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media on which or in which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all licenses, consents, permits, variances,
certifications and approvals of governmental agencies now or hereafter held by
Borrowers; and (g) all causes of action, claims and warranties now or hereafter
owned or acquired by Borrowers in respect of any of the items listed above.
"INTEREST EXPENSE" means, for any period, the total amount of all charges
for the use of funds (whether characterized as interest, debt service or
otherwise) payable during such period with respect to all Indebtedness for
Borrowed Money of a Borrower for such period including the amortization of debt
discounts and the amortization of all fees payable in connection with the
incurrence of such Indebtedness.
"INTEREST PERIOD" means:
(a) For each Libor Rate Loan, the period commencing on the Draw
Date and ending one, two or three months thereafter as selected by Holdings in
accordance with Section 2.5 hereof; provided that
(i) any Interest Period which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month, in
which case such Interest Period shall end on the next preceding Business
Day;
(ii) any Interest Period which 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
(iii) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end on the
Termination Date; and
(b) For an Adjusted Prime Rate Loan, the period ending on the
earlier of repayment by the Borrowers, the date on which such Adjusted Prime
Rate Loan is converted to a Libor Rate Loan pursuant to Section 2.5(a) hereof,
or the Termination Date.
<PAGE>
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"INVENTORY" means, with respect to any Person, such Person's inventory,
including without limitation: (i) all raw materials, work in process, parts,
components, assemblies, supplies and materials used or consumed in such Person's
business, wherever located and whether in the possession of such Person or any
other Person; (ii) all goods, wares and merchandise, finished or unfinished,
held for sale or lease or leased or furnished or to be furnished under contracts
of service, wherever located and whether in the possession of such Person or any
other Person; and (iii) all goods returned to or repossessed by such Person.
"INVESTMENT" means all investments in any other Person by stock purchase,
capital contribution, loan, advance, guaranty of any Indebtedness or creation or
assumption of any other liability in respect of any Indebtedness of such other
Person (including, without limitation, any liability of any kind described in
clause (i) or (ii) of the definition of the term "Indebtedness" set forth in
this Section 1.2), or the transfer or sale of Property (otherwise than in the
ordinary course of the business) to any other Person for less than payment in
full in cash or other property of the transfer or sale price or the fair value
thereof (whichever of such price or value is higher).
"ISSUING BANK" means Provident, or such other Lender as shall issue any
Letter of Credit hereunder.
"LEASEHOLD MORTGAGES" mean the Leasehold Mortgages granted from time to
time by a Borrower to Agent to secure the Loans in the form of Exhibit F hereto
and as they may be amended or supplemented from time to time.
"LEGAL REQUIREMENTS" mean all applicable laws, rules, regulations,
ordinances, judgments, orders, decrees, injunctions, arbitral awards, permits,
licenses, authorizations, directions and requirements of all governments,
departments, commissions, boards, courts, authorities, agencies, and officials
and officers thereof, that are now or at any time in the future in effect.
"LENDERS" mean collectively each of the banks or lending institutions set
forth on Schedule 1 and their respective successors and assigns; and "Lender"
means any one of the Lenders.
"LETTERS OF CREDIT" means the letters of credit issued by the Issuing Bank
at any time pursuant to Section 2.14 hereof.
"LETTER OF CREDIT FEE" means the fee charged by the Issuing Bank for the
issuance of a Letter of Credit pursuant to Section 2.14(g) hereof.
"LIBOR" shall mean the rate (rounded upward to the next highest 1/100 of
1%) obtained by dividing (x) the rate of interest per annum determined by the
Agent equal to the offered rates for
<PAGE>
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deposits in U.S. Dollars of one, two or three-month periods (as the case may
be) commencing of the first date of the applicable Interest Period for which
such rate is determined as such rate appears on the Telerate system as of
11:00 a.m. (London, England time) on the date which is two (2) Business Days
preceding the first day of such Interest Period, for a period comparable to
the duration of such Interest Period and in an amount comparable to the
amount of the Libor Rate Loan to be outstanding during such Interest Period,
by (y) a percentage equal to one hundred percent (100%) minus the stated
maximum rate of all reserves required to be maintained against "Libor Rate
liabilities" as specified in Regulation D (or against any other category of
liabilities which includes deposits by reference to which the interest rate
on Libor Rate Loans or loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of
a bank to United States residents) on such date to any member bank of the
Federal Reserve System.
"LIBOR BREAK FUNDING COSTS" means an amount sufficient to reimburse each
Lender for any and all loss, cost or expense (including, without limitation, any
loss incurred in obtaining, liquidating or reemploying deposits from third
parties acquired to maintain any Loan or part thereof as a Libor Rate Loan)
incurred or sustained by each of them as the consequence of the occurrence of
any Libor Break Funding Event. Such indemnification shall include, without
limitation, an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid or
repaid or not borrowed for the period, beginning with the date of such payment,
prepayment or repayment until the last day of the Interest Period that would
otherwise have been in effect for such Libor Rate Loan, at the applicable rate
of interest for such Libor Rate Loan over (ii) the amount of interest
(determined by Agent) that otherwise would have accrued on such principal amount
by reemploying such amount at a rate equal to Libor for such period or nearest
available period for deposits bearing a rate equal to Libor.
"LIBOR BREAK FUNDING EVENT" means any of the events or occurrences set
forth in Sections 2.10(a) or 2.10(b).
"LIBOR RATE" shall mean for each Interest Period, the sum of Libor, plus
the Applicable Margin.
"LIBOR RATE LOAN" means a Loan which bears interest at the Libor Rate.
"LICENSES AND PERMITS" mean all licenses, permits, registrations and
recordings thereof and all applications incorporated into for such licenses,
permits and registrations now owned or hereafter acquired by Borrowers and
required from time to time for the business operations of a Borrower.
<PAGE>
-21-
"LIEN" means any lien, mortgage, pledge, security interest, charge or other
encumbrance of any kind including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any
security interest.
"LITIGATION" has the meaning set forth in Section 5.10 hereof.
"LOAN DOCUMENTS" mean this Agreement, the Notes, the Letters of Credit, the
Security Documents and any other agreement, instrument, certificate or document
executed in connection with or pursuant to this Agreement whether concurrently
herewith or subsequent hereto.
"LOANS" mean, collectively, the Revolving Credit Loans, each singly a Loan
made or to be made to Borrowers by the Lenders pursuant to this Agreement.
"LOAN YEAR" means each period of twelve (12) consecutive months, commencing
on the Closing Date and on each anniversary thereof.
"LONG-TERM LEASE" means any lease of real or personal property having an
original term, including any period which the lease may be renewed or extended,
at the option of the lessee, of more than three (3) years.
"MANAGEMENT OFFICERS" means the Chief Executive Officer, Chief Operating
Officer, Controller, Chief Financial Officer, Chairman, President, Vice
President of Turf Partners West, Vice President of Turf Partners Midwest, Vice
President of Turf Partners East, Head of Research and Development and Head of
Product Development.
"MANAGEMENT SHAREHOLDERS" means those shareholders of Holdings who are
Management Officers.
"MATERIAL ADVERSE EFFECT" means any event which will, or is reasonably
likely to, have a material adverse effect upon the financial condition,
operations or assets of any of the Borrowers and their Subsidiaries, taken as a
whole.
"MATERIAL LEASE" means any lease under which a Borrower shall lease (as
lessee) or acquire the right to possess and/or use any Real Estate or other
Property or any other similar agreement (whether written or oral) pursuant to
which such Borrower pays an annual lease payment or rental payment equal to or
greater than One Hundred Thousand and 00/100 Dollars ($100,000.00) or which
otherwise is material to the operation of the business of such Borrower.
<PAGE>
-22-
"MAXIMUM BORROWING BASE" means the lesser of either (i) the Maximum
Revolving Commitment or (ii) the Borrowing Base.
"MAXIMUM CREDIT LIABILITY" for any Borrower, other than Holdings, shall
mean, as of any date of determination thereof, the sum of (i) with respect to
each Loan the proceeds of which are used to make or the issuance of which
constitutes a Valuable Transfer to such Borrower, the amount of such Loan PLUS
(ii) with respect to each Loan the proceeds of which are not used to make or the
issuance of which does not constitute a Valuable Transfer to such Borrower, the
lesser of (A) the outstanding amount of such Loan as of such date or (B) the
greater of (i) ninety-five percent (95%) of the Subsidiary Net Worth at the time
of such Loan or (II) ninety-five percent (95%) of the Subsidiary Net Worth of
such Borrower at the earliest of (x) such date, (y) the date of the commencement
of a case under Title 11 of the United States Code (or any successor provision)
in which such Borrower is a debtor or (z) the date enforcement hereunder is
sought.
"MAXIMUM REVOLVING COMMITMENT" means Twenty Million and 00/100 Dollars
($20,000,000.00).
"MORTGAGES" means the real estate mortgages or deeds of trust granted from
time to time by a Borrower to Agent to secure the Loans, substantially in the
form of Exhibit F, and as they may be amended or supplemented from time to time.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined in Section
4001(a)(3) of ERISA which (i) a Borrower or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or, within the last
six years, maintained, administered, contributed to or was required to
contribute to, or under which a Borrower or an ERISA Affiliate may incur any
liability and (ii) covers any employee or former employee of a Borrower or any
ERISA Affiliate (with respect to their relationship with such entities).
"NET INCOME" means, for any period, the aggregate of the net income (or net
loss) of the Borrowers and their Subsidiaries for such period, determined on a
consolidated basis without duplication in accordance with GAAP.
"NET PROCEEDS" means the aggregate proceeds paid in cash or Cash
Equivalents received by a Borrower in respect of any Extraordinary Disposition,
net of direct costs relating to such Extraordinary Disposition (including
without limitation, legal, accounting and investment banking fees, and sales
commissions and costs of preparing properties for sale) and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions in any tax
sharing arrangements), amounts required to be applied in payment of Indebtedness
secured by a Lien incurred in accordance with this Agreement on the
<PAGE>
-23-
assets or assets that are subject of such Extraordinary Disposition and which
Indebtedness is required pursuant to the terms of the instrument governing
such Indebtedness or Lien or in order to obtain the necessary consent to such
sale to be repaid in connection with such Extraordinary Disposition and any
reserve for adjustment in respect of the sale price of or other liability in
respect of such asset or assets.
"NET WORTH" means, at any date, Consolidated stockholders' equity
(including the par value or stated value of all outstanding capital stock,
additional paid-in capital and retained earnings) of Holdings determined in
accordance with GAAP, except that there shall be deducted therefrom any amount
of treasury stock reflected as an asset of Holdings or any Subsidiary.
"NOTES" mean, collectively, the Revolving Credit Notes, each of which are
to be dated, executed and delivered to Lenders by Borrowers on the Closing Date.
"Note" shall mean any one of the Notes, unless specifically identified.
"OBLIGATIONS" means, collectively, all of the indebtedness, obligations,
covenants, promises, agreements and liabilities existing on the date hereof or
arising from time to time hereafter, whether direct, indirect, absolute,
contingent, joint or several, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise, of
Borrowers to the Agent or any Lenders (i) in respect of the Loans made pursuant
to this Agreement; or (ii) under or in respect of any one or more of the Loan
Documents. Obligations shall also include all interest, charges and other fees
chargeable hereunder to a Borrower or due hereunder from a Borrower to Lenders
from time to time and all costs and expenses referred to in Section 11.6 herein.
"PARTICIPATION PERCENTAGE" means, in relation to each Lender, the
percentage set forth with respect to such Lender on Schedule 1 with respect to
each Loan.
"PATENTS" shall mean all of the following in which any Borrower now holds
or hereafter acquires any interest: (i) all letters patent of the United States
or any country, all registrations and recordings thereof, and all applications
for letters patent of the United States or any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state or territory thereof or any other country, and (ii) all reissues,
continuations, continuations-in-part or extensions thereof.
"PERMITTED ACQUISITIONS" means acquisitions (including acquisitions by way
of merger, consolidation or amalgamation) by Holdings or a Subsidiary of
Holdings of the capital stock or other ownership interest of, or all or
substantially all of the assets of, any Person (or in the case of an acquisition
of assets, (a) substantially all of the assets within a reasonably identifiable
business unit of such Person or (b) Intellectual Property), but only to the
extent that (1) the Person within which
<PAGE>
-24-
the capital stock has been acquired or (2) the assets acquired, reasonably
relate to, or are synergistic with, the business of, (or a related business
to), developing, marketing or selling proprietary and biological and
traditional chemical products for turf and crop problems in the golf course
and agricultural industries.
"PERMITTED LIENS" means those Liens and encumbrances permitted hereunder
pursuant to Section 8.8.
"PERSON" shall include an individual, a company, a corporation, an
association, a partnership, a joint venture, an unincorporated trade or business
enterprise, a trust, an estate, or other legal entity or a government (national,
regional or local), court, arbitrator or any agency, instrumentality or official
of the foregoing.
"PLEDGE AGREEMENT" means a stock pledge agreement or agreements with
respect to the Pledged Stock substantially in the form of Exhibit G hereto.
"PLEDGED STOCK" means all of the Capital Stock of Borrowers (other than
Holdings) and any Subsidiary of Borrowers whether now existing or hereafter
formed or acquired, other than Capital Stock issued to Management Shareholders
pursuant to an Employee Benefit Plan of Borrowers and, except as provided in
Section 3.4 hereof, Capital Stock of any Foreign Subsidiary of any Borrower.
"PREFERRED STOCK", as applied to the Capital Stock of any Person, means
Capital Stock of such Person (other than Common Stock of such Person) of any
class or classes (however designated) that rank prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"PREMISES" means collectively, all real property and leasehold interests
now or hereafter acquired by a Borrower, including without limitation, all the
Premises as defined in the Mortgages.
"PRIME RATE" means the rate of interest announced from time to time by
Agent as its prime rate at its Head Office, whether or not Agent shall at times
lend to other borrowers at lower rates of interest, or, if there is no such
prime rate, then such other rate as may be substituted by Agent for its Prime
Rate.
"PRINCIPAL ACCOUNT DEBTORS" means initially the Account Debtors set forth
on Schedule 1.3 so long as Agent shall be reasonably satisfied as to the credit
quality of such Account Debtors, and such other Account Debtors which Agent may
determine from time to time satisfy its normal requirement for concentration of
Accounts.
<PAGE>
-25-
"PROCEEDS" means "proceeds," as such term is defined in Section 9-306(1) of
the UCC and, in any event, shall include, without limitation, (i) any and all
proceeds of any insurance, indemnity, warranty, or guaranty payable from time to
time with respect to any of the Collateral, and (ii) any and all payments (in
any form whatsoever) made or due and payable from time to time in connection
with any requisition, confiscation, condemnation, seizure, or forfeiture of all
or any part of the Collateral by any governmental body, authority, bureau, or
agency (or any Person acting under color of governmental authority).
"PROPERTY" means all types of real, personal, tangible, intangible or mixed
property.
"PRO RATA SHARE" means, in relation to any particular item, the share of
any Lender in such item, which shall be in the same proportion which the
aggregate amount of all of the obligations owing to such Lender with respect to
such item at such time shall bear to the aggregate amount of all of the
obligations owing to all of the Lenders with respect to such item at such time
net of any and all charges or fees due and payable to Agent under the Loan
Documents.
"RATE OPTION" means the Adjusted Prime Rate or the Libor Rate.
"REAL ESTATE" means all real property owned by a Borrower and all real
property hereafter acquired by Borrowers, together with all fixtures, rights of
way, privileges, liberties, tenements, hereditaments, and appurtenances
belonging or in any way appertaining thereto, all easements now or hereafter
benefiting such real property and all royalties and rights appertaining to the
use and enjoyment of such real property, together with all of the buildings,
structures, and other improvements thereto.
"REFERENCE PERIOD" means, with respect to a particular Computation Date,
the period of four (4) consecutive calendar quarters ending on such Computation
Date.
"REIMBURSEMENT OBLIGATIONS" means any amounts owing by Borrowers to the
Lender on account of draws or disbursements under or with respect to the Letters
of Credit.
"REQUISITE LENDERS" mean at such times as there are any Loans outstanding,
the Lenders whose aggregate Pro Rata Shares of the outstanding Loans are greater
than or equal to fifty-one percent (51%) of the aggregate amount of the
outstanding Loans, and at all other times, the Lenders whose aggregate Credit
Commitments are greater than or equal to fifty-one percent (51%) of the
aggregate Credit Commitments of all the Lenders.
"RESTRICTED PAYMENT" means: (a) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock of Borrowers or any
of their Subsidiaries now or hereafter
<PAGE>
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outstanding, except a dividend payable solely in shares of that class of
stock to the holders of that class; (b) any redemption, conversion, exchange,
retirement, sinking fund or similar payment, purchase or other acquisition
for value, direct or indirect, of any shares of any class of stock of
Borrowers or any of their Subsidiaries now or hereafter outstanding; (c) any
payment or prepayment of principal of, premium, if any, or interest on,
redemption, conversion, exchange, purchase, retirement, defeasance, sinking
fund or similar payment with respect to, any subordinated indebtedness; (d)
any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock of
Borrowers or any of their Subsidiaries now or hereafter outstanding; and (e)
any payment made in connection with a Permitted Acquisition that is made
after the closing of such acquisition.
"REVOLVING CREDIT LOAN" means all Loans outstanding from time to time made
pursuant to Section 2.2 hereof and any amounts added to the principal balance of
the Revolving Credit Loan pursuant to this Agreement.
"REVOLVING CREDIT NOTES" mean, collectively, with respect to the Revolving
Credit Loan the promissory notes of Borrowers, in the face amounts of the Credit
Commitment of the respective Lenders in or substantially in the form of Exhibit
H hereto. "REVOLVING CREDIT NOTE" shall mean any one of the Revolving Credit
Notes.
"SAN DIEGO PROPERTY" means the improved real property which is the subject
of the San Diego Property Acquisition Agreement.
"SAN DIEGO PROPERTY ACQUISITION AGREEMENT" means that certain Standard
Offer, Agreement and Escrow Instructions for Purchase of Real Estate, dated
December 19, 1997 between Holdings and DDC-4S, INC. and any amendments thereto
executed prior to the Closing Date, and any amendments thereto after the Closing
Date approved by Agent.
"SEC" means the Securities and Exchange Commission or any successor agency.
"SECURITIES" mean any stock, shares, voting trust certificates, bonds,
debentures, notes, or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments commonly
known as "securities" or any certificates of interest, shares or participation
in temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITY DOCUMENTS" shall mean, collectively, this Agreement, the
Mortgages, the Blocked Account Agreements, the Assignment of Patents, the
Assignment of Trademarks, the Pledge
<PAGE>
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Agreement, and each other agreement, assignment or instrument creating or
purporting to create a lien in favor of Agent for the ratable benefit of the
Lenders.
"SENIOR SECURED INDEBTEDNESS" means Indebtedness of the Borrowers which
would, in accordance with GAAP, constitute long-term debt and have a security
interest in any of the assets of a Borrower, including, without limitation, (a)
any debt with a maturity more than one year after the creation of such debt, (b)
any portion thereof included in the Current Liabilities and (c) any debt
outstanding under a revolving credit or similar agreement providing for
borrowings (and any renewals and extensions thereof) over a period of more than
one year, notwithstanding that any such indebtedness may be payable on demand or
within one year after the creation thereof, and excluding all Indebtedness
solely by and between two or more Borrowers or their Subsidiaries.
"SPECIFIED DISPOSITIONS" means the sale of the capital stock or all or
substantially all of the assets of ACI.
"STANDARD FLOOD HAZARD DETERMINATION FORM" means Form 81-93 or any
successor or replacement thereof developed by FEMA pursuant to Section 528 of
the National Flood Insurance Reform Act of 1994 (42 U.S.C. 1365(a)), for
determining whether a building or structure is located in an area identified as
an area having special flood hazards, whether flood insurance is required and
whether flood insurance is available under 42 U.S.C. 4001, et seq.
"SUBORDINATED DEBT OFFERING" means the Fifteen Million and 00/100 Dollar
($15,000,000.00) offering of senior subordinated notes with detachable warrants.
"SUBORDINATED DEBT DOCUMENTS" means the Note and Warrant Purchase Agreement
and the Common Stock Purchase Warrant, both of which are dated as of August 25,
1998 and executed in connection with the Subordinated Debt offering, and any
other documents related thereto and referenced therein.
"SUBSIDIARY" means, as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, controlled or held directly or indirectly by
such Person or the management of such corporation, partnership or other entity
is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of any Borrower (including each Borrower).
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"SUBSIDIARY NET WORTH" of any Borrower, other than Holdings, shall mean, as
of any date of determination thereof, the excess of (i) the amount of the
"present fair saleable value" of the assets of such Borrower as of the date of
such determination, over (ii) the amount of all "liabilities of such Borrower,
contingent or otherwise," as of the date of such determination, as such quoted
terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors. In determining the
Subsidiary Net Worth of any Borrower for purposes of calculating the Maximum
Credit Liability, the liabilities of such Borrower to be used in such
determination pursuant to clause (ii) of the preceding sentence shall in any
event include the liabilities of such Borrower hereunder and under the other
Loan Documents in respect of all Loans other than the Loans in respect of which
such calculation is being made.
"TERMINATION DATE" means, with respect to the Revolving Credit Loans, the
earlier of (i) the third (3rd) anniversary of the Closing Date; (ii) the date
upon which the entire principal of the Notes shall become due pursuant to the
provisions hereof (whether as a result of acceleration by Agent or the Requisite
Lenders or otherwise); or (iii) the date upon which the Credit Commitments
terminate pursuant to Section 9.2 hereof.
"TERMINATION EVENT" means (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, but not including any such
event for which the 30 day notice requirement has been waived by applicable PBGC
regulation; or (ii) the withdrawal of a Borrower or an ERISA Affiliate of
Borrowers from a Guaranteed Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; or (iii) the
filing of a notice of intent to terminate a Guaranteed Pension Plan or the
treatment of a Guaranteed Pension Plan amendment as a termination under Section
4041 of ERISA; or (iv) the institution of proceedings to terminate a Guaranteed
Pension Plan by the Pension Benefit Guaranty Corporation; or (v) the withdrawal
or partial withdrawal of a Borrower or an ERISA Affiliate of a Borrower from a
Multiemployer Plan; or (vi) any other event or condition which might reasonably
be expected to constitute grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any Guaranteed Pension Plan.
"TRADEMARKS" shall mean all of the following in which Borrowers now hold or
hereafter acquire any interest: (i) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature, all
registrations and recordings thereof, and all applications in connection
therewith, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state or territory thereof or any other country, and (ii) all
reissues, extensions or renewals thereof.
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"UCC" means the Uniform Commercial Code as the same may, from time to time,
be in effect in the State of Ohio; PROVIDED, HOWEVER, that in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection,
or priority of Lender's security interest in any of the Collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other than the
State of Ohio, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection, or priority and for purposes of definitions
related to such provisions.
"UCC FINANCING STATEMENTS" mean the UCC financing statements naming the
Borrowers, as debtors, and Agent, for the ratable benefit of Lenders, as
creditor, which UCC financing statements describe all or some portion of the
Collateral and which together perfect Agent's security interest in the
Collateral.
"VALUABLE TRANSFERS" shall mean, in respect of any Borrower, (i) all loans,
advances or capital contributions made to or for the benefit of such Borrower
with proceeds of Loans, (ii) all debt securities or other obligations of such
Borrower acquired by such Borrower or retired by such Borrower with proceeds of
Loans, (iii) the fair market value of all property acquired with proceeds of
Loans, and transferred, absolutely and not as collateral, to such Borrower, and
(iv) all equity securities of such Borrower acquired by such Borrower with
proceeds of Loans.
"YEAR 2000 PROBLEM" shall mean any significant risk that computer hardware,
software or equipment containing embedded microchips essential to the business
or operations of Holdings or any of its Subsidiaries will not, in the case of
dates or time periods occurring after December 31, 1999, function at least as
effectively and reliably as in the case of times or time periods occurring
before January 1, 2000, including the making of accurate leap year calculations.
ARTICLE 2
THE LOANS
Section 2.1 COMMITMENTS. Each Lender, severally and not jointly, agrees,
upon the terms and subject to the conditions contained in this Agreement, to
make the Revolving Credit Loans to Borrowers from time to time prior to the
Termination Date in a principal amount equal to such Lender's Participation
Percentage of the aggregate principal amount of such Loan.
Section 2.2 MAKING THE LOANS. Each Lender will, subject to all of the
applicable terms and conditions of this Agreement, make an amount equal to its
Participation Percentage in each Revolving Credit Loan available to Borrowers at
such times and in such amount as shall be requested
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by Borrowers in compliance with Section 2.3, and Borrowers may borrow on a
revolving basis from Lenders on the Closing Date and from time to time
thereafter, sums not to exceed the Maximum Borrowing Base. Borrowers may
borrow, repay and reborrow hereunder on and after the date hereof until the
Termination Date, subject to the terms, provisions and limitations set forth
herein.
Section 2.3 DRAWS, ADVANCES AND SETTLEMENT OF PAYMENTS AND ADVANCES.
(a) On the Closing Date, and upon satisfaction of the conditions
set forth in Section 4.1, Lenders shall make available to Borrowers the initial
Revolving Credit Loan in the amount set forth in the initial draw request
certificate of Borrowers delivered at the Closing.
(b) All advances or disbursements of the Revolving Credit Loan
proceeds shall be effectuated at Borrowers' request either through wire transfer
or by receipt by Agent of a check drawn on a central disbursement account (the
"Agent Disbursement Account") of Borrowers maintained with Agent. Any request
for advance by wire transfer may be transmitted to Agent at its Head Office via
facsimile provided Borrowers immediately notify Agent by telephone of such
transmission. All such requests for wire transfer advances shall be made to and
received by Agent not later than 12:00 noon Cincinnati, Ohio time on the Draw
Date specified on such request and each such check or wire transfer request
shall be deemed to be a request for an advance on the Revolving Credit Loan on
the date when received and processed by Agent. Borrowers hereby designate the
Chief Executive Officer, President, Treasurer or Chief Financial Officer of
Holdings (or any other officer authorized by Borrowers and designated as such to
Agent) acting individually or jointly to make all requests for draws and
advances.
(c) The Agent shall promptly notify each Lender of its
Participation Percentage of each requested Revolving Credit Loan and the date of
such borrowing. On the borrowing date specified in such notice, each Lender
shall make its share of the borrowing available at the Head Office of the Agent
for deposit to such account as the Agent shall designate, no later than
1:00 p.m. Cincinnati time, in federal or other immediately available funds.
Upon receipt of the funds to be made available by Lenders to fund any Revolving
Credit Loan hereunder, the Agent shall disburse such funds by depositing them
into the Agent Disbursement Account.
(d) On the date the initial Revolving Credit Loan is made and on
or before the fifteenth (15th) of each month thereafter (beginning September 15,
1998), or as frequently as Agent may reasonably determine if a Default or an
Event of Default occurs), Borrowers shall submit to Agent a Borrowing Base
Certificate, setting forth the Inventory and the Accounts for the immediately
preceding month ending the last day thereof and calculations for the Eligible
Accounts and Eligible Inventory. Lenders shall have no obligation to fund any
request for an advance or pay any check submitted for payment after the
fifteenth (15th) day of any month until Agent shall have received and
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approved such Borrowing Base Certificate for such month. If Agent does not
disapprove or otherwise object to the Borrowing Base Certificate within five
(5) Business Days of receiving same, the Borrowing Base Certificate shall be
deemed approved, until the earlier of the fifteenth (15th) day of the
following month or receipt of a new Borrowing Base Certificate to which Agent
objects, whichever is sooner.
(e) Subject to Section 6.16 hereof, each bank or other financial
institution, other than Provident, with which a Borrower maintains an account
for the deposit of funds shall, within one hundred and twenty (120) days of the
Closing Date, execute a Blocked Account Agreement pursuant to which such bank or
other financial institution shall agree to direct all funds to an account at
Agent's Head Office (the "Agent Deposit Account"). All deposits to the Agent
Deposit Account shall be the property of Agent for the benefit of Lenders and
shall not be commingled with Borrowers' other funds or be deposited in any bank
account of any Borrower, or used in any manner except to pay the Obligations.
Agent shall, at the close of business on each Business Day, automatically debit
the Agent Deposit Account and apply the proceeds against the Loans and other
Obligations pursuant to the provisions of Section 2.7(b). So long as no Event
of Default shall have occurred and be continuing, if funds remain in the Agent
Deposit Account following the application provided for in the preceding
sentence, the balance will be promptly transferred to the Agent Disbursement
Account. The crediting of items deposited in the Agent Deposit Account to the
reduction of the Loans shall be conditioned upon final payment of the item and
if any item is not so paid, the amount of any credit given for it may be charged
to the Loans or to any other deposit account of a Borrower, whether or not the
item is returned.
Section 2.4 THE NOTES. The absolute and unconditional obligation of
Borrowers to repay to each Lender its respective Pro Rata Share of the principal
of each Loan and the interest thereon shall be evidenced by a separate Revolving
Credit Note for each Lender in the amount of its respective Credit Commitment
for each Loan dated as of the Closing Date. All payments under the Notes shall
be made to Agent at its Head Office, for the account of Lenders, and Agent shall
allocate all payments on each Loan received from Borrowers among all Lenders in
accordance with each Lender's Pro Rata Share of such Loan in accordance with
Section 2.7(b).
Section 2.5 INTEREST PAYABLE ON THE LOANS.
(a) INTEREST RATE. Except as otherwise provided herein, the Loans
shall bear interest on the daily outstanding principal balance thereunder at an
annual rate equal to, at Borrowers' option, the Adjusted Prime Rate or Libor
Rate. Each Libor Rate Loan shall bear interest from and including the first day
of the Interest Period applicable thereto to (but not including) the last day of
such Interest Period at the interest rate determined as applicable to such Libor
Rate Loan. Borrowers shall select Interest Periods with respect to Libor Rate
Loans so that it is not necessary to pay a Libor
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Rate Loan prior to the last day of the applicable Interest Period in order to
repay the Loans on the Termination Date.
(b) NOTICE. Except as otherwise provided herein, if, on any day
any part of the Revolving Credit Loans is outstanding with respect to which
notice has not been timely received by the Agent in accordance with this
Agreement specifying that the Libor Rate shall be applicable thereto, then for
that day such Loan shall bear interest at the Adjusted Prime Rate.
(c) CONVERSIONS. Borrowers may elect from time to time to convert
all or part of the outstanding principal balance of any Revolving Credit Loan
from an Adjusted Prime Rate Loan to a Libor Rate Loan by the Borrowers' giving
Agent at least three (3) Business Days prior irrevocable notice of such an
election; PROVIDED, that no Loan may be converted to a Libor Rate Loan while a
Default or an Event of Default has occurred and is continuing. Borrowers may
also elect from time to time to continue any outstanding Libor Rate Loan
(whether for a similar or a different Interest Period) upon expiration of the
Interest Period then applicable thereto by the Borrowers' giving the Agent at
least three (3) Business Days' prior irrevocable notice of such continuation of
such Libor Rate Loan; PROVIDED, that no Revolving Credit Loan may be continued
as a Libor Rate Loan while a Default or an Event of Default has occurred and is
continuing.
(d) ELECTION. Each notice of election to convert to a Libor Rate
Loan or to continue a Libor Rate Loan shall be in the form of Exhibit I hereto
and shall specify (i) the proposed conversion or continuation date; (ii) the
amount of the Revolving Credit Loan to be converted or the amount of the Libor
Rate Loan continued; (iii) whether a conversion or a continuation is being
requested; and (iv) the requested Interest Period, which shall be one (1), two
(2) or three (3) months. Each such notice shall also certify that no Default or
Event of Default has occurred and is then continuing.
(e) EFFECTIVENESS. On the date upon which each conversion to a
Libor Rate Loan or continuation of a Libor Rate Loan is being made pursuant to a
notice given in accordance with this Agreement, the Agent shall take such action
as is necessary to effect such conversion or continuation. Subject to the
limitations set forth in this Section 2.5 and in the definition of Interest
Period, all or any part of the Revolving Credit Loans may be converted into
Libor Rate Loans or continued as Libor Rate Loans as provided herein; PROVIDED,
that partial conversions or continuations of any Libor Rate Loan shall be in the
minimum amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) and, if
in excess thereof, in integral multiples of One Hundred Thousand and 00/100
Dollars ($100,000.00); PROVIDED, FURTHER, that there shall be no more than three
(3) borrowings comprised of Libor Rate Loans outstanding at any time.
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(f) DETERMINATION OF ADJUSTED PRIME RATE. Agent shall determine
the Adjusted Prime Rate in effect from time to time. Any change in the Adjusted
Prime Rate shall, for all purposes of this Agreement and any of the other Loan
Documents, become effective on the effective date of such change in the Prime
Rate as announced by Agent in accordance with Agent's customary practices.
(g) MONTHLY INSTALLMENTS. Borrowers shall pay to Agent:
(i) for the account of Lenders in accordance with their
respective Pro Rata Shares, monthly in arrears on the first Business Day of
each month beginning with the month following the month in which the
Closing Date falls, interest on the outstanding principal amount of the
Adjusted Prime Rate Loans at the annual rate equal to the Adjusted Prime
Rate; PROVIDED, HOWEVER, that if Borrowers elect, pursuant to this Section
2.5, to convert an Adjusted Prime Rate Loan, or any portion thereof, to a
Libor Rate Loan, Borrowers shall pay to Agent, for the account of Lenders
in accordance with their respective Pro Rata Shares, all accrued but unpaid
interest on the Adjusted Prime Rate Loan, or such portion thereof, being
converted for the period commencing the date of the last payment date under
this Section 2.5(g) to the first day of the Interest Period for the Libor
Rate Loan into which the Adjusted Prime Rate Loan was converted; and
(ii) for the account of Lenders in accordance with their
respective Pro Rata Shares, in arrears on the last Business Day of each
Interest Period for each Libor Rate Loan interest on the outstanding
principal amount of the Libor Rate Loans at the annual rate equal to the
Libor Rate; PROVIDED, HOWEVER, that for each Libor Rate Loan having an
Interest Period longer than three (3) months, interest accrued on such Loan
shall also be payable on the last day of each three month interval during
such Interest Period.
(h) INTEREST ON OVERDUE PAYMENTS; DEFAULT INTEREST RATE. If the
Notes have been accelerated pursuant to Section 9.2(b) or if an Event of Default
hereunder shall have occurred and during the period in which the Event of
Default is continuing, the outstanding principal and all accrued interest as
well as any other Obligations due Lenders or Agent hereunder or under any Loan
Document shall bear interest from the date on which such amount shall have first
become due and payable to Lenders or Agent to the date on which such amount
shall be paid to Lenders or Agent (whether before or after judgment or such
Event of Default shall have been otherwise waived in writing by Agent or cured),
at the Default Interest Rate. Interest at the Default Interest Rate will
continue to accrue and will (to the extent permitted by applicable law) be
compounded daily until the Obligations in respect of the payment are discharged
(whether before or after judgment or such Event of Default shall have been
otherwise waived in writing by Agent or cured).
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Section 2.6 REPAYMENTS AND PREPAYMENTS OF PRINCIPAL.
(a) REPAYMENTS ON THE REVOLVING CREDIT LOANS. Borrowers shall
have the right to repay the principal of the Revolving Credit Loans in full or
in part at any time and from time to time without any penalty or premium.
(b) REVOLVING CREDIT LOAN OVERADVANCE. If at any time the
aggregate amount of the Revolving Credit Loans outstanding to Borrowers exceeds
the Maximum Borrowing Base, Borrowers shall be obligated to immediately prepay
the amount that exceeds the Maximum Borrowing Base.
(c) PREPAYMENTS FROM EXTRAORDINARY DISPOSITIONS. Immediately upon
receipt by any Borrower of Net Proceeds, such Borrower shall prepay (or shall
cause Borrowers to prepay) the Loans in an amount equal to the total Net
Proceeds then subject to this Section 2.6(c) in accordance with Section 2.6(g)
provided that no prepayment shall be required pursuant to this sentence with
respect to (a) any sale, lease, assignment, transfer or other disposition of any
property to any Borrower or Subsidiary of any Borrower, (b) the sale of
Specified Dispositions, (c) any sale of the San Diego Property (or the rights of
Holdings in the San Diego Property Acquisition Agreement) which is promptly
followed with a leaseback of the San Diego Property, if permitted by Section
8.12 herein or (d) such Net Proceeds that constitute 10% or less of the
Consolidated Current Assets immediately after such Extraordinary Disposition.
Notwithstanding the foregoing, in the event that a Borrower (1) has an accrued
tax liability with respect to an Extraordinary Disposition (other than those
described in clauses (a) through (d) of this Section) or (2) reasonably expects
the proceeds of such Extraordinary Disposition (other than those described in
clauses (a) through (d) of this Section) to be (i) reinvested within twelve (12)
months of the receipt thereof in productive assets of a kind then used or
useable in the business of such Borrower or a Subsidiary of such Borrower, or
(ii) in the case of insurance and condemnation proceeds, utilized within twelve
(12) months of the receipt thereof (or such longer period as the Agent may agree
to, such agreement not to be unreasonably withheld if such Borrower has timely
begun and is diligently pursuing the rebuilding or repair in question but
reasonably expects that such rebuilding or repair will not be completed within
such twelve (12) month period) to repair the loss or damage to or otherwise
rebuild the assets in respect of which the proceeds were paid, then Holdings
shall deliver (or shall cause Borrowers to deliver) such proceeds or portion
thereof to Agent to be held by Agent in a cash collateral account bearing
interest payable to such Borrower at a rate per annum (meaning three hundred
sixty (360) days) equal to the interest rate paid by Agent on overnight funds.
Upon such Borrower's request, Agent and Lenders shall release such proceeds to
such Borrower for payment of the accrued tax liability or for reinvestment,
repair or rebuilding. In the event such Borrower (1) is not required to pay all
or any portion of the accrued tax liability or (2) fails to reinvest such
proceeds or utilize them for repair or rebuilding within twelve (12) months of
the receipt thereof (or such longer period that may be agreed
<PAGE>
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to pursuant to this Section 2.6(c), each Borrower authorizes and directs
Agent and Lenders to apply such amount as a prepayment of the Loans to be
applied in accordance with Section 2.6(g).
(d) PREPAYMENT FROM EQUITY OFFERINGS. In the event that any
Borrower issues Equity Interests, no later than the third Business Day following
the date of receipt of the proceeds from any sale of such Equity Interests
(other than: (i) proceeds of the issuance of a Borrower's Capital Stock
received on or before the Closing Date; (ii) proceeds, if any, from the issuance
of Holdings' Capital Stock to members of the management of Holdings, a Borrower
or a Subsidiary of a Borrower or officers, directors or employees of any of
them; (iii) proceeds from the issuance of Equity Interests to a Borrower or any
Subsidiary of a Borrower by any Person that was a Subsidiary of a Borrower
immediately prior to such issuance; and (iv) proceeds constituting equity
contributions to any Subsidiary of a Borrower by Holdings, a Borrower or any
Subsidiary of a Borrower), such Borrower shall prepay the Loans in an amount
equal to the lesser of (1) the amount of such proceeds, net of underwriting
discounts and commissions and other reasonable costs associated therewith or (2)
the amount of the Obligations then outstanding. Prepayments made under this
Section 2.6(d) shall be applied to the Loans in accordance with Section 2.6(g).
Notwithstanding the foregoing, prepayments shall not be required pursuant to
this Section 2.6(d) in connection with (a) the issuance of Equity Interests in
connection with Permitted Acquisitions or (b) the issuance of Equity Interests
for the application against Earn Out Obligations.
(e) PREPAYMENT FROM KEY MAN INSURANCE. In the event that a
Borrower or Agent receives proceeds from payment of the key man life insurance
maintained pursuant to Section 6.3, Borrowers shall prepay or Agent shall apply
such amount as a prepayment of the Loans in an amount equal to the lesser of
such insurance proceeds or the amount of the Obligations then outstanding.
Prepayments made under this Section 2.6(e) shall be applied to the Loans in
accordance with Section 2.6(g).
(f) MATURITY. Subject to the terms and conditions of this
Agreement, Borrowers will be entitled to reborrow all or any part of the
principal of the Revolving Credit Notes repaid or prepaid prior to the
Termination Date. The Credit Commitments shall terminate and all of the
indebtedness evidenced by the Revolving Credit Notes shall, if not sooner paid,
be in any event absolutely and unconditionally due and payable in full by
Borrowers on August 25, 2001, the date of the final maturity of such Notes.
(g) APPLICATION OF PROCEEDS. With respect to mandatory
prepayments described in Section 2.6(c), 2.6(d) or 2.6(e), such prepayments
shall be applied in repayment of and permanent reduction of the Revolving Credit
Loan.
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(h) PREPAYMENT FEES. If Borrowers voluntarily effect, directly or
indirectly, a permanent reduction in the Maximum Revolving Commitment prior to
the third anniversary of the Closing Date in connection with any change in
control or early termination of this Agreement, Borrowers shall pay to Agent,
for the ratable benefit of Lenders, as liquidated damages and compensation for
the costs of being prepared to make funds available to Borrowers under this
Agreement, and not as a penalty, an amount determined by multiplying (x) the
amount of the permanent reduction of the Credit Commitment, TIMES (y) two
percent (2%) upon reduction during the first Loan Year or one percent (1%) upon
reduction during the second Loan Year; PROVIDED, HOWEVER, if such reduction is
made in connection with a refinancing of the Loans with Provident then no such
liquidated damages shall be required.
(i) APPLICATION OF PREPAYMENTS. Any prepayment of the Obligations
under the Notes or any of the other Loan Documents shall be applied by Agent as
set forth in Section 2.7 hereof. Any amounts received in connection with a
payment, repayment or prepayment shall be applied to the extent possible, first,
to Adjusted Prime Rate Loans and, then, to Libor Rate Loans. To the extent that
such payment, repayment or prepayment shall be applied to a Libor Rate Loan,
Agent shall retain such amount until the expiration of the Interest Period
applicable to such Libor Rate Loan, and apply such payment at such time so as to
minimize the Libor Break Funding Costs applicable to such payment, repayment or
prepayment, unless otherwise instructed by Borrowers, to pay, repay or prepay
such Libor Rate Loan and nonetheless incur the applicable Libor Break Funding
Cost.
(j) LIBOR BREAKAGE COSTS. Upon any repayment or prepayment
pursuant to this Section 2.6 of any Loan which is also a Libor Rate Loan not
made on the last day of any Interest Period for such Libor Rate Loan, Borrowers
shall pay to Agent for the ratable benefit of the Lenders, such Libor Break
Funding Costs pursuant to Section 2.10 hereof.
Section 2.7 PAYMENTS AND COMPUTATIONS.
(a) TIME AND PLACE OF PAYMENTS. Notwithstanding anything in this
Agreement or any of the other Loan Documents to the contrary, each payment
payable by Borrowers to the Agent or any Lender under this Agreement or any of
the other Loan Documents other than payments pursuant to Section 2.3(e) made as
a result of the application of funds in the Agent Deposit Account, shall be made
directly to the Agent, at Agent's Head Office, not later than 12:00 noon Eastern
Standard or Eastern Daylight Time, as applicable in Cincinnati, Ohio, on the due
date of each such payment in immediately available and freely transferrable
funds. The Agent will promptly cause to be distributed to each Lender in
immediately available and freely transferrable funds such Lender's Pro Rata
Share of each such payment received by the Agent. In order to cause timely
payment to be made to Agent of all Obligations as and when due, each Borrower
hereby authorizes and directs
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Agent, at Agent's option to debit the Agent's Disbursement Account (by
increasing the principal balance of the Revolving Credit Loan) when such
Obligations become due.
(b) APPLICATION OF FUNDS. Notwithstanding anything herein to the
contrary, the funds received by Agent with respect to the Obligations shall be
applied as follows:
(i) NO DEFAULT. If the Notes have not been accelerated
pursuant to Section 9.2(b) and if no Event of Default hereunder or under
the Notes or any of the other Loan Documents shall have occurred and be
continuing at the time Agent receives such funds, in the following manner:
(a) first, to the payment of all fees, charges, and other sums (with
exception of principal and interest) then due and payable to Agent or
Lenders under the Notes, this Agreement or the other Loan Documents at such
time; (b) second, to the payment of all of the interest which shall be due
and payable on the principal of the Notes at the time of such payment in
accordance with each Lender's Pro Rata Share; (c) third, to the payment of
principal of the Revolving Loan Notes then due and payable in accordance
with each Lender's Pro Rata Share; and (d) fourth, to the Borrowers.
(ii) DEFAULT. If the Notes have been accelerated pursuant
to Section 9.2(b), or if an Event of Default hereunder shall have occurred
and be continuing hereunder or under the Notes or any of the other Loan
Documents at the time Agent receives such funds, in the following manner:
(a) first, to the payment or reimbursement of Lenders and Agent for all
costs, expenses, disbursements and losses which shall have been incurred or
sustained by Lenders or Agent in or incidental to the collection of the
Obligations owed by Borrowers hereunder or the exercise, protection, or
enforcement by Lenders and Agent of all or any of the rights, remedies,
powers and privileges of Lenders and Agent under this Agreement, the Notes,
or any of the other Loan Documents and in and towards the provision of
adequate indemnity to the Agent and any of the Lenders against all taxes or
Liens which by law shall have, or may have priority over the rights of the
Agent or Lenders in and to such funds, and (b) second, without duplication,
to the payment of all of the Obligations in accordance with Section
2.7(b)(i) above.
(c) PAYMENTS ON BUSINESS DAYS. If any sum would (but for the
provisions of this Section 2.7(c)) become due and payable to Agent or any Lender
by Borrowers under any of the Loan Documents on any day which is not a Business
Day, then such sum shall become due and payable on the Business Day next
succeeding the day on which such sum would otherwise have become due and payable
hereunder or thereunder, and interest payable to Agent or any Lender under this
Agreement or any of the other Loan Documents shall continue to accrue and shall
be adjusted by the Agent accordingly.
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(d) COMPUTATION OF INTEREST. All computations of interest payable
under this Agreement, the Notes, or any of the other Loan Documents shall be
computed by Agent on the basis of the actual principal amount outstanding on
each day during the payment period and shall be calculated on the basis of the
actual number of days elapsed during such period for which interest is being
charged, predicated on a year consisting of three hundred and sixty (360) days.
The daily interest charge shall be one three-hundred-sixtieth (1/360th) of the
annual interest amount. Each determination of any interest rate by Agent
pursuant to this Agreement, any Note, or any of the other Loan Documents shall
be conclusive and binding on Borrowers in the absence of manifest error. Absent
manifest error, a certificate or statement signed by an authorized officer of
Agent shall be conclusive evidence of the amount of the Obligations due and
unpaid as of the date of such certificate or statement.
Section 2.8 PAYMENTS TO BE FREE OF DEDUCTIONS. Each payment payable by a
Borrower to Agent or any Lender under this Agreement, any Note, or any of the
other Loan Documents shall be made in accordance with Section 2.7 hereof,
without set-off or counterclaim and free and clear of and without any deduction
of any kind for any taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, compulsory loans, restrictions or conditions of any nature now or
hereafter imposed or levied by any political subdivision or any taxing or other
authority therein, unless a Borrower is compelled by law to make any such
deduction or withholding. In the event that any such obligation to deduct or
withhold is imposed upon a Borrower with respect to any such payment payable by
a Borrower to Agent or any Lender,(a) each Borrower shall be permitted to make
the deduction or withholding required by law in respect of the said payment, and
(b) there shall become and be absolutely due and payable by such Borrower to
Agent or such Lender on the date on which the said payment shall become due and
payable and each Borrower hereby promises to pay to Agent or such Lender on such
date, such additional amount as shall be necessary to enable Agent or such
Lender to receive the same net amount which Agent or such Lender would have
received on such due date had no such obligation been imposed by law. Anything
in this Section 2.8 to the contrary notwithstanding, the foregoing provisions of
this Section 2.8 shall not apply in the case of any deductions or withholdings
made in respect of taxes charged upon or by reference to the overall net income,
profits or gains of Agent or any Lender. Borrowers shall have no obligation to
make any payment pursuant to this Section 2.8 with respect to any Lender who is
not a party hereto on the Closing Date unless (i) no such payments would be
payable to any such Lender on the date it becomes a party hereto and no such
payments could be reasonably expected to be payable to such Lender and (ii) if
such Lender is organized under the laws of a foreign jurisdiction, such
jurisdiction is exempt from United States withholding tax and such Lender has
provided any Borrower with an Internal Revenue Form 4224 or Form 1001 or other
certificate of document required under United States law to establish
entitlement to such exemption.
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Section 2.9 USE OF PROCEEDS.
(a) PERMITTED USES OF LOAN PROCEEDS. Each Borrower represents,
warrants and covenants to Agent and each Lender that all proceeds of the Loans
shall be used by Borrowers solely for the purpose of acquisitions, Capital
Expenditures, construction of proprietary systems, repayment of existing debt,
stock repurchases not prohibited in Section 8.3(c), financing working capital
and for general corporate purposes, and to pay fees and expenses reasonably
associated with any of the foregoing.
(b) PROHIBITED USES. Each Borrower represents, warrants and
covenants to Agent and each Lender that no part of the proceeds of the Loans
will be used (directly or indirectly) so as to result in a violation under
Regulations U, T or X of the Board of Governors of the Federal Reserve System or
for any other purpose violative of any rule or regulation of such Board.
Section 2.10 LIBOR BREAKAGE COST. Borrowers shall pay to Agent, for the
ratable benefit of each Lender, the Libor Break Funding Costs that Agent
determines are attributable to the following events (regardless of whether such
events occur as a result of the occurrence of an Event of Default or the
exercise of any right or remedy of the Agent or the Lenders under this Agreement
or any other agreement, or at law):
(a) any payment (including, without limitation, the acceleration
of the Loans pursuant to this Agreement or any Loan Document), repayment,
mandatory or optional prepayment, or conversion of a Libor Rate Loan for any
reason on a date other than the last day of the Interest Period for such Libor
Rate Loan; or
(b) any failure by Borrowers for any reason to borrow a Libor Rate
Loan on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to this Agreement.
Section 2.11 ADDITIONAL COSTS, ETC. If any Lender shall reasonably
determine that any future applicable law, rule or regulation, or any change in
any present law or in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender's capital, as a
consequence of its obligations hereunder, to a level below that which such
Lender could have achieved but for such adoption, change or compliance by any
amount deemed by such Lender to be material and is not otherwise reflected in
the interest and other charges payable by Borrowers hereunder, then Borrowers
shall pay to such Lender upon demand such
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amount or amounts, in addition to the amounts payable under the other
provisions of this Agreement or the Notes, as will compensate such Lender for
such reduction. Determinations by any Lender of the additional amount or
amounts required to compensate such Lender in respect of the foregoing shall
be conclusive in the absence of manifest error. In determining such amount
or amounts, Lender may use any reasonable averaging and attribution methods.
Notwithstanding the foregoing, Borrowers shall not be required to pay to any
Lender any amount in respect of any such reduction in the rate of return on
such Lender's capital that is attributable to the period more than 120 days
prior to the date of receipt by Borrowers of such Lender's demand for
compensation in respect thereof unless such reduction in the rate of return
on capital prior to such 120 day period results from the retroactive effect
of a law, rule or regulation enacted, issued, modified or given a different
interpretation during such 120 day period.
Section 2.12 AGENT AND LENDER STATEMENTS. A statement signed by an
officer of Agent or any Lender (as the case may be) setting forth any additional
amount required to be paid by Borrowers to Agent or such Lender under Sections
2.8 and 2.11 hereof, and the computations made by Agent or such Lender to
determine such additional amount or amounts, shall be submitted by Agent or such
Lender to Borrowers in connection with each demand made at any time by Agent
(and copies thereof delivered to each other Lender) or such Lender under either
of such Sections. Subject to the conditions set forth in Section 2.11, claim by
Agent or any Lender for all or any part of any additional amounts required to be
paid by Borrowers under Sections 2.8 and 2.11 hereof may be made before or after
any payment to which such claim relates. Each such statement shall, in the
absence of manifest error, constitute conclusive evidence of the additional
amount required to be paid to Agent or such Lender, provided it sets out in
reasonable detail the reasons for such notice and the averaging and attribution
methods used by Agent or such Lender to determine the amounts set forth in such
notice.
Section 2.13 ALLOCATION OF LIABILITY.
(a) Notwithstanding anything herein to the contrary, each
Borrower's liability (other than Holdings') under the Notes shall be limited to
the Maximum Credit Liability for each Borrower as determined at the earlier of
the date of commencement of a case under Title 11 of the United States Code (or
any successor provision) in which such Borrower is a debtor or the date
enforcement is sought hereunder or under the Notes; PROVIDED, HOWEVER, that each
Borrower shall be jointly and severally liable for all advances, charges, costs
and expenses, including reasonable attorneys' fees incurred or paid by Agent or
any Lender in exercising any right, power or remedy conferred by this Agreement
or any enforcement thereof, including without limitation those additional costs,
claims and damages set forth in Section 11.6.
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(b) Each Borrower agrees that in the event of (i) the dissolution
or insolvency of any Borrower, (ii) the inability of any Borrower to pay its
debts as they become due, (iii) an assignment by any Borrower for the benefit of
its creditors, or (iv) the institution of any bankruptcy or other proceeding by
or against any Borrower alleging that such Borrower is insolvent or unable to
pay its debts as they become due, and whether or not such event shall occur at a
time when the Obligations are not then due and payable, the other Borrowers
shall pay the Obligations promptly upon demand as if the Obligations were then
due and payable. Each Borrower agrees that upon the filing by or against any
other Borrower of any proceeding under any present or future provision of the
United States Bankruptcy Code, or any other similar federal or state statute,
other Borrowers shall have no right to contribution, indemnification, or any
recourse whatsoever against the bankrupt Borrower for any liability incurred by
the other Borrowers under the terms of the Loan Documents. Each Borrower agrees
that this provision shall continue to be effective or be reinstated, as the case
may be, if at any time any payment, or any part thereof, of principal, interest
or any other amount with respect to the Obligations is rescinded or must
otherwise be restored by Agent or the Lenders upon the bankruptcy or
reorganization of any Borrower, any other Person or otherwise.
(c) Each Borrower further agrees that, to the extent that any
Borrower makes a payment to Agent, which payment or payments or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or otherwise required to be repaid to another Borrower, its estate,
trustee, receiver or any other party, including without limitation, under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such payment or repayment, the obligation or part thereof which has
been paid, reduced or satisfied by such amount shall be reinstated and continued
in full force and effect as of the date such initial payment, reduction or
satisfaction occurred.
Section 2.14 LETTERS OF CREDIT.
(a) OBLIGATION TO ISSUE LETTERS OF CREDIT. Subject to the terms
and conditions of this Agreement, prior to the maturity of the Loans (whether by
acceleration or otherwise) and so long as no Default has occurred and is
continuing, Issuing Bank agrees to issue, in accordance with Issuing Bank's
usual and customary business practices, one or more Letters of Credit at the
request of Borrowers, PROVIDED, that Issuing Bank shall not issue any Letter of
Credit if any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain Issuing Bank from
issuing such Letter of Credit or any rule, regulation or law applicable to
Issuing Bank or any request or directive from any governmental authority with
jurisdiction over Issuing Bank shall prohibit or request that Issuing Bank
refrain from the issuance of letters of credit generally or such Letters of
Credit in particular or shall impose upon Issuing Bank with respect to such
Letters of Credit any restriction or reserve or capital requirement (for which
Issuing Bank is not otherwise compensated) not in effect on the date hereof, or
any unreimbursed loss, cost or expense which was
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not applicable, in effect or known to Issuing Bank as of the date hereof in
which Issuing Bank in good faith deems material to it; or any of the
conditions precedent for the issuance of such Letter of Credit or other terms
and provisions of this Loan or any subsequent loans hereof are not satisfied.
(b) EXPIRATION DATE OF LETTERS OF CREDIT. The expiration date of
any Letter of Credit shall not be later than the earlier of twelve (12) months
after the date of the issuance thereof, and the third anniversary of the
Closing Date.
(c) LETTERS OF CREDIT DEEMED TO BE LOANS. All Letters of Credit
issued by Issuing Bank shall be issued in connection with this Agreement and
Borrowers' obligation to pay any amount drawn under any Letter of Credit shall
constitute an Obligation hereunder and shall be bound by and shall benefit from
all the terms, provisions and conditions hereunder, including without
limitation, Issuing Bank's rights to recover costs and expenses relating thereto
as provided in this Agreement and Issuing Bank's remedies upon the occurrence
and continuance of an Event of Default. Each Letter of Credit issued hereunder
shall reduce the amount of Loan proceeds available for disbursement under the
Credit Commitment in an amount equal to the face amount of each such Letter of
Credit. No interest shall accrue on the amount of undisbursed Loan proceeds
representing the aggregate amount of the Letters of Credit until such time as
such Letters of Credit are drawn upon.
(d) PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. Borrowers shall
give Issuing Bank two (2) business days' prior written notice, or telephonic or
electronically transmitted notice confirmed promptly thereafter in writing, of
any requested issuance of a Letter of Credit under this Agreement. Such notice
shall specify the stated amount of the Letter of Credit requested, the effective
date (which day shall be a business day) of issuance of such requested Letter of
Credit, the date on which such requested Letter of Credit is to expire (which
date shall be a business day and shall in no event be later than the third
anniversary of the Closing Date), the proposed beneficiaries of such Letter of
Credit, the conditions for draws under such Letter of Credit, and any other
information relevant thereto as Issuing Bank may request. Unless there is a
Default or Event of Default hereunder, or unless the amount of the Letter of
Credit exceeds the limitations set forth by Section 2.14(f) hereof, then,
subject to the terms and conditions of this Agreement, Issuing Bank shall issue,
on the requested date, a Letter of Credit for the account of Borrowers in
accordance with Issuing Bank's usual and customary business practices.
(e) REIMBURSEMENT OBLIGATIONS. Borrowers agree that all
Reimbursement Obligations owing to Issuing Bank under or with respect to each
such Letter of Credit issued by Issuing Bank shall be deemed to be a request for
a draw or advance hereunder and shall be deemed to have been disbursed to
Borrowers as a Loan hereunder. Borrowers hereby promise to pay to Agent any and
all Reimbursement Obligations hereunder at the same times and in the same manner
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as Loans disbursed pursuant to Section 2.3(a) are required to be paid. Interest
shall begin to accrue on the Reimbursement Obligations on the day such
Reimbursement Obligations are incurred by Borrowers as a result of disbursement
under the Letter of Credit.
(f) AMOUNT OF LETTERS OF CREDIT. At no time shall the aggregate
amount of all of the issued and outstanding Letters of Credit exceed One Million
and 00/100 Dollars ($1,000,000.00), nor shall the sum of all Letters of Credit
outstanding and all Loans outstanding exceed the Revolving Credit Commitment.
(g) FEES. A fee in the amount of one and three quarter percent
(1.75%) per annum (computed on the basis of a 360-day year for the days elapsed)
of the daily average undrawn face amount of each of the Letters of Credit shall
be payable by Borrowers ("LETTER OF CREDIT FEE"), plus all out-of-pocket
expenses, including, but not limited to, charges for the opening, closing,
amending, reissuing and extending of letters of credit. The Letter of Credit
fee shall be paid in arrears on the last day of each month and on the
Termination Date or if such day is not a Business Day on the next succeeding
Business Day commencing on the first such date following the issuance of any
Letter of Credit. The Agent agrees to disburse from such Letter of Credit Fee,
promptly upon receipt, to the Issuing Bank a fronting fee in an amount equal to
one quarter of one percent (0.25%) per annum of the daily average undrawn face
amount of each of the Letters of Credit, plus all commissions, charges, costs
and expenses in the amounts customarily charged by the Issuing Bank from time to
time in like circumstances with respect to the issuance of each Letter of
Credit, and the balance thereof to each Lender its Pro Rata Share of such Letter
of Credit fee.
(h) LETTER OF CREDIT PARTICIPATIONS. By issuance of a Letter of
Credit and without any further action on the part of Issuing Bank or Lenders in
respect thereof, Issuing Bank hereby grants to each Lender, and each Lender
hereby agrees to acquire from Issuing Bank, a participation in such Letter of
Credit equal to such Lender's Pro Rata Share of the face amount of such Letter
of Credit, effective upon the issuance of such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees to pay to Agent on behalf of Issuing Bank, such
Lender's Pro Rata Share of any Reimbursement Obligation. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this Section 2.14(h) in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including without limitation the occurrence and continuance of a default or an
event of default hereunder, and that each such payment shall be made without any
offset, abatement, withholding or reduction whatsoever.
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ARTICLE 3
SECURITY AGREEMENT
Section 3.1 SECURITY INTEREST. To secure the prompt repayment of the
Notes and the Obligations, Borrowers hereby grant, and hereby pledge and
collaterally assigns, to Agent, on behalf of the Lenders, a lien and security
interest in and to all Collateral owned by each Borrower, wherever located,
whether now or hereafter owned, existing or acquired or hereafter arising. To
secure further such liabilities and Obligations, Borrowers shall grant to Agent,
on behalf of the Lenders, a lien upon those leasehold interests of Borrowers
identified on Schedule 3.1; and shall, at the time Borrower acquires such
interests, execute and deliver to Agent, on behalf of the Lenders, Mortgages or
deeds of trust, amendments or modifications to Mortgages and valid assignments
of all other property rights (including, without limitation, rights to receive
rents and rights with respect to judgments and claims) which now exist or which
may exist or arise hereafter from time to time; and shall deliver to Agent, on
behalf of the Lenders, to the extent required herein or upon Agent's request in
accordance with the terms of this Agreement, all certificates of title,
instruments, documents and Chattel Paper in which Borrowers from time to time
has an interest and such other documents as Agent may reasonably request to
perfect a security interest in the Collateral.
Section 3.2 FINANCING STATEMENTS; ADDITIONAL DOCUMENTS. Each Borrower
shall take all necessary action or as requested by Agent or any Lender to
continue as perfected the first lien (subject only to Permitted Liens) and
security interest in the Collateral of Lenders and Agent, except for such
Collateral in which a first lien can be perfected only by possession or other
action other than filing a UCC Financing Statement and such possession or other
action is not required by Agent at such time. Such filings shall be in form and
substance required by Agent, and each Borrower shall pay all costs of recording
and filing the financing statements (and any continuation or termination
statements with respect thereto), the Mortgages and any other documents, titles,
statements, assignments or the like reasonably required to create, maintain,
preserve or perfect the liens or security interests granted under the Loan
Documents, together with costs and expenses of any lien or UCC searches required
by Agent in connection with the making of the Loans. Each Borrower irrevocably
hereby makes, constitutes and appoints Agent (and all Persons designated by
Agent for that purpose) as such Borrower's true and lawful attorney and
agent-in-fact to execute such financing statements, documents and other
agreements and instruments and do such other acts and things as may be necessary
to preserve and perfect the security interest in the Collateral granted to Agent
for the benefit of the Lenders. At Agent's request, each Borrower shall execute
and deliver to Agent, on behalf of the Lenders, at any time and from time to
time hereafter, all supplemental documentation that Agent may reasonably request
to perfect, maintain, preserve or continue the security interest and liens
granted Lenders and Agent hereby and under any of the other Loan Documents, in
form and substance acceptable to Agent, and pay the costs of preparing and
recording
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or filing of the same. Each Borrower agrees that a carbon, photographic, or
other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement. Except as otherwise provided in this
Agreement, each Borrower immediately on acquiring Inventory or Accounts or
Proceeds thereof for which separate perfection is necessary or reasonably
considered desirable by Agent, shall deliver to Agent, on behalf of the
Lenders, any and all evidence of ownership of any such property and shall
take all such action as may be reasonably necessary to perfect Agent's
security interest in such property. Each Lender (by any of its officers,
employees or agents, but only upon authorization of an officer of such
Lender) shall have the right, at any time or times during Borrowers' usual
business hours, to inspect the Collateral, all records related thereto (and
to make extracts from such records) and the premises upon which any of the
Collateral is located, to discuss Borrowers' affairs and finances with any
accountant, account debtor or creditor of Borrowers and to verify the amount,
quality, quantity, value and condition of, or any other matter relating to,
the Collateral. Each Borrower shall perform all reasonable acts and execute
or cause to be executed all documents, including, without limitation, the
Assignment of Patents and the Assignment of Trademarks for filing with the
United States Patent and Trademark Office, state offices and corresponding
foreign registries as Agent reasonably deems necessary or desirable, to
establish, perfect, record and maintain the security interest in the
Intellectual Property and the goodwill symbolized thereby (whether now
existing or hereafter acquired). If Borrowers are unable to obtain the
consents or approvals to permit the assignment of the Patents and Trademarks
listed on Schedule 3.2 attached hereto to Agent, as collateral security for
the Loans hereunder, by December 31, 1998, after good faith efforts to obtain
such consents (such determination to be made by Agent in its sole discretion)
then the Applicable Margin for both Adjusted Prime Rate Loans and Libor Rate
Loans shall increase by 50 basis points per annum and the Commitment Fee to
be paid hereunder shall increase by 50 basis points per annum. Upon the
expiration or termination of any Capital Lease or documents relating to
Acquisition Indebtedness which impose negative pledge restrictions not
prohibited by Section 8.9, Borrowers shall execute such further documents
required by Agent to create and if requested by Agent, to perfect, a lien in
the property or assets previously covered by such restriction.
Section 3.3 ACCOUNTS; CHATTEL PAPER; LEASE AGREEMENTS. After the
occurrence of an Event of Default and during the continuance thereof, Agent
shall have the right at any time to notify any Person obligated to make payments
to Borrowers with respect to Accounts, Chattel Paper and lease agreements to
make such payments directly to Agent, on behalf of the Lenders, or directly into
the deposit accounts subject to a Blocked Account Agreement.
Section 3.4 PLEDGE OF STOCK. As additional collateral for the Loans to be
made hereunder, each Borrower and each stockholder or subsidiary of a Borrower
shall execute and deliver to Agent for the ratable benefit of the Lenders,
appropriate Pledge Agreements with respect to all Pledged Stock. If Agent, in
its reasonable discretion, determines that the assets or business of any Foreign
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Subsidiary constitutes a material portion of the assets or business of
Holdings, on a Consolidated basis, the Borrower owning the Capital Stock of
such Foreign Subsidiary and such Foreign Subsidiary shall execute such
documents or take such action as shall be necessary to grant to Agent, on
behalf of Lenders, a perfected security interest in the Capital Stock or
assets of such Foreign Subsidiary to the full extent requested by Agent that
would not create any additional income tax obligation for Borrowers or such
Foreign Subsidiary under Section 956 of the Code, or any similar successor
provision of the Code.
Section 3.5 RELEASE OF COLLATERAL. Upon Borrowers' full performance of
the Obligations Agent and Lenders shall release their interest in all
Collateral. Upon any sale of Collateral permitted pursuant to Section 8.5,
Agent shall release its interest in the portion of the Collateral being sold,
without prejudice to the continuation of its lien on any other Collateral. In
either event, upon request of Holdings, the Agent shall take such action, and
execute such documents, as Holdings may reasonably request in order to
effectuate the foregoing.
ARTICLE 4
CONDITIONS PRECEDENT TO DISBURSEMENTS
Section 4.1 CONDITIONS PRECEDENT TO INITIAL CLOSING. On or prior to the
Closing Date, each of the following conditions precedent shall have been
satisfied:
(a) CERTIFIED COPIES OF CHARTER DOCUMENTS AND BYLAWS. Agent and
each Lender shall have received from each Borrower (i) a copy, certified by the
Secretary or an Assistant Secretary of each Borrower to be true and complete on
and as of the Closing Date, of the charter or other organization documents and
by-laws of such Borrower as in effect on the Closing Date (together with all, if
any, amendments thereto); and (ii) the charter or other organization documents
of such Borrower certified by the applicable Secretary of State.
(b) PROOF OF CORPORATE AUTHORITY. Agent and each Lender shall
have received from each Borrower copies, certified by the Secretary or an
Assistant Secretary of each Borrower to be true and complete on and as of the
Closing Date, of records of all action taken by each Borrower to authorize (i)
the execution and delivery of this Agreement and the other Loan Documents and to
which it is or is to become a party as contemplated or required by this
Agreement; (ii) its performance of all of its obligations under each of such
documents; and (iii) the making by each Borrower of the borrowings contemplated
hereby. Agent shall have received from the applicable Secretary of State a
Certificate of Good Standing of recent date certifying the existence and good
standing of each Borrower under the laws of the state where such Borrower is
incorporated and
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certificates evidencing each Borrower's good standing in each state where
such Borrower is required to qualify to conduct business unless failure to so
qualify could not be expected to have a Material Adverse Effect.
(c) AUTHORITY TO EXECUTE PLEDGE AGREEMENTS. Each Person executing
a Pledge Agreement which is not an individual shall deliver to Agent such
evidence as Agent shall reasonably deem necessary to evidence the authority of
such Person to execute and deliver each such Pledge Agreement and to perform its
respective obligations thereunder; provided, however, delivery of stock
certificates pursuant thereto shall be required as set forth in Section 4.2(f).
(d) INCUMBENCY CERTIFICATE. Agent and each Lender shall have
received from each Borrower an incumbency certificate, dated as of the Closing
Date, signed by the Secretary or an Assistant Secretary and giving the name and
bearing a specimen signature of each individual who shall be authorized (i) to
sign, in the name and on behalf of each Borrower, each of the Loan Documents to
which each Borrower is or is to become a party on the Closing Date; and (ii) to
give notices and to take other action on behalf of each Borrower under the Loan
Documents.
(e) OFFICERS' CERTIFICATES. Agent and each Lender shall have
received from each Borrower a certificate dated as of the Closing Date, signed
by a duly authorized officer and certifying that each of the representations and
warranties made by and on behalf of such Borrower to Agent and each Lender in
this Agreement and in the other Loan Documents was true and correct when made,
and is true and correct on and as of the Closing Date.
(f) LOAN DOCUMENTS, ETC. (i) Each of the Loan Documents shall
have been duly and properly authorized, executed and delivered by each Borrower
and shall be in full force and effect on and as of the Closing Date;
(ii) executed originals of each of the Notes shall have been delivered to each
Lender in accordance with their respective Credit Commitments; and
(iii) executed originals or (as the case may be) executed counterparts of each
of the other Loan Documents shall have been delivered to Agent and/or each
Lender.
(g) ACTIONS TO PERFECT LIENS. Agent shall have received evidence
in form and substance satisfactory to it that all filings, recordings,
registrations and other actions, including without limitation, the filing of
duly executed financing statements on Form UCC-1 in the jurisdictions listed on
Schedule 5.22 Part I or otherwise as necessary or, in the opinion of Agent,
desirable to perfect the Liens created by the Security Documents shall have been
completed.
(h) INSURANCE. Agent shall have received copies of certificates of
insurance executed by each insurer or its authorized agent evidencing the
insurance required to be maintained by Borrowers pursuant to Section 6.2(b)
(except as provided in Section 4.2(g) herein), and a
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certificate of a nationally recognized insurance broker reasonably
satisfactory to Agent certifying that insurance complying with such Section
has been obtained and is in full force and effect.
(i) FLOOD HAZARD DETERMINATION. If requested by Agent, Agent
shall have received at Borrowers' expense, a Standard Flood Hazard Determination
Form issued or certified by a Person satisfactory to Agent for each structure or
improvement that either (i) is located on Real Estate covered by a Mortgage or
(ii) stores or houses any Inventory or Equipment or any substantial part of the
Collateral. Further, in the event such Standard Flood Hazard Determination Form
evidences that the subject structure or improvement is located in a special
flood hazard, as defined by FEMA, Borrowers shall deliver to Agent and Lenders
evidence of appropriate flood insurance in amounts and under such conditions as
identified in Section 6.2(b) hereof.
(j) LEGALITY OF TRANSACTIONS. No change in applicable law shall
have occurred as a consequence of which it shall have become and continue to be
unlawful (i) for Agent or any Lender to perform any of its agreements or
obligations under any of the Loan Documents to which it is a party on the
Closing Date; or (ii) for any Borrower to perform any of its agreements or
obligations under any of the Loan Documents to which it is a party on the
Closing Date.
(k) PERFORMANCE, ETC. Each Borrower shall have duly and properly
performed, complied with and observed each of its covenants, agreements and
obligations contained in each of the Loan Documents to which such Borrower is a
party or by which such Borrower is bound on the Closing Date. No event shall
have occurred on or prior to the Closing Date, and no condition shall exist on
the Closing Date, which constitutes a Default or an Event of Default.
(l) PROCEEDINGS AND DOCUMENTS. All corporate, governmental and
other proceedings in connection with the transactions contemplated by this
Agreement, each of the other Loan Documents and all instruments and documents
incidental thereto shall be in form and substance satisfactory to Agent and
Lenders, and Agent and each Lender shall have received all such counterpart
originals or certified or other copies of all such instruments and documents as
Agent and each Lender shall have requested.
(m) COMPLIANCE WITH LAWS. The borrowings made under this
Agreement are and shall be in compliance with the requirements of all applicable
laws, regulations, rules and orders, including without limitation, the
Environmental Laws and the requirements imposed by the Board of Governors of the
Federal Reserve System under Regulations G and X, and by the SEC.
(n) LEGAL OPINION. Agent and Lenders shall have received a
written legal opinion, addressed to Agent and each Lender and dated as of the
Closing Date, from legal counsel for
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Borrowers, which shall be substantially in the form of Exhibit J hereto and
which legal opinion shall otherwise be acceptable to Agent and each Lender.
(o) LEGAL FEES. Borrowers shall have reimbursed Agent for all
fees and disbursements of legal counsel to Agent (in its capacity as Agent and a
Lender) which shall have been incurred by Agent through the Closing Date in
connection with the preparation, negotiation, review, execution and delivery of
the Loan Documents and the handling of any other matters incidental thereto.
Each Lender, other than Provident, agrees that it shall be responsible for any
legal fees incurred by it in connection with the negotiation, review, execution
and delivery of the Loan Documents.
(p) PAYMENT OF CLOSING FEE. Borrowers shall have paid to Agent
the Closing Fee.
(q) SUBORDINATED DEBT OFFERING. Holdings shall have closed, or be
prepared to simultaneously close with the closing of the Loans, the Subordinated
Debt Offering on terms and conditions satisfactory to Agent and each Lender.
(r) LIEN SEARCHES. Agent shall have received the results of a
recent search by a Person satisfactory to Agent, of the UCC, judgment and tax
lien filings which may have been filed with respect to personal property of
Borrowers or any of their Subsidiaries in the jurisdictions listed on Schedule
5.22, and the results of such search shall be satisfactory to Agent.
(s) CHANGES; NONE ADVERSE. From the date of the Current Financial
Statements referred to in Section 5.5 of this Agreement to the Closing Date, no
changes shall have occurred in the assets, liabilities, financial condition,
business, operations or prospects of Borrowers which, individually or in the
aggregate, are materially adverse to Borrowers.
(t) FINANCIAL STATEMENTS. Each Lender shall have received the
financial statements referred to in Section 5.5, certified by an officer of
Borrowers and each Lender shall have been satisfied that such financial
statements accurately reflect the financial status and condition of Borrowers.
Section 4.2 CONDITIONS PRECEDENT TO SUBSEQUENT LOANS. The obligation
of the Lenders to make the initial Revolving Credit Loan and any subsequent
Revolving Credit Loan shall be subject to the satisfaction, prior thereto or
concurrently therewith, of each of the following conditions precedent:
(a) LEGALITY OF TRANSACTIONS. It shall not be unlawful (a) for
any Lender or the Agent to perform any of its agreements or obligations under
any of the Loan Documents to which
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such Person is a party on the Draw Date of such Loan or (b) for Borrowers to
perform any of their material agreements or obligations under any of the Loan
Documents.
(b) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties made by or on behalf of the Borrowers to the Lenders or the Agent
in this Agreement or any other Loan Document (a) shall be true and correct in
all material respects when made and (b) shall, for all purposes of this
Agreement, be deemed to be repeated on and as of the date of Borrowers' request
for such Loan, as the case may be, and shall be true and correct as of each of
such dates (unless specifically stated to relate only to an earlier date, in
which case such representation or warranty shall be true and correct in all
material respects as of such earlier date), except, in each case, as affected by
the consummation of the transactions contemplated by the Loan Documents.
(c) NO DEFAULT. No event shall have occurred on or prior to such
date and be continuing on such date, and no condition shall exist on such date
which constitutes a Default or Event of Default.
(d) MAXIMUM CREDIT. The making of such Revolving Credit Loan
shall not result in the sum of all outstanding Revolving Credit Loans exceeding
the Maximum Borrowing Base.
(e) ACTIONS TO PERFECT LIENS. Agent shall have received evidence
in form and substance satisfactory to it that all filing, recordings,
registrations and other actions, including without limitation, the filing of
duly executed financing statements on Form UCC-1 in the jurisdictions listed on
Schedule 5.22 Part II or as otherwise necessary or, in the opinion of Agent,
desirable to perfect the Liens created by the Security Documents.
(f) PLEDGED STOCK. Agent shall have received Pledged Stock (as
defined in the Pledge Agreement) and undated assignments separate from the
Pledged Stock duly executed in blank for each certificate representing shares of
the Pledged Stock.
(g) INSURANCE CERTIFICATES. Agent shall have received insurance
certificates naming Agent as mortgagee, loss payee and additional insured as its
interests may appear as required by Section 6.2(b)(iii) herein.
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ARTICLE 5
GENERAL REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to Agent and each Lender as follows:
Section 5.1 EXISTENCE, ETC.
(a) Each Borrower (i) is duly organized, validly existing and in
good standing under the laws of the state of its respective incorporation; and
(ii) has full corporate power and authority and full legal right to own or to
hold under lease its respective Property and to carry on its respective
businesses. Except where the failure to be so qualified and licensed will not
have a Material Adverse Effect, each Borrower is qualified and licensed in each
jurisdiction wherein the character of the Property owned or held under lease by
it, or the nature of its business make such qualification necessary or
advisable. Each Borrower is currently qualified in good standing as a foreign
corporation in each jurisdiction set forth on Schedule 5.1(a).
(b) The authorized Capital Stock of each Borrower and each
Subsidiary of a Borrower as of the Closing Date is as set forth on Schedule
5.1(b), Part I. All issued and outstanding shares of Capital Stock of each
Borrower and each Subsidiary of a Borrower are duly authorized and validly
issued, are fully paid and nonassessable and such shares were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities. Except as listed on Schedule 5.1(b), Part II, and except for the
lien of the Pledge Agreement, there are no outstanding options, rights or
warrants issued by any Borrower for the acquisition of shares of the Capital
Stock of any Borrower, nor any outstanding securities or obligations convertible
into such shares, nor any agreements by any Borrower to issue or sell such
shares. There are no options, sale agreements, pledges (other than the Pledge
Agreement in favor of the Agent), proxies, voting trusts, powers of attorney or
any other agreements or instruments binding upon any of Borrowers' shareholders
with respect to beneficial or record ownership of or voting rights with respect
to shares of the Capital Stock of any Borrower (other than Holdings).
(c) Borrowers have no Subsidiaries except as set forth on Schedule
5.1(c) and Subsidiaries formed or acquired after the Closing Date in connection
with Permitted Acquisitions and the Capital Stock of which has been pledged to
Agent, for the benefit of the Lenders. All the Capital Stock of each Subsidiary
is free and clear of all Liens other than those in favor of Agent. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the state of its incorporation, and has full corporate power and
authority and full legal right to own or to hold under lease its Property and to
carry on its business. Each Subsidiary is qualified and licensed in each
jurisdiction wherein the character of the Property owned or held under lease by
it, or the nature
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of its business makes such qualification necessary or advisable. Each
Subsidiary is currently qualified in good standing as a foreign corporation in
each jurisdiction set forth on 5.1(c).
(d) Except for stock of Subsidiaries, no Borrower owns or holds of
record (whether directly or indirectly) any shares of any class in the capital
of any corporation, nor does any Borrower own or hold (whether directly or
indirectly) any legal and/or beneficial equity interest in any partnership,
business trust or joint venture or in any other unincorporated trade or business
enterprise.
Section 5.2 AUTHORITY, ETC.
(a) Each Borrower has adequate power and authority and has full
legal right to enter into this Agreement and each of the other Loan Documents,
and to perform, observe and comply with all of its agreements and obligations
under each of such documents, including, without limitation the borrowings
contemplated hereby.
(b) The execution and delivery by Borrowers of each of the Loan
Documents, the performance by Borrowers of all of their agreements and
obligations under such documents, and the making by Borrowers of the borrowings
contemplated by this Agreement, have been duly authorized by all necessary
corporate action on the part of Borrowers and do not and will not (i) contravene
any provision of its charter documents or by-laws (each as in effect from time
to time); (ii) conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in the creation of any
Lien upon any of the Property of Borrowers under any agreement, trust deed,
indenture, mortgage or other material instrument to which Borrowers are parties
or by which Borrowers or any other Property of Borrowers is bound or affected
(except that the execution and delivery of the Loan Documents will create liens
in favor of the Lenders in accordance with the Loan Documents); (iii) violate or
contravene any provision of any law, rule or regulation (including, without
limitation, Regulations U, T or X of the Board of Governors of the Federal
Reserve System) or any order, ruling or interpretation thereunder or any decree,
order or judgment of any court or governmental or regulatory authority, bureau,
agency or official (all as from time to time in effect and applicable to
Borrowers the violation or breach of which could reasonably be expected to have
a Material Adverse Effect); or (iv) require any waivers, consents or approvals
by any of the creditors or trustees for creditors of Borrowers or any other
Person except the consents or approvals listed on Schedule 3.2.
(c) Other than filings required to perfect the security interests
granted hereunder and compliance with Federal and state securities laws in
connection with any sale of any portion of the certificates evidencing or
representing the shares of capital stock listed on Exhibit A to the Pledge
Agreement or any other portion of the Collateral consisting of securities, no
approval,
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consent, order, authorization or license by, or giving notice to, or
taking any other action with respect to, any governmental or regulatory
authority or agency is required, under any provision of any applicable law:
(i) for the execution and delivery by Borrowers of this
Agreement, each Note, and the other Loan Documents, for the performance by
Borrowers of any of the agreements and obligations thereunder or for the
making by Borrowers of the borrowing contemplated by this Agreement or for
the conduct by Borrowers of their business; or
(ii) to ensure the continuing legality, validity, binding
effect, enforceability or admissibility in evidence of this Agreement, the
Notes and the other Loan Documents.
Section 5.3 BINDING EFFECT OF DOCUMENTS, ETC. Each of the Loan
Documents which each Borrower has or is to have executed and delivered as
contemplated and required to be executed and delivered as of the Closing Date
by this Agreement has been so executed and delivered by each Borrower, and
each such Loan Document is and will be in full force and effect. The
agreements and obligations of such Borrower contained in each such Loan
Document constitute or shall constitute legal, valid and binding obligations
of such Borrower, enforceable against each Borrower in accordance with its
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
the enforcement of creditors' rights generally.
Section 5.4 NO EVENTS OF DEFAULT, ETC.
(a) No event has occurred and is continuing, and no condition
exists, which constitutes a Default or an Event of Default.
(b) No default by a Borrower and no accrued right of rescission,
cancellation or termination on the part of a Borrower, exists under this
Agreement or any of the other Loan Documents.
Section 5.5 FINANCIAL STATEMENTS. The Consolidated balance sheets and
other financial statements of Borrowers dated [ ] previously
delivered to Agent ("Current Financial Statements") have been prepared in
accordance with GAAP except as otherwise indicated in the notes to such
financial statements and subject in the case of unaudited statements to changes
resulting from year-end adjustments. The balance sheets contained in the
Current Financial Statements present fairly the Consolidated financial condition
of the Borrowers as of the dates thereof in accordance with GAAP. The
statements of income contained in the Current Financial
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Statements present fairly the Consolidated results of operations of Borrowers
for the fiscal periods then ended in accordance with GAAP. As of the dates
of such balance sheets, there did not exist any material liabilities or
obligations, secured or unsecured (whether accrued, absolute or actual,
contingent or otherwise), which were not reflected in said balance sheets or
in the footnotes thereto, and which should, in accordance with GAAP, have
been reflected in such balance sheets.
Section 5.6 CHANGES; NONE ADVERSE. No changes have occurred in the
assets, liabilities or financial condition of the Borrowers from those reflected
in the most recent balance sheet referred to in Section 5.5 hereof (the "Current
Balance Sheet") which, individually or in the aggregate, constitutes a material
adverse change in the assets, liabilities, or prospects of Borrowers. Since the
date of Current Balance Sheet, there has been no materially adverse development
in the business or in the operations or prospects of Borrowers.
Section 5.7 TITLE TO ASSETS; MATERIAL LEASES. Each Borrower has good,
sufficient and legal title to, or leasehold interest in, all the Property and
assets reflected in the Current Balance Sheet, except for minor defects in title
that do not materially interfere with the ability of such Borrowers to conduct
its business consistent with past practices. Each Borrower enjoys peaceful and
undisturbed possession of all Property subject to Material Leases and all such
Material Leases are valid and in full force and effect, except when failure to
enjoy such peaceful undisturbed possession or failure of such Material Lease to
be in full force and effect would not reasonably be expected to have a Material
Adverse Effect. All Material Leases in effect on the Closing Date are set forth
on Schedule 5.7.
Section 5.8 INTELLECTUAL PROPERTY.
(a) Schedule 5.8 sets forth a complete and correct list of all
Patents and Trademarks owned by Borrowers on the date hereof which are material
to Borrowers' business or financial condition. Except as set forth on Schedule
5.8, (a) Borrowers own and possess the right to use, and have done nothing to
authorize or enable any other Person to use, any Patent or Trademark listed on
said Schedule 5.8 and all registrations listed on said Schedule 5.8 are valid
and in full force and effect, and (b) Borrowers own and possess the right to use
all Patents and Trademarks.
(b) Schedule 5.8 sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property on the
date hereof.
(c) (i) To the knowledge of Borrowers, there is no violation by
others of any right of Borrowers with respect to any Patent or Trademark listed
on Schedule 5.8 (except for any such violation which would not reasonably be
expected to have a Material Adverse Effect); (ii) to the knowledge of Borrowers,
Borrowers are not infringing in any respect upon any Patent or Trademark
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of any other Person; (iii) no proceedings have been instituted or are pending
against Borrowers or, to Borrowers' knowledge, threatened, and no claim
against Borrowers has been received by Borrowers, alleging any such violation.
Section 5.9 INDEBTEDNESS FOR BORROWED MONEY. Except as listed on
Schedule 5.9, and Indebtedness being paid off on the Closing Date, no
Indebtedness of any Borrower is secured by or otherwise benefits from any
Lien on or with respect to the whole or any part of Borrowers' properties or
assets, present or future. There exists no default or event or condition
which, with the giving of notice or passage of time, or both, would
constitute a default under the provisions of any instrument evidencing such
Indebtedness or of any agreement relating thereto which would interfere with
the priority of Agent's lien on the Collateral.
Section 5.10 LITIGATION. Except as listed on Schedule 5.10, there is no
pending or to Borrowers' knowledge threatened action, suit, proceeding or
investigation before any court, governmental or regulatory authority, agency,
commission or official, board of arbitration or arbitrator against Borrowers or
in which any Borrower is a participant ("Litigation"), as to which there is a
reasonable likelihood of an adverse determination and that, if adversely
determined, would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. There are no proceedings pending or threatened
against any Borrower which call into question the validity or enforceability of
any of the Loan Documents.
Section 5.11 NO MATERIALLY ADVERSE CONTRACTS. Except as listed on
Schedule 5.11, the San Diego Property Acquisition Agreement and other contracts
entered into after the date hereof in the ordinary course of business and in
accordance with reasonable business practices, no Borrower is a party to or
bound by any forward purchase contract, futures contract, covenant not to
compete, unconditional purchase, take or pay or other contracts, agreements or
instruments (whether written or oral) which restricts its ability to conduct its
business or, either individually or in the aggregate has or could reasonably be
expected to have a Material Adverse Effect.
Section 5.12 TAXES AND TAX RETURNS, ETC.
(a) Except as set forth on Schedule 5.12(a), each Borrower has
timely filed (inclusive of any permitted extensions) or had filed on its behalf
with the appropriate taxing authorities all material returns (including without
limitation, material information returns and other material information) in
respect of taxes required to be filed through the date hereof. The information
filed was complete and accurate in all material respects at the time of filing.
Except as set forth on Schedule 5.12(a), no Borrower nor any group of which such
Borrower is or was the common parent has requested any extension of time within
which to file returns (including without limitation information returns) in
respect of any taxes other than routine extensions of time for filing
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returns which have not involved the payment of material taxes (other than taxes
immaterial in amount) beyond the due date thereof.
(b) All taxes and assessments in respect of periods beginning
prior to the date hereof have been timely paid, or will be timely paid, or an
adequate reserve has been established therefor, as reflected in the most recent
financial statements of Borrowers. No Borrower has any liability for taxes in
excess of the amounts so paid or reserves so established.
(c) Except as set forth on Schedule 5.12(c), no deficiencies for
taxes have been claimed, proposed or assessed by any taxing authority or other
governmental authority against any Borrower nor any Subsidiary of a Borrower and
no tax liens have been filed. Except as set forth on Schedule 5.12(c), there
are no pending or threatened audits, investigations or claims for or relating to
any liability in respect to taxes, and there are no matters under discussion
with any taxing authorities or other governmental authorities with respect to
taxes which are likely to result in a additional liability for taxes. No
extension of a statute of limitations relating to taxes or assessments is in
effect with respect to any Borrower.
(d) Neither Borrowers nor any Subsidiary of a Borrower has any
obligation under any tax sharing agreement or agreement regarding payments in
lieu of taxes.
Section 5.13 CONTRACTS WITH AFFILIATES, ETC.
(a) Except as permitted by Section 8.13 hereof, no Borrower is a
party to or otherwise bound by any written agreements, instruments or contracts
(whether written or oral) with any Affiliate (other than a Borrower or a
Subsidiary of a Borrower).
(b) Except as permitted by Section 8.13 hereof, there is no
Indebtedness for Borrowed Money owing by any Borrower to any Affiliate (other
than a Borrower or a Subsidiary of a Borrower), nor is there Indebtedness for
Borrowed Money owing by any Affiliate (other than a Borrower or a Subsidiary of
a Borrower) to any Borrower.
Section 5.14 EMPLOYEE BENEFIT PLANS.
(a) Each Borrower and its ERISA Affiliates are in compliance in
all material respects with any applicable provisions of ERISA and the
regulations thereunder and of the Internal Revenue Code of 1986, as amended,
with respect to all Employee Benefit Plans.
(b) No Termination Event has occurred or is reasonably expected to
occur with respect to any Guaranteed Pension Plan.
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(c) The actuarial present value of all benefit commitments under
each Guaranteed Pension Plan does not exceed the assets of that Plan.
(d) No Borrower nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any withdrawal liability under ERISA to
Multiemployer Plans.
As used in this Section 5.14, the terms "actuarial present value" and
"benefit commitments" shall have the meanings specified in Section 4001 of
ERISA.
Section 5.15 GOVERNMENTAL REGULATION. No Borrower is a "public utility
company", a "holding company" or a "subsidiary" or an "affiliate" of a "holding
company," as such terms are defined in the federal Public Utility Holding
Company Act of 1935, as amended. No Borrower is an "investment company" or a
company "controlled" by an "investment company," as such terms are defined in
the Federal Investment Company Act of 1940, as amended. No Borrower is subject
to regulation under the Public Utility Holding Company Act 1935, the Federal
Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or
to any federal or state statute or regulation limiting its ability to incur
Indebtedness for Borrowed Money.
Section 5.16 SECURITIES ACTIVITIES. No Borrower is engaged in the
business of extending credit for the purpose of purchasing or carrying any
"margin security" or "margin stock" as such terms are used in Regulation U, T
and X of the Board of Governors of the Federal Reserve System.
Section 5.17 DISCLOSURE. Neither this Agreement, any other Loan
Document, nor any other document, certificate or written statement furnished to
Agent or any Lender by or on behalf of Borrowers for use in connection with the
transactions contemplated by this Agreement, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading as of the date of such document,
certificate or other statement; provided, however, that to the extent any
statements in any such document was based upon or constitutes a forecast,
projection or expression of opinion, each of the Borrowers represent only that
the assumptions upon which all forecasts, projections or opinions are based are
based on sound business judgment. There is no fact known to any Managing
Officers which has or which could reasonably be expected in the future to have a
Material Adverse Effect.
Section 5.18 NO MATERIAL DEFAULT. No Borrower is in default under any
material order, writ, judgment, injunction, decree, statute or governmental
rule, indenture, agreement, contract, lease or other instrument or contract
applicable to it, which default would have a Material Adverse Effect or
materially adversely effect any Borrower's performance of any covenants or
conditions respecting any of its Indebtedness, and, except as set forth on
Schedule 5.18 hereof, no holder of any Indebtedness of any Borrower has given
notice of any asserted default thereunder, and no liquidation
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or dissolution of any Borrower and no receivership, insolvency, bankruptcy,
reorganization or other similar proceedings relative to any Borrower or its
Property is pending or is threatened.
Section 5.19 ENVIRONMENTAL CONDITIONS.
(a) Each Borrower and its Affiliates have obtained all material
permits, licenses, variances, clearances and all other necessary approvals
required under applicable Environmental Laws (collectively the "EPA Permits")
for use of the Real Estate and the operation and conduct of its business from
all applicable federal, state, and local governmental authorities including, but
not limited to, any and all appropriate federal or state environmental
protection agencies and similar local agencies in regard to the use of the Real
Estate and the operation and conduct of its business, and the handling,
transporting, treating, storage, disposal, discharge, or Release of Hazardous
Substances, if any, into, on or from the environment (including, but not limited
to, any air, water, or soil).
Each issued EPA Permit is in full force and effect, has not
expired or been suspended, denied or revoked, and is not the subject of any
pending challenge by any Person. Each Borrower is in compliance in all material
respects with each issued EPA Permit.
(b) Neither any Borrower, the Real Estate, nor any other Property
owned or leased by a Borrower is subject to any material private or governmental
litigation (or to the best of Borrower's knowledge, any threatened litigation),
Lien or written judicial or administrative notice, order or action relating to
Hazardous Substances or relating to environmental problems, impairments or
liabilities with respect to the Real Estate or such other Property.
(c) To the best of Borrower's knowledge, there has been no
material "Release" (as defined in Section 101(22) of CERCLA) into, on or from
any Real Estate and no Hazardous Substances (except "Household Waste" as that
term is defined at 40 C.F.R. 261.4(b)(1) (1990)) are located on or have been
treated, stored, processed, disposed of, handled, transported to or from,
disposed of upon the Real Estate during Borrowers' ownership or into, upon or
from the environment including, but not limited to, any air, water, or soil,
except in compliance with applicable Environmental Laws. No Borrower has
allowed any Hazardous Substance to be treated, stored, disposed, Released,
located, discharged, possessed, managed, processed, or otherwise handled on the
Real Estate or in the operation or conduct of its respective businesses in
violation of Environmental Laws. Each Borrower has complied, in all material
respects, with all Environmental Laws affecting the Real Estate.
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(d) Borrowers and their Affiliates do not and shall not transport,
in any manner, any Hazardous Substances except in the ordinary course of
business in compliance with Environmental Laws.
(e) No Borrower has received written notice of any circumstances
which would result in any material obligation under any Environmental Law to
investigate or remediate any Hazardous Substances in, on or under the Real
Estate.
Section 5.20 LICENSES AND PERMITS. Subject to Section 5.19 with respect
to EPA Permits, each Borrower owns or possesses all material Licenses and
Permits and rights with respect thereto, necessary for the conduct of its
business as presently conducted and proposed to be conducted, without any known
conflict with the rights of others, and, in each case, free of any Lien not
permitted by Section 8.8 of this Agreement. All of the foregoing are in full
force and effect, and each Borrower is in compliance with the foregoing without
any known conflict with the valid rights of others. No event has occurred which
permits, or after notice or lapse of time or both would permit, the revocation
or termination of any such License or Permit, or affect the rights of such
Borrower thereunder.
Section 5.21 SPECIAL FLOOD HAZARD DETERMINATION. Neither any of the Real
Estate covered by a Mortgage nor any Inventory or Equipment is stored or housed
in any structure or improvement that is located within a hundred year flood
plain or an area identified by FEMA as being in a special flood hazard area.
Section 5.22 GENERAL COLLATERAL REPRESENTATION.
(a) Borrowers are the sole owners of and have good and marketable
title to the Collateral, free from all Liens, in favor of any Person other than
the Agent and except Permitted Liens, and subject to negative pledges not
prohibited under Section 8.9, has full right and power to grant the Agent a
security interest therein. All information furnished to the Agent concerning
the Collateral is and will be complete, accurate and correct in all material
respects when furnished.
(b) No security agreement, UCC Financing Statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by Borrowers in favor of Agent pursuant to this
Agreement, or (ii) in respect of the items of Collateral subject to the
Permitted Liens.
(c) The provisions of this Agreement are sufficient to create in
favor of the Agent, as of the Closing Date, a valid and continuing lien on, and,
to the extent perfection actions have been taken hereunder and subject to
Permitted Liens, first security interest in, the types of the Collateral
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hereunder in which a security interest may be created under Article 9 of the
UCC. UCC Financing Statements have been duly executed on behalf of Borrowers
and the description of such Collateral set forth therein is sufficient to
perfect first priority security interests in such Collateral in which a security
interest may be perfected by the filing of UCC Financing Statements. When such
UCC Financing Statements are duly filed in the filing offices listed on Schedule
5.22, and the requisite filing fees are paid, such filings will be sufficient to
perfect security interests in such of the Collateral described in the UCC
Financing Statements as can be perfected by filing (other than Equipment affixed
to real property so as to become fixtures), which perfected security interests
will be subject to Permitted Liens, prior to all other Liens in favor of others
and rights of others, enforceable as such as against creditors of and purchasers
from Borrowers (other than purchasers of Inventory in the ordinary course) and
as against any owner of the Real Estate where any of the Equipment is located
and as against any purchaser of such Real Estate and any present or future
creditor obtaining a Lien on such real property.
(d) Upon delivery to and possession by Agent of the Pledged Stock
pursuant to the terms of the Pledge Agreement, Agent shall possess a valid,
first priority security interest in such Pledged Stock in accordance with
Article 9 of the UCC; and
(e) No Person now having possession or control of any of the
Collateral consisting of Inventory or Equipment has issued, in receipt therefor,
a negotiable bill of lading, warehouse receipt or other document of title.
ARTICLE 6
AFFIRMATIVE COVENANTS OF BORROWERS
Each Borrower covenants with and warrants to Agent and each Lender that,
from and after the Closing Date and until all of the Obligations are paid and
satisfied in full except as otherwise expressly consented to in writing by the
Requisite Lenders (unless the context otherwise requires):
Section 6.1 REPORTS AND OTHER INFORMATION.
(a) Holdings, on behalf of itself and each of the Borrowers,
shall provide to the Agent as soon as available, and in any event within thirty
(30) days after the close of each month of each fiscal year of Holdings,
Consolidated balance sheets of Holdings as of the end of such month and
Consolidated and consolidating statements of income and statements of cash flow
of Holdings for such month and for the period commencing at the end of the
previous fiscal year and ending with the end of such month, certified by the
chief financial officer, principal accounting officer or chief
<PAGE>
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executive officer of Holdings to the effect that such financial statements,
while not examined by independent public accountants, reflect in his opinion
and in the opinion of senior management of Holdings, all adjustments
necessary to present fairly the Consolidated financial position of Holdings
as at the end of such month and the results of its operations for the month
then ended in conformity with GAAP consistently applied, subject only to
year-end and audit adjustments, which statements shall be delivered at the
end of each month, together with a certificate of such officer stating that
as of the date of such certificate that, to the best of his knowledge, after
reasonable inquiry, no event has occurred which constitutes an Event of
Default or would constitute an Event of Default with the giving of notice or
the lapse of time or both, or, if an Event of Default or such an event has
occurred and is continuing, a statement as to the nature thereof and the
action which Holdings has taken or proposes to take with respect thereto, and
further setting out in such detail as is reasonably required by the Lenders'
calculations demonstrating Borrowers' compliance with the requirements of
Article 7 and Sections 8.8 and 8.11 hereof.
(b) Holdings, on behalf of itself and each of the Borrowers, shall
provide to the Agent a copy of its Form 10-Q within 5 days after it is filed
with the SEC, or if Holdings is not required to file a Form 10-Q, then Holdings,
on behalf of itself and each of the Borrowers, shall provide to the Agent, as
soon as available, and in any event within forty-five (45) days after the close
of each quarter of each fiscal year of Borrowers, quarterly Consolidated
financial statements for such year for Holdings and each of its subsidiaries and
divisions, including therein a copy of the Consolidated balance sheets of
Holdings as of the end of such fiscal year and consolidated and consolidating
statements of income and statements of cash flow and statements of shareholders'
equity of Holdings and its divisions and Subsidiaries, certified without
qualification by the Accountants, all adjustments necessary to present fairly
the financial position of Holdings as at the end of such quarter and the results
of their respective operations for the quarter then ended in conformity with
GAAP consistently applied, subject only to year-end and audit adjustments, which
statements shall be delivered at the end of each fiscal quarter. A Compliance
Certificate of the chief financial officer, principal accounting officer or
chief executive officer of Holdings shall be included with such reports stating
that as of the date of such certificate, to the best of his knowledge, after
reasonable inquiry, no event has occurred which constitutes a Default or an
Event of Default or would constitute a Default or an Event of Default with the
giving of notice or the lapse of time or both, or, if a Default or an Event of
Default or such an event has occurred and is continuing, a statement as to the
nature thereof and the action which the Borrowers have taken or proposes to take
with respect thereto, and further setting out in such detail as is reasonably
required by the Lenders each Borrower's compliance with the requirements of
Article 7 and Sections 8.8 and 8.11 hereof.
(c) Holdings, on behalf of itself and each of the Borrowers, shall
provide to the Agent a copy of its Form 10-K within five (5) days after it is
filed with the SEC, or if Holdings is not required to file a Form 10-K, then
Holdings, on behalf of itself and each of the Borrowers, shall
<PAGE>
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provide to the Agent, as soon as available and in any event within ninety
(90) days after the end of each fiscal year of Holdings a copy of the annual
financial statements for such year for Holdings, including therein a copy of
the Consolidated balance sheet of Holdings as of the end of such fiscal year
and consolidated and consolidating statements of income and statements of
cash flow and statements of shareholders' equity of Holdings and its
respective divisions and Subsidiaries, certified without qualification by the
Accountants. A Compliance Certificate of the chief financial officer,
principal accounting officer or chief executive officer of Holdings shall be
included with such reports stating that, as of the date of such certificate,
to the best of his knowledge and after reasonable inquiry, no event has
occurred which constitutes a Default or an Event of Default, or, if a Default
or an Event of Default or such an event has occurred and is continuing, a
statement as to the nature thereof and the action which Borrowers have taken
or proposes to take with respect thereto and further setting out in such
detail as is reasonably required by the Lenders each Borrowers' compliance
with the requirements of Article 7 and Sections 8.8 and 8.11 hereof.
(d) Together with each delivery of financial statements of
Holdings pursuant to Sections 6.1(a), 6.1(b), or 6.1(c), Holdings, on behalf of
itself and each of the Borrowers, will deliver a management report:
(1) describing the Consolidated operations and financial condition of Holdings
and its Subsidiaries and divisions for the period then ended and the portion of
the current fiscal year then elapsed (or for the fiscal year then ended in the
case of year-end financials). The information above shall be presented in
reasonable detail and shall be certified by the chief financial officer or
controller of Holdings to the effect that such information fairly presents the
Consolidated results of operations and financial condition of Holdings and its
subsidiaries and divisions as at the dates and for the periods indicated.
(e) Holdings, on behalf of itself and each of the Borrowers, shall
provide, periodically at the request of the Agent or the Requisite Lenders and
in any event no less frequently than the fifteenth (15th) day of each month
beginning August 15, 1998, a report with respect to the Eligible Inventory and
Eligible Accounts included in the Borrowing Base, which report shall indicate
that the information set forth in the most recent Borrowing Base Certificate
delivered by Borrowers is accurate and complete in all material respects. Agent
expects to conduct periodic field audits of each Borrower and a comprehensive
field audit of such Borrower on a semi-annual basis. Each Borrower shall
cooperate fully with the Agent in the completion of each such audit.
(f) Holdings, on behalf of itself and each of the Borrowers, shall
provide to the Agent, promptly after sending or filing thereof, copies of all
reports and communications which Holdings sends to its security holders, and
copies of all reports and registration statements which Holdings files with the
SEC.
<PAGE>
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(g) Holdings, on behalf of itself and each of the Borrowers, shall
provide to the Agent as soon as possible, and in any event within fifteen (15)
days after a Management Officer knows or has reason to know that any Termination
Event with respect to any Plan has occurred, a statement of the chief financial
officer or treasurer of Holdings describing such Termination Event and the
action which such Borrower proposes to take with respect thereto.
(h) Holdings, on behalf of itself and each of the Borrowers, shall
provide to the Agent as soon as possible, and in any event within five (5) days
after the occurrence of a Default or Event of Default, continuing on the date of
such statement, a statement of the chief financial officer or treasurer of
Holdings setting forth the details of such Default or Event of Default, and the
action which Borrowers propose to take with respect thereto.
(i) If (and on each occasion that) any of the following events
shall occur:
(i) any Loan Document shall at any time be terminated,
canceled or rescinded for any reason whatever; or
(ii) any action at law, suit in equity or other legal
proceeding shall at any time be commenced or threatened in writing by any
Person (A) to terminate, cancel or rescind any Loan Document, or (B) to
enforce any other Person's performance or observance of or compliance with
any covenants, agreements or obligations under any Loan Document; or
(iii) any Person which is a party to or otherwise bound by
any Loan Document shall fail or refuse to perform, comply with or observe
or shall otherwise breach any one or more of the material covenants,
agreements or obligations under such Loan Document;
then Borrowers will promptly (and, in any event, within five (5) Business Days)
after Borrowers shall have first become aware of the occurrence of any such
event, furnish to Agent written notice setting forth brief particulars thereof.
(j) Holdings, on behalf of itself and each of the Borrowers, shall
provide the Agent with the following additional reports:
(i) as soon as available and in any event within a
reasonable time after the close of each fiscal year of Holdings copies of
the portions of any and all auditor's letters, if any, to the board of
directors of Holdings or to any other entity comprising Holdings regarding
the various accounting practices and control procedures used by any
Borrower;
<PAGE>
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(ii) promptly after a Borrower becomes aware of the
commencement thereof, notice of all actions, suits and proceedings before
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which may adversely affect a Borrower
and which are not fully covered by insurance without the applicability of
any co-insurance provisions or which have not been bonded and in which
either (A) the amount in controversy exceeds One Hundred Thousand and
00/100 Dollars ($100,000.00) for any single proceeding or Five Hundred
Thousand and 00/100 Dollars ($500,000.00) in the aggregate or (B) would
cause a Material Adverse Effect;
(iii) as soon as practicable after becoming aware of a claim
by any Person that a Borrower is in default under any agreement entered
into in connection with Indebtedness for Borrowed Money in excess of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), notice of any such
claim or default;
(iv) notice of any change in the conduct of the business,
prospects or financial condition of a Borrower promptly upon such Borrower
becoming aware of any such change which would have a Material Adverse
Effect;
(v) notice of any release of Hazardous Substances on the
Real Estate that is in material violation of Environmental laws or would
require remediation pursuant to applicable federal or state law or of any
notification having been filed with regard to a release of Hazardous
Substances on or into Real Estate under the Federal Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section
9601, et seq., or the Federal Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., or any other applicable Environmental Law.
Such notice shall indicate the steps the responsible Borrower has or will
take to remediate all hazardous environmental conditions if any such steps
are required of it by applicable Environmental Law and the estimated costs
of such remediation; and
(vi) if (and on each occasion that) any event shall at any
time occur or any condition shall at any time develop which constitutes a
Default or an Event of Default, then, promptly (and, in any event, within
five (5) Business Days) after a Borrower shall have first become aware of
the occurrence or development of any such event or condition, such Borrower
will furnish or cause to be furnished to Agent a written notice specifying
the nature and the date of the occurrence of such event or (as the case may
be), the nature and the period of existence of such condition and what
action such Borrower is taking or proposes to take with respect thereto.
<PAGE>
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(k) Each Borrower shall also provide the Agent with such other
information relating to any Borrower (including, without limitation, any
Employee Benefit Plan) as the Agent may from time to time reasonably request.
To the extent the Agent is obligated to do so by applicable law, rule or
regulation, it may deliver to any regulatory body having jurisdiction over it,
copies of the reports and other information provided by Borrowers to the Agent
pursuant to this Section 6.1.
Section 6.2 MAINTENANCE OF PROPERTY; AUTHORIZATION; INSURANCE.
(a) Each Borrower covenants to keep and maintain all of its
Property in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time to make, or use all reasonable legal remedies to
cause to be made, all proper repairs, renewals or replacements, betterments and
improvements thereto so that the business carried on in connection therewith may
be properly and advantageously conducted at all times;
(b) At their own cost and expense, Borrowers shall obtain and
maintain during the term of this Agreement (i) insurance against loss,
destruction or damage to their properties as Agent may reasonably require from
time to time to fully protect the Agent's and Lenders' interests in the
Collateral; (ii) minimum flood insurance as required by FEMA or any other
government agency or when required by federal, state or local law, statute,
regulation or ordinance and as may be reasonably required by Agent and Lenders;
and (iii) insurance against public liability and third party property damage,
with such insurance companies, in such amounts and covering such risks as are at
all times reasonably satisfactory to Agent and naming Agent for the benefit of
Lenders as mortgagee, loss payee and additional insured as its interests may
appear. Borrowers agree to deliver to Agent upon request insurance certificates
or policies evidencing compliance with the above requirements. Each Borrower
covenants, warrants and represents that it will not do any act or voluntarily
suffer or permit any act to be done whereby any insurance required hereunder
shall or may be suspended, impaired or defeated. In the event that any item or
Collateral shall be lost, destroyed or irreparably damaged from any cause
whatsoever during the term hereof, Borrowers agree to proceed diligently and
cooperate fully with Agent and Lenders in the recovery of any and all proceeds
of insurance applicable thereto, and the carriers named therein are hereby
directed by Borrowers to make payment for such loss to Agent, on behalf of the
Lenders, and not to Borrowers and Lenders jointly. If any insurance losses are
paid by check, draft or other instrument payable to Borrowers and Agent and
Lenders jointly, Agent may endorse the names of Borrowers thereon and do such
other things as it may deem advisable to reduce the same to cash. Provided
Borrowers are not in Default in any of their Obligations to Agent or Lenders
under any of the Loan Documents, all loss recoveries received by Agent and
Lenders upon any such insurance shall be paid by Agent and Lenders to Borrowers
so long as such proceeds promptly are reinvested in such Borrower's business.
Should any Borrower then be in default in any of its obligations to Agent or
Lenders under any of
<PAGE>
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the Loan Documents, such cash resources may be applied and credited by Agent
and Lenders to any obligation, subject to Section 2.8(a). Borrowers further
covenant that each shall require that the insurer with respect to each such
insurance policy provide for thirty (30) days' advance written notice to
Agent of any cancellation or termination of, or other change of any nature
whatsoever in, the coverage provided under any such policy.
Section 6.3 KEY MAN LIFE INSURANCE. Holdings shall obtain, within
forty-five (45) days after the Closing Date, and maintain key man life
insurance policies covering William B. Adams in an amount not less than Five
Million and 00/100 Dollars ($5,000,000.00), and Holdings shall maintain such
insurance in full force and effect until the Loans have been paid in full and
all financing agreements among Borrowers, Agent and the Lenders related
thereto have been terminated. Holdings shall assign such policy to the Agent
for the benefit of itself and the Lenders pursuant to an assignment in form
and substance satisfactory to the Agent with respect to such policy.
Section 6.4 CORPORATE EXISTENCE. Each Borrower shall preserve and
maintain its existence as a corporation in its state of its incorporation on the
Closing Date and all of its rights, franchises and privileges as a corporation,
except where the failure to take such actions would not reasonably be expected
to have a Material Adverse Effect.
Section 6.5 INSPECTION RIGHTS. At any reasonable time, upon reasonable
notice, and from time to time, each Borrower shall permit the Agent or any
Lender, or any of their respective agents, representatives or current or
prospective participants in the Loan, to inspect the Collateral, to examine and
make copies of and abstracts from the records and books of account of, to visit
the properties of, any Borrower and to discuss the affairs, finances and
accounts of such Borrower with any of their officers, employees, agents or the
Accountants.
Section 6.6 PAYMENT OF TAXES AND CLAIMS. Each Borrower shall pay or
cause to be paid all taxes, assessments and other governmental charges
imposed upon its properties or assets or in respect of any of its franchises,
business, income or profits before any penalty or interest accrues thereon,
and all claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which
by law have become due and payable and which by law have become a lien or
charge upon any of its properties or assets, provided that (unless any
material item of property would be lost, forfeited or materially damaged as a
result thereof) no such charge or claim need be paid if the amount,
applicability or validity thereof is currently being contested in good faith
and if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor.
<PAGE>
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Section 6.7 COMPLIANCE WITH LAWS.
(a) Each Borrower will comply with all applicable federal, state
and local laws, rules, regulations and orders pertaining to the operation of its
business (except to the extent such non-compliance would not reasonably be
expected to have a Material Adverse Effect), paying before the same become
delinquent all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or its properties, and paying all lawful
claims which if unpaid might become a Lien upon any of its properties, except to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof.
(b) Each Borrower will promptly notify each Lender in the event
that such Borrower receives any notice, claim or demand from any governmental
agency which alleges that such Borrower is in material violation of any of the
terms of, or has materially failed to comply with any applicable order issued
pursuant to any federal, state or local statute regulating its operation and
business, including, but not limited to, the Occupational Safety and Health Act,
the Federal Comprehensive Environmental Response, Compensation and Liability Act
and the Resource Conservation and Recovery Act and the Federal Water Pollution
Control Act.
Section 6.8 NOTICE OF OTHER EVENTS. Immediately upon a Borrower first
becoming aware of any of the following occurrences, such Borrower will furnish
or cause to be furnished to Agent written notice with full particulars of
(i) the business failure, insolvency or bankruptcy of a Borrower; (ii) the
rescission, cancellation or termination, or the creation or adoption, of any
agreement or contract to which such Borrower is a party (but only to the extent
that the same would reasonably be expected to have a Material Adverse Effect)
PROVIDED, HOWEVER, Holdings shall not be required to provide Agent with a copy
of any notice of default from Encore Technologies, Inc. ("Encore") in which
Encore is claiming that Holdings is in default of its payment obligations under
that certain Settlement Agreement dated as of July 6, 1997 (as set forth on
Schedule 5.18) and the Management Officers, in good faith, believe that Holdings
has fully complied with such payment obligations; (iii) any labor dispute, any
attempt by any labor union or organization representatives to organize or
represent employees of any Borrower, or any unfair labor practices or
proceedings of the National Labor Relations Board with respect to such Borrower
(but only to the extent that the same would reasonably be expected to have a
Material Adverse Effect); or (iv) any defaults or events of default under any
agreement of such Borrower or any violations of any laws, regulations, rules or
ordinances of any governmental or regulatory body (but only to the extent that
the same would reasonably be expected to have a Material Adverse Effect).
Section 6.9 INSPECTIONS AND AUDITS. Each Borrower will, and will cause
each of its Subsidiaries to, at the expense of such Borrower, permit the Agent
and representatives appointed by
<PAGE>
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the Agent (including, without limitation, independent accountants, agents,
attorneys, and appraisers) at any time, upon reasonable notice, in the
Agent's sole discretion or at the discretion of the Required Lenders to visit
and inspect its property, including its books and records, its accounts
receivable and inventory, its facilities and its other business assets, to
conduct periodic field exams and/or appraisals and to make photocopies or
photographs thereof and to write down and record any information such
representative obtains and shall permit the Agent or its representatives to
investigate and verify the accuracy of information provided to the Lenders
and to discuss all such maters with the officers, employees and
representatives of such Person.
Section 6.10 PAYMENT OF INDEBTEDNESS. Borrowers will duly and punctually
pay or cause to be paid principal and interest on the Loans and all fees and
other amounts payable hereunder or under the Loan Documents in accordance with
the terms hereunder. Each Borrower shall pay all other Indebtedness (whether
existing on the date hereof or arising at any time thereafter) punctually in
accordance with trade practices or within any applicable period of grace except
to the extent that any such obligation is contested in good faith by proper
proceedings or such Borrower has provided Agent evidence that any Lien resulting
from the non-payment thereof has been bonded or with respect to which adequate
reserves have been set aside for the payment thereof.
Section 6.11 PAYMENT OF FEES.
(a) Borrowers shall pay to Agent for the ratable benefit of
Lenders, the Commitment Fee, which shall commence to accrue on the Closing Date,
in monthly installments in arrears with the first installment being due on
September 1, 1998, and the subsequent installments being due on the first
Business Day of each month thereafter until the Termination Date, at which time
all accrued amounts of the Commitment Fee shall be immediately due and payable.
Agent shall distribute the Commitment Fee to Lenders in accordance with each
Lender's Pro Rata Share.
(b) Borrowers shall pay to Agent the Audit Fee.
Section 6.12 PERFORMANCE OF OBLIGATIONS UNDER CERTAIN DOCUMENTS. Each
Borrower will duly and properly perform, observe and comply with all of its
agreements, covenants and obligations under this Agreement and each of the other
Loan Documents.
Section 6.13 GOVERNMENTAL CONSENTS AND APPROVALS.
(a) Each Borrower will obtain or cause to be obtained all such
approvals, consents, orders, authorizations and licenses from, give all such
notices promptly to, register, enroll or file all such agreements, instruments
or documents promptly with, and promptly take all such other action with respect
to, any governmental or regulatory authority, agency or official, or any
<PAGE>
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central bank or other fiscal or monetary authority, agency or official, as
may be required from time to time under any provision of any applicable law,
except, in any case, where the failure to do any of the foregoing, either
individually or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect.
(i) for the performance by such Borrower of any of its
agreements or obligations under the Notes, this Agreement or any of the
other Loan Documents or for the payment by such Borrower to the Agent at
its Head Office of any sums which shall become due and payable by such
Borrower to Agent or any Lender thereunder;
(ii) to ensure the continuing legality, validity, binding
effect or enforceability of the Notes or any of the other Loan Documents or
of any of the agreements or obligations thereunder of such Borrower; or
(iii) to continue the proper operation of the business and
operations of such Borrower.
(b) Each Borrower shall duly perform and comply with the terms and
conditions of all such approvals, consents, orders, authorizations and Licenses
and Permits from time to time granted to or made upon such Borrower (except to
the extent that a failure to do so would not reasonably be expected to have a
Material Adverse Effect).
Section 6.14 EMPLOYEE BENEFIT PLANS AND GUARANTEED PENSION PLANS. Each
Borrower will and will cause each of its ERISA Affiliates to (a) comply in all
material respects with all requirements imposed by ERISA and the Internal
Revenue Code of 1986, as amended, applicable from time to time to any of its
Guaranteed Pension Plans or Employee Benefit Plans, (b) make full payment when
due of all amounts which, under the provisions of Employee Benefit Plans or
under applicable law, are required to be paid as contributions thereto, (c) not
permit to exist any accumulated funding deficiency, whether or not waived, (d)
file on a timely basis all reports, notices and other filings required by any
governmental agency with respect to any of its Employee Benefit Plans, (e) make
any payments to Multiemployer Plans required to be made under any agreement
relating to such Multiemployer Plans, or under any law pertaining thereto, (f)
not amend or otherwise alter any Guaranteed Pension Plan if the effect would be
to cause the actuarial present value of all benefit commitments under each
Guaranteed Pension Plan to be less than the current value of the assets of such
Guaranteed Pension Plan allocable to such benefit commitments, (g) furnish to
all participants, beneficiaries and employees under any of the Employee Benefit
Plans, within the periods prescribed by law, all reports, notices and other
information to which they are entitled under applicable law, and (h) take no
action which would cause any of the Employee Benefit Plans to fail to meet any
qualification requirement imposed by the Internal Revenue Code of 1986, as
amended.
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As used in this Section 6.14, the term "accumulated funding deficiency" has
the meaning specified in Section 302 of ERISA and Section 412 of the Internal
Revenue Code, and the terms "actuarial present value", "benefit commitments"
and "current value" have the meaning specified in Section 4001 of ERISA.
Section 6.15 FURTHER ASSURANCES. Each Borrower will execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, any and all
such further assurances and other agreements or instruments, and take or cause
to be taken all such other action, as shall be reasonably requested by the Agent
from time to time in order to give full effect to any of the Loan Documents,
including, without, limitation, such additional Security Documents required by
Agent in accordance with Article 3.
Section 6.16 BORROWERS' DEPOSITORY ACCOUNTS. Borrowers shall concentrate
all of their bank and depository accounts with Provident, including without
limitation, all demand deposit, time deposit, concentration and zero balance
accounts except that Borrowers may maintain up to six (6) operating accounts
with local financial institution with balances less than $25,000.00 each, which
such amounts shall not be subject to Blocked Account Agreements, provided
Borrowers shall use their best efforts to maintain such accounts with one or
more of the Lenders. Such depository account concentrations and primary
depository accounts shall be established with Provident within one hundred
twenty (120) days of the Closing Date.
Section 6.17 USE OF PROCEEDS. Borrowers shall use all Loan proceeds
disbursed only in accordance with the purposes set forth in Section 2.9 of this
Agreement.
Section 6.18 YEAR 2000 COMPATIBILITY. Holdings has reviewed, or will
expeditiously review, its operations and those of its Subsidiaries with a view
to assessing whether its businesses, or the businesses of any of its
Subsidiaries, will be vulnerable to a Year 2000 Problem or will be vulnerable to
the effects of a Year 2000 Problem suffered by any of Holdings' or any of its
Subsidiaries' major commercial counterparties. Holdings shall take all actions
necessary and commit adequate resources to assure that its computer-based and
other systems (and those of all Subsidiaries) are able to effectively process
data, including dates before, on or after January 1, 2000, without experiencing
any Year 2000 Problem that could cause a Material Adverse Effect. At the
request of the Bank, Holdings will provide the Bank with assurances and
substantiations (including, but not limited to, the results of internal or
external audit reports prepared in the ordinary course of business) reasonably
acceptable to the Bank as to the capability of Holdings and its Subsidiaries to
conduct its and their businesses and operations before, on and after January 1,
2000 without experiencing a Year 2000 Problem causing a Material Adverse Effect.
Holdings represents and warrants that it has a reasonable basis to believe that
no Year 2000 Problem will cause a Material Adverse Effect.
<PAGE>
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ARTICLE 7
FINANCIAL COVENANTS
Each Borrower covenants with and warrants to Agent and each Lender that,
from and after the Closing Date and until all of the Obligations are paid and
satisfied in full except as otherwise expressly consented to in writing by the
Requisite Lenders (unless the context otherwise requires):
Section 7.1 SENIOR SECURED INDEBTEDNESS RATIO. Borrowers shall not
permit their ratio of Senior Secured Indebtedness to Consolidated EBITDA for
the Reference Period ending on each Computation Date to be greater than 2.25
to 1.00.
Section 7.2 INTEREST COVERAGE RATIO. On each Computation Date,
Borrowers shall not permit their ratio of Consolidated EBITDA to Consolidated
Cash Interest Expense to be greater than the ratio set forth opposite such
date for the relevant Reference Period:
<TABLE>
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
COMPUTATION DATE RATIO
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
<S> <C>
September 30, 1998, December 31, 1998 2.50 to 1.00
- ---------------------------------------------------------------------
March 31, 1999, June 30, 1999, September 3.00 to 1.00
30, 1999 and December 31, 1999
- ---------------------------------------------------------------------
March 31, 2000 and each Computation Date 3.50 to 1.00
thereafter
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
Section 7.3 TOTAL INDEBTEDNESS RATIO. Borrowers shall not permit
their ratio of Consolidated Indebtedness to Consolidated EBITDA for the
Reference Period ending on the dates set forth below to be greater than the
ratio set forth opposite such date:
<TABLE>
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
COMPUTATION DATE RATIO
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
<S> <C>
September 30, 1998 6.00 to 1.00
- ---------------------------------------------------------------------
December 31, 1998 4.00 to 1.00
- ---------------------------------------------------------------------
March 31, 1999, June 30, 1999, September 3.75 to 1.00
30, 1999 and December 31, 1999
- ---------------------------------------------------------------------
March 31, 2000 and each Computation Date 3.00 to 1.00
thereafter
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
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Section 7.4 FIXED CHARGE COVERAGE. Borrowers shall not permit their
ratio of Consolidated EBITDA to Consolidated Fixed Charges for the Reference
Period ending on the dates set forth below to be less than the ratio set
forth opposite such date:
<TABLE>
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
COMPUTATION DATE RATIO
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
<S> <C>
September 30, 1998 0.55 to 1.00
- ---------------------------------------------------------------------
December 31, 1998 1.05 to 1.00
- ---------------------------------------------------------------------
March 31, 1999, June 30, 1999, September 1.25 to 1.00
30, 1999 and December 31, 1999
- ---------------------------------------------------------------------
March 31, 2000 and each Computation Date 1.50 to 1.00
thereafter
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
Section 7.5 CURRENT RATIO. Borrowers shall not permit their Current
Ratio on each Computation Date to be less than 1.50 to 1.00.
Section 7.6 LIMITATION ON CAPITAL EXPENDITURES. Borrowers on a
Consolidated basis shall not make or incur any Capital Expenditures in the
aggregate during any of the periods set forth below in excess of the maximum
amount set forth below for such period:
<TABLE>
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
MAXIMUM AMOUNT OF CAPITAL
PERIOD EXPENDITURES
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
<S> <C>
January 1, 1998 through December 31, 1998 $17,500,000
- --------------------------------------------------------------------------
January 1, 1999 through December 31, 1999 $17,500,000
- --------------------------------------------------------------------------
January 1, 2000 through December 31, 2000
and each Computation Date thereafter $17,500,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
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To the extent actual Capital Expenditures for any such period shall be less
than the maximum amount set forth above for such period, the difference shall be
available for excess Capital Expenditures in the next immediately succeeding
period only (to be applied as though such carryover amount were the last dollar
spent in such succeeding period).
If a Borrower enters into a Capital Lease with respect to fixed assets, for
purposes of calculating Capital Expenditures under this Section, the aggregate
amount of all payments due for the entire term of such Capital Lease (excluding,
however, the interest portion of capitalized lease payments or the interest
portion of any other permitted Indebtedness) shall be considered expended in
full on the date that such Borrower enters into such Capital Lease.
ARTICLE 8
NEGATIVE COVENANTS OF BORROWERS
Each Borrower covenants with and warrants to Agent and each Lender that
from and after the Closing Date and until all of the Obligations are paid and
satisfied in full except as otherwise expressly consented to in writing by the
Requisite Lenders:
Section 8.1 LIMITATION ON NATURE OF BUSINESS. No Borrower will at any
time make any material change in the nature of its business as carried on at the
date hereto or undertake, conduct or transact any business in a manner
prohibited by applicable law. No Borrower shall create, capitalize or acquire
any Subsidiary after the Closing Date except in connection with Permitted
Acquisitions.
Section 8.2 LIMITATION ON FUNDAMENTAL CHANGES. No Borrower nor any
Subsidiary of a Borrower shall at any time consolidate with or merge into or
with any Person or Persons or enter into or undertake any plan or agreement of
consolidation or merger with any Person except in connection with Permitted
Acquisitions. No Borrower nor any Subsidiary of a Borrower shall liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution), or convey,
lease, sell, transfer or otherwise dispose of, in one transaction or series of
transactions, all or substantially all of Borrowers' or any such Subsidiary's
business or property whether now or hereafter acquired except if such
transaction or series of transactions will not cause a Material Adverse Effect.
Neither Borrower nor any Subsidiary shall make or permit any amendment or
modification to its charter documents or by-laws.
Section 8.3 RESTRICTED PAYMENTS. Borrowers will not and will not permit
any of their Subsidiaries to directly or indirectly declare, order, pay, make or
set apart any sum for any Restricted Payments except that:
<PAGE>
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(a) Borrowers may make the scheduled periodic payments of interest
under the Subordinated Debt Documents (as such Agreement is in effect on the
Closing Date) in accordance with the terms thereof, but subject to the
subordination provisions contained in Section 13 of such Note and Warrant
Purchase Agreement or otherwise as approved in writing by Requisite Lenders;
(b) So long as no Default or Event of Default exists, Subsidiaries
of Borrowers may make Restricted Payments with respect to their common stock;
(c) Borrowers may make payments pursuant to stock repurchase plans
approved by the Board of Directors of Holdings not to exceed One Million and
00/100 Dollars ($1,000,000.00) or twenty-five percent (25%) of Net Income of
Holdings from and after the Closing Date, whichever is greater; at the time of
such repurchase, no Event of Default shall have occurred and no Default could
reasonably be expected to occur as a result of such repurchase;
(d) Borrowers may make payments with respect to Earn Out
Obligations described in Clause (a) of the definition of Earn Out Obligations;
(e) Borrowers may make payments on Acquired Indebtedness,
provided, however, that so long as an Event of Default shall have occurred and
be continuing, Borrowers will not make any payments with respect to Earn Out
Obligations described in clause (b) of the definition of Earn Out Obligations
other than as permitted under clause (f) below;
(f) Borrowers may make payments or issuances of Capital Stock for
application against Earn Out Obligations;
(g) Holdings may issue options to acquire Capital Stock of
Holdings, and Capital Stock pursuant to said options, to consultants, employees,
officers and directors of Holdings and its Subsidiaries (provided such issuances
do not violate the terms of Section 8.4 hereof); and
(h) Borrowers may make payments with respect to Capital Leases
existing as of the date hereof and listed on Schedule 5.7 and with respect to
other Capital Leases not prohibited in this Agreement.
Section 8.4 MANAGEMENT COMPENSATION. Neither Borrowers nor any
Subsidiary shall pay or enter into an agreement to pay any Management
Shareholder yearly Compensation in excess of the reasonable amounts set by
the Board of Directors of Holdings or a compensation committee thereof,
consistent with past procedures of such Board or committee. As used herein,
"Compensation" shall mean all forms of direct and indirect remuneration and
include, without limitation, salaries, commissions, bonuses, securities,
property, insurance benefits, personal benefits
<PAGE>
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and contingent forms of remuneration. Neither Borrowers nor any Subsidiary
shall pay or obligate themselves to pay, directly or indirectly, any
management fee or similar compensation to any Person other than officers and
employees of a Borrower in the ordinary course of business.
Section 8.5 LIMITATION ON DISPOSITION OF ASSETS.
(a) Neither Borrowers nor any of their Subsidiaries will sell,
lease, transfer or otherwise dispose of any of their properties, business or
assets ("Asset Dispositions"), or grant any Person an option to acquire any such
property, business or assets except for (A) Specified Dispositions, (B) the sale
of the San Diego Property (or rights under the San Diego Property Acquisition
Agreement), (C) bona fide sales of Inventory to customers in the ordinary course
of business and dispositions of obsolete equipment not used or useful in the
business, and (D) Asset Dispositions which satisfy the following conditions:
(i) the market value of assets sold or otherwise disposed
of in any single transaction or series of related transactions does not
exceed Fifty Thousand and 00/100 Dollars ($50,000.00) and the aggregate
market value of assets sold or otherwise disposed of in any Fiscal Year
does not exceed One Hundred Thousand and 00/100 Dollars ($100,000.00);
(ii) the consideration received is at least equal to the
fair market value of such assets;
(iii) if the consideration received is not solely in cash,
all non-cash consideration is pledged to the Agent pursuant to documents
satisfactory to the Agent so that the Agent has received a first priority
perfected security interest in such non-cash consideration to secure the
Obligations;
(iv) the Net Proceeds of such Asset Disposition are applied
as required by Section 2.6(c);
(v) after giving effect to the sale or other disposition of
the assets included within the Asset Disposition and the repayment of
Indebtedness with the proceeds thereof, Borrowers are in compliance on a
pro forma basis with the covenants set forth in Article 7, recomputed for
the most recently ended month for which information is available and is in
compliance with all other terms and conditions contained in this Agreement;
and
(vi) no Default or Event of Default shall result from such
sale or other disposition.
<PAGE>
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(b) Except as permitted elsewhere in this Agreement, Borrowers
will not and will not permit any of their Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any Capital Stock in
any Borrower or any such Subsidiaries, including warrants, rights or options to
acquire shares or other equity securities of any of their Subsidiaries, except
(i) to any Borrower or another Subsidiary of any Borrower, (ii) Capital Stock of
Holdings paid as purchase consideration to sellers in connection with Permitted
Acquisitions, (iii) Capital Stock of Holdings delivered for application against
Earn Out Obligations, or (iv) Capital Stock of Holdings (and options or warrants
to acquire Capital Stock of Holdings) issued to consultants, employees, officers
and directors of Holdings and its Subsidiaries (provided such issuances do not
violate the terms of Section 8.4 hereof).
Section 8.6 LIMITATION ON INVESTMENTS. No Borrower shall at any time
make any Investments of any kind whatever in any Person or Persons;
EXCLUDING, HOWEVER from the operation of the foregoing provisions of this
Section 8.6:
(a) Property to be used in the ordinary course of business of such
Borrower;
(b) Assets arising from the sale of goods and services in the
ordinary course of business of such Borrower;
(c) Investments in cash and Cash Equivalents;
(d) Investments made in connection with the consummation of
Permitted Acquisitions, provided that (i) after giving affect to the payment of
any Cash Acquisition Consideration provided in connection with such Permitted
Acquisition, the aggregate Cash Acquisition Consideration provided in connection
with all Permitted Acquisitions theretofore affected in such calendar year does
not exceed Five Million and 00/100 Dollars ($5,000,000.00), (ii) no Event of
Default shall have occurred and is continuing at the time of the consummation of
such Permitted Acquisition and (iii) no Default could reasonably be expected to
occur or result from the consummation of such Permitted Acquisition, taking into
consideration the Cash Acquisition Consideration and the pro forma effect of
such Permitted Acquisition ; and
(e) The acquisition of the San Diego Property on or before
December 31, 1998 in accordance with the San Diego Property Acquisition
Agreement.
Section 8.7 ACQUISITION OF MARGIN SECURITIES. No Borrower shall own,
purchase or acquire (or enter into any contract to purchase or acquire) any
"margin security" as defined by any regulation of the Federal Reserve Board
as now in effect or as the same may hereafter be in effect unless, prior to
any such purchase or acquisition or entering into any such contract, Agent
and each
<PAGE>
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Lender shall have received an opinion of counsel satisfactory to Agent and each
Lender to the effect that such purchase or acquisition will not cause this
Agreement or the Notes to be in violation of Regulation U, T, X or any other
regulation of the Federal Reserve Board then in effect.
Section 8.8 LIMITATION ON MORTGAGES, LIENS AND ENCUMBRANCES. No
Borrower shall at any time create, assume, incur or permit to exist, any
mortgage, Lien or other encumbrance in respect of any of its Property,
assets, income or revenues of any character, whether heretofore or hereafter
acquired by it; EXCLUDING, HOWEVER, from the operation of the foregoing
provisions of this Section 8.8 (each a "PERMITTED LIEN"):
(a) Any Liens for taxes, assessments or governmental charges or
claims the payment of which is not at the time required by Section 6.7 of this
Agreement;
(b) Any statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law incurred in
the ordinary course of business for sums not yet delinquent;
(c) Any Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security;
(d) Any easements, rights-of-way, encroachments, leases,
royalties, restrictions and other similar title exceptions or encumbrances
provided such do not, in the aggregate, materially interfere with the ordinary
conduct of the business of a Borrower or materially reduce or impair the value
of the Real Estate so encumbered;
(e) Any interest or title of a lessor under any Material Lease
listed on Schedule 5.7 annexed to this Agreement;
(f) Liens granted to Agent for the benefit of Lenders and the
additional existing mortgages, Liens and encumbrances of Borrowers, listed and
described, but only to the extent indicated, on Schedule 8.8(f) annexed to this
Agreement;
(g) The Indebtedness of a Borrower under or in respect to any
conditional sales agreements, security agreements, equipment leases in the
nature of title retention agreements or security agreements or other similar
title retention agreements entered into by a Borrower on, prior to or after the
date of this Agreement in order to secure the payment of the purchase price of
any
<PAGE>
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equipment purchased, leased or otherwise acquired by such Borrower for use in
the ordinary course of its business; PROVIDED, HOWEVER, that such Borrower
is, by the terms of each of Sections 8.12 or 8.13 hereof, expressly permitted
to enter into such agreement or lease;
(h) Precautionary UCC filings made by lessors in connection with
Capital Leases;
(i) Liens listed on Schedule 5.9;
(j) Liens securing Acquired Indebtedness provided that such Liens
relate only to the assets acquired and such Liens do not encumber any other
assets of Borrower; and
(k) Liens on assets acquired in connection with Permitted
Acquisitions closed prior to the Closing Date to secure any unpaid Cash
Acquisition Consideration or Earn Out Obligations, and Liens on Capital Stock of
Holdings to secure Earn Out Obligations arising in connection with Permitted
Acquisitions closed prior to the Closing Date.
Section 8.9 NO ADDITIONAL NEGATIVE PLEDGES. No Borrower will create or
otherwise cause or suffer to exist or become effective, directly or indirectly,
(a) any prohibition or restriction (including any agreement to provide equal or
ratable security to any other Person in the event a Lien is granted to or for
the benefit of the Agent) on the creation or existence of any Lien upon the
assets of a Borrower, or (b) any contractual obligation which may restrict or
inhibit the Agent's rights or ability to sell or otherwise dispose of the
Collateral or any part thereof after the occurrence of an Event of Default (each
a "Negative Pledge"); except, however, Negative Pledge restrictions incurred in
connection with Capital Leases or Acquisition Indebtedness, but in each case
only so long as the Negative Pledge applies only to the property subject to the
Capital Lease or asset acquired pursuant to the Permitted Acquisition in which
such Acquisition Indebtedness was incurred.
Section 8.10 NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO BORROWERS.
Except as provided herein, Borrowers will not and will not permit any of their
Subsidiaries directly or indirectly to create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any such Subsidiaries to: (1) pay dividends or make any other
distribution on any of such Subsidiary's Capital Stock owned by Borrowers or any
Subsidiaries of Borrowers; (2) subject to subordination provisions, pay any
indebtedness owed to Borrowers or any other Subsidiary; (3) make loans or
advances to Borrowers or any other Subsidiary; or (4) transfer any of their
properties or assets to Borrowers or any other Subsidiary.
Section 8.11 LIMITATION ON INDEBTEDNESS. Except for (i) the existing
indebtedness listed on Schedules 5.9 and 8.11, (ii) Acquired Indebtedness,
(iii) Indebtedness incurred in connection with a Capital Lease of a Borrower
as permitted herein (including without limitation
<PAGE>
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Capital Leases existing as of the date hereof and listed on Schedule 5.7),
(iv) Indebtedness outstanding under the Subordinated Debt Documents, no
Borrower shall at any time create, incur or assume, or become liable
(directly or indirectly) in respect of, any Indebtedness for Borrowed Money,
other than Indebtedness arising under this Agreement and the other Loan
Documents, (v) Earn Out Obligations treated as Indebtedness in accordance
with the definition of Indebtedness or (vi) Indebtedness incurred in
connection with Permitted Acquisitions (so long as any such Indebtedness
incurred under this clause (vi) does not result in a violation of the terms
of Article 7 or Section 8.6(d)
Section 8.12 LIMITATION ON SALES AND LEASEBACKS. No Borrower shall at
any time, directly or indirectly, sell and thereafter lease back any of its
respective assets or Property except the sale and leaseback of the San Diego
Property which shall occur, if at all, by December 31, 1998.
Section 8.13 TRANSACTIONS WITH AFFILIATES. Except as otherwise permitted
herein, no Borrower shall at any time enter into or participate in any
agreements or transactions of any kind with any Affiliates of any Borrower
(except that a Borrower shall be permitted to enter into such agreements or
transaction with any other Borrower), except (i) agreements or transactions that
produce annual payments of less than Twenty Thousand and 00/100 Dollars
($20,000.00) individually or One Hundred Thousand and 00/100 Dollars
($100,000.00) in the aggregate; or (ii) agreements or transactions entered into
in the ordinary course of business upon fair and reasonable terms no less
favorable to Borrowers than could be obtained in a comparable arms-length
transaction with an unaffiliated Person. Notwithstanding the foregoing, nothing
contained in this Section 8.13 shall preclude transactions between Holdings and
its Subsidiaries the Capital Stock of which has been pledged to Agent.
Section 8.14 CHANGES RELATING TO SUBORDINATED INDEBTEDNESS. Borrowers
will not and will not permit any of their Subsidiaries to change or amend the
terms of the Subordinated Debt Documents that would amend or modify any
provisions of Articles 11 or 13 (a) accelerate the amount or the time of any
prepayment or payment of the principal amount of Indebtedness outstanding under
the Subordinated Debt Documents; or (b) provide for per annum interest rates
payable on the Indebtedness outstanding under the Subordinated Debt Document at
any time in excess of 2.00% over the per annum interest rates that would
otherwise be payable on such Indebtedness at such time; or (c) that would amend
or modify the covenants or events of default contained in the Subordinated Debt
Documents so that, taken as a whole, they would impose upon the Borrowers or
their assets, taken as a whole, materially more stringent obligations or
otherwise subject them to a materially greater degree of recourse than provided
thereunder as of the date hereof.
Section 8.15 NO ADDITIONAL BANK ACCOUNTS. Except as provided in
Section 6.16, no Borrower shall open, maintain or otherwise have any bank
accounts.
<PAGE>
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ARTICLE 9
EVENTS OF DEFAULT AND REMEDIES
Section 9.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an "Event of Default":
(a) PRINCIPAL AND INTEREST. Any principal shall not be paid when
due, or any interest or any other sum payable under this Agreement or the Notes
shall not be paid within three (3) days after the same is due and payable.
(b) REPRESENTATION AND WARRANTIES. Any representation or
warranty at any time made by or on behalf of a Borrower in this Agreement, any
Loan Document or in any certificate, written report or statement furnished to
Agent or any Lender pursuant hereto or thereto shall prove to have been untrue,
incorrect or breached in any material respect on or as of the date on which such
representation or warranty was made or deemed to have been made or repeated;
(c) CERTAIN COVENANTS. Any Borrower shall fail to comply with
the covenants set forth in Sections 6.2(b), 6.4, Article 7 or Article 8, and,
in the case of any such covenant which is capable or cure or remedy, such
non-compliance or breach has continued for a period of ten (10) days;
(d) OTHER COVENANTS. Any Borrower shall fail to perform, comply
with or observe or shall otherwise breach any other covenant or agreement
contained in this Agreement and such failure or breach shall continue for more
than thirty (30) days after the earlier of the date on which Borrowers shall
have first become aware of such failure or breach or Agent or any Lender shall
have first notified such Borrower of such failure or breach, unless such
Borrower is continuing to undertake reasonable efforts to cure such default or
breach and for a period of sixty (60) days thereafter, if such default is
capable of cure within such additional period;
(e) LOAN DOCUMENTS. The breach or a failure of a Borrower to
perform, comply with or observe any Loan Document, other than this Agreement, or
any other agreement, document, instrument or certificate executed on delivered
in connection with this Agreement and if such failure shall continue for more
than fifteen (15) days after the earlier of the date on which a Borrower shall
have first become aware of such failure or breach or Agent or any Lender shall
have first notified a Borrower of such failure or breach, or any Loan Document
shall cease to be legal, valid, binding or enforceable in accordance with the
terms thereof;
<PAGE>
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(f) LITIGATION. Any action at law, suit in equity or other legal
proceeding to amend, cancel, revoke or rescind any Loan Document shall be
commenced by or on behalf of a Borrower or any other Person bound thereby, or by
any court or any other governmental or regulatory authority or agency of
competent jurisdiction; or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination that,
or shall issue a judgment, order, decree or ruling to the effect that, any one
or more of the material covenants, agreements or obligations of a Borrower under
any one or more of the Loan Documents are illegal, invalid or unenforceable in
accordance with the terms thereof;
(g) DEFAULT BY BORROWERS UNDER OTHER AGREEMENTS. Any default by
any Borrower or any event of default shall occur under any agreement, instrument
or contract relating to outstanding Indebtedness individually or in the
aggregate in excess of One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00) to which such Borrower is at any time a party or by which such
Borrower is at any time bound or affected, or any Borrower shall fail to perform
or observe any of its agreements or covenants thereunder, and such default,
event of default or failure shall continue for such period of time as would
permit, or as would have permitted (assuming the giving of appropriate notice),
holders of such Indebtedness to accelerate the maturity of all or any part of
such Indebtedness under any such document;
(h) INSOLVENCY. Any action shall be taken by or on behalf of a
Borrower for the termination, winding up, liquidation or dissolution of such
Borrower; or a Borrower shall make an assignment for the benefit of creditors,
become insolvent or be unable to pay its debts as they mature; or a Borrower
shall file a petition in voluntary liquidation or bankruptcy; or a Borrower
shall file a petition or answer or consent seeking the reorganization of such
Borrower, or the readjustment of any of the Indebtedness of such Borrower; or a
Borrower shall commence any case or proceeding under applicable insolvency or
bankruptcy laws now or hereafter existing; or a Borrower shall consent to the
appointment of any receiver, administrator, custodian, liquidator or trustee of
all or any part of the Property or assets of such Borrower; or any corporate
action shall be taken by a Borrower for the purpose of effecting any of the
foregoing; or by order or decree of any court of competent jurisdiction, a
Borrower shall be adjudicated as bankrupt or insolvent; or any petition for any
proceedings in bankruptcy or liquidation or for the reorganization or
readjustment of Indebtedness of such Borrower shall be filed, or any case or
proceeding shall be commenced, under any applicable bankruptcy or insolvency
laws now or hereafter existing, against such Borrower, or any receiver,
administrator, custodian, liquidator or trustee shall be appointed for a
Borrower or for all or any part of the Property of a Borrower and such case or
proceeding shall remain undismissed for a period of sixty (60) days, or any
order for relief shall be entered in a proceeding with respect to such Borrower
under the provisions of the United States Bankruptcy Code, as amended;
<PAGE>
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(i) JUDGMENT. Any judgment, order or decree for the payment of
money in excess of Fifty Thousand and 00/100 Dollars ($50,000.00), which is not
insured against, shall be rendered against a Borrower, and such Borrower shall
not discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof, within the period of time
provided therefor under the applicable law in the jurisdiction in which such
judgment was rendered, but in any event within forty-five (45) days after the
date of the entry thereof;
(j) ERISA. (i) Any Termination Event shall occur and as of the
date thereof or any subsequent date, the sum of the various liabilities of a
Borrower and its ERISA Affiliates (such liabilities to include, without
limitation, any liability to the Pension Benefit Guaranty Corporation (or any
successor thereto) or to any other party under Sections 4062, 4063, or 4064 of
ERISA or any other provision of law and to be calculated after giving effect to
the tax consequences thereof) resulting from or otherwise associated with such
event exceeds Fifty Thousand and 00/100 Dollars ($50,000.00); or a Borrower or
any of its ERISA Affiliates as an employer under any Multiemployer Plan shall
have made a complete or partial withdrawal from such Multiemployer Plans and the
plan sponsors of such Multiemployer Plans shall have notified such withdrawing
employer that such employer has incurred a withdrawal liability requiring a
payment in an amount exceeding Fifty Thousand and 00/100 Dollars ($50,000.00);
(k) CHANGE OF CONTROL. Any Change of Control shall occur;
(l) MATERIAL ADVERSE CHANGE. Any event or occurrence which has a
Material Adverse Effect.
Section 9.2 TERMINATION OF COMMITMENTS AND ACCELERATION OF OBLIGATIONS.
If any one or more of the Events of Default shall at any time occur:
(a) The Agent may, and upon the request of the Requisite Lenders,
shall, by giving notice to Borrowers, immediately terminate the Credit
Commitments of all of the Lenders in full and each Lender shall thereupon be
relieved of all of its obligations to make any Loans thereunder; except that if
there shall be an Event of Default under Section 9.1(h) hereof, the Credit
Commitments of all of the Lenders shall automatically terminate in full, and
each Lender shall thereupon be relieved of all of its obligations to make any
Loans hereunder.
(b) The Agent may, and upon the request of the Requisite Lenders,
shall, by giving notice to Borrowers (in this Agreement and in the other Loan
Documents called a "Notice of Acceleration"), declare all of the Obligations,
including the entire unpaid principal of the Notes, all of the unpaid interest
accrued thereon, and all other sums (if any) payable by Borrowers under this
Agreement, the Notes, or any of the other Loan Documents, to be immediately due
and payable;
<PAGE>
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except that if there shall be an Event of Default under Section 9.1(h), all of
the Obligations, including the entire unpaid balance of all of the Notes, all of
the unpaid interest accrued thereon and all other sums (if any) payable by
Borrowers under this Agreement, the Notes or any of the other Loan Documents
shall automatically and immediately be due and payable without notice to
Borrowers. Thereupon, all of such Obligations which are not already due and
payable shall forthwith become and be absolutely and unconditionally due and
payable, without any further notice or any other formalities of any kind, all of
which are hereby expressly and irrevocably waived.
Section 9.3 REMEDIES. From and after the occurrence of an Event of
Default which is continuing and which has not been waived by the Agent at the
direction of the Requisite Lenders, the Agent may, and, upon the request of the
Requisite Lenders, shall:
(a) Subject always to the provisions of Section 10.9 hereof,
proceed to protect and enforce all or any of its or the Lenders' rights,
remedies, powers and privileges under this Agreement, the Notes or any of the
other Loan Documents by action at law, suit in equity or other appropriate
proceedings, whether for specific performance of any covenant contained in this
Agreement, any Note or any of the other Loan Documents, or in aid of the
exercise of any power granted to Agent herein or therein. In the event the
Agent shall fail or refuse to so proceed, the Requisite Lenders shall be
entitled to take such action as they shall deem appropriate to enforce their
rights hereunder and under the other Loan Documents.
(b) Remove from any premises where same may be located any and all
Inventory or any and all documents, instruments, files and records (including
the copying of any computer records), and any receptacles or cabinets containing
same, relating to the Accounts of the Borrowers, or the Agent may use (at the
expense of the Borrowers) such of the supplies or space of the Borrowers, at any
Borrowers' place of business or otherwise, as may be necessary to properly
administer and control the Accounts of the Borrowers or the handling of
collections and realizations thereon;
(c) Bring suit, in the name of any Borrower or the Lenders, and
generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any such
Accounts and issue credits in the name of any Borrower or the Lenders;
(d) Sell, assign and deliver such Inventory and Accounts and any
returned, reclaimed or repossessed merchandise, with or without advertisement,
at public or private sale, for cash, on credit or otherwise, at the Agent's sole
discretion, and any Lender may bid-or become a purchaser at any such sale, free
from any right of redemption, which right is hereby expressly waived by the
Borrowers;
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(e) (i) notify the Account Debtor on any Account or Chattel Paper
of Lenders' security interest therein; (ii) demand that monies due or to become
due be paid directly to Agent for the account of Lenders; (iii) open Borrowers'
mail and to collect any and all amounts due Borrowers from account debtors; (iv)
enforce payment of the accounts receivable or Chattel Paper by legal proceedings
or otherwise; (v) exercise all of Borrowers' rights and remedies with respect to
the collection of the accounts receivable or Chattel Paper; (vi) settle, adjust,
compromise, modify, extend or renew the accounts receivable or Chattel Paper;
(vii) settle, adjust or compromise any legal proceedings brought to collect the
accounts receivable or Chattel Paper; (viii) to the extent permitted by
applicable law, sell or assign the accounts receivable or Chattel Paper upon
such terms, for such amounts and at such time or times as Agent deems advisable;
(ix) grant waivers or indulgences with respect to, accept partial payments from,
discharge, release, surrender, substitute any customer security for, make
compromise with or release, any other party liable on, any account receivable or
Chattel Paper; (x) take control, in any manner, of any item of payment or
proceeds from any account debtor; (xi) prepare, file, and sign Borrowers' name
on any proof of claim in Bankruptcy or similar document against any account
debtor; (xii) prepare, file, and sign the appropriate Borrower's name on any
notice of lien, assignment or satisfaction of lien or similar document in
connection with the accounts receivable or Chattel Paper; (xiii) endorse the
name of the appropriate Borrower upon any Chattel Paper, document, instrument,
invoice, freight bill, bill of lading or similar document or agreement relating
to the accounts receivable or Chattel Paper or inventory; (xiv) use the
appropriate Borrowers' stationery and sign the appropriate Borrowers' name to
verifications of the accounts receivable or Chattel Paper and notices thereof to
account debtors; and (xv) use the information recorded on or contained in any
data processing Equipment or computer hardware or software relating to the
accounts receivable, Chattel Paper, inventory, or proceeds thereof to which such
Borrower has access; and
(f) foreclose the security interests created pursuant to the Loan
Documents by any available judicial procedure, or take possession of any or all
of the Inventory and Equipment of any Borrower without judicial process and
enter any premises where any such Inventory and Equipment may be located for the
purpose of taking possession of or removing the same.
The Agent shall have the right, without notice of advertisement, to sell,
lease, or otherwise dispose of all or any part of the Inventory and Equipment of
any Borrower, whether in its then condition or after further preparation or
processing, in the name of such Borrower, or the Lenders, or in the name of such
other party as the Agent may designate, either at public or private sale or at
any broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such other terms and conditions as the
Agent in its sole discretion may deem advisable, and the Agent or any other
Lender shall have the right to purchase at any such sale. If any such Inventory
and Equipment shall require rebuilding, repairing, maintenance or preparation,
the Agent shall have the right, at its option, to do such of the aforesaid as is
necessary, for the
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purpose of putting such Inventory and Equipment in such saleable form as the
Agent shall deem appropriate. The Borrowers agree, at the request of the Agent,
to assemble such Inventory and Equipment and to make it available to the Agent
at places which the Agent shall reasonably select, whether at the premises of
such Borrower or elsewhere, and to make available to the Agent the premises and
facilities of such Borrower for the purpose of the Agent's taking possession of,
removing or putting such Inventory and Equipment in saleable form. However, if
notice of intended disposition of any Collateral is required by law, it is
agreed that five (5) Business Days notice shall constitute reasonable
notification and full compliance with the law. The Agent shall be entitled to
use all intangibles and computer software programs and data bases used by a
Borrower in connection with its business or in connection with the Collateral.
The net cash proceeds resulting from the Agent's exercise of any of the
foregoing rights (after deducting all charges, costs and expenses including
reasonable attorneys' fees) shall be applied by the Agent to the payment of the
Obligations, whether due or to become due, in such order as the Agent may elect.
Each Borrower shall remain liable to the Lenders for any deficiencies, and the
Lenders in turn agree to remit to the appropriate Borrower or its successors or
assigns, any surplus resulting therefrom. The enumeration of the foregoing
rights is not intended to be exhaustive and the exercise of any right shall not
preclude the exercise of any other rights, all of which shall be cumulative.
Section 9.4 NO IMPLIED WAIVER; RIGHTS CUMULATIVE. No delay on the part of
the Agent or any Lender in exercising any right, remedy, power or privilege
under any of the Loan Documents or provided by statute or at law or in equity or
otherwise shall impair, prejudice or constitute a waiver of any such right,
remedy, power or privilege or be construed as a waiver of any Default or Event
of Default or as an acquiescence therein. No right, remedy, power or privilege
conferred on or reserved to Agent or any Lender under any of the Loan Documents
or otherwise is intended to be exclusive of any other right, remedy, power or
privilege. Each and every right, remedy, power and privilege conferred on or
reserved to Agent or any Lender under any of the Loan Documents or otherwise
shall be cumulative and in addition to each and every other right, remedy, power
or privilege so conferred on or reserved to Agent or any such Lender and may be
exercised at such time or times and in such order and manner as Agent or any
such Lender shall (in its sole and complete discretion) deem expedient.
Section 9.5 SET-OFF; PRO RATA SHARING. If any principal, interest or
other sum payable by a Borrower to Agent or any Lender under the Notes or any of
the Loan Documents is not paid to Agent or such Lender punctually when the same
shall first become due and payable, or if any Event of Default shall at any time
occur and be continuing, any deposits, balances or other sums credited by or due
from Agent or such Lender or any of the offices or branches of Agent or any
Lender to any Borrower, may, without any prior notice of any kind to such
Borrower, or compliance with any other conditions precedent now or hereafter
imposed by statute, rule or law or otherwise (all of which are hereby expressly
and irrevocably waived by Borrowers), be immediately set off, appropriated and
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applied by Agent or such Lender toward the payment and satisfaction of the
Obligations (but not to any other obligations of any Borrower to Agent or such
Lender until all of the Obligations have been paid in full) in such order and
manner as Agent or such Lender (in its sole and complete discretion) may
determine, subject, however, to the provisions of Section 10.13.
ARTICLE 10
CONCERNING THE AGENT AND THE LENDERS
The Agent and the Lenders agree as follows:
Section 10.1 APPOINTMENT OF THE AGENT. Each of the Lenders hereby
appoints Provident to serve as Agent, under this Agreement and the other Loan
Documents, and in such capacity, to administer this Agreement, and the other
Loan Documents.
Section 10.2 AUTHORITY. Each of the Lenders hereby irrevocably
authorizes the Agent (i) to take such action on such Lender's behalf under this
Agreement and the other Loan Documents and to exercise such powers and to
perform such duties hereunder and thereunder as are delegated to or required of
the Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto; and (ii) to take such action on such Lender's
behalf as the Agent shall consider necessary or advisable for the protection,
collection or enforcement of any of the Obligations. The Agent will promptly
notify each of the Lenders as soon as it becomes aware of any Default or Event
of Default or any failure by the Borrowers to make any payment in respect of any
of the Notes, PROVIDED, HOWEVER, that Agent shall not be deemed to have
knowledge of any item until such time as Agent's officers responsible for
administration of the Loans shall receive written notice thereof or have actual
knowledge of such event. If any Lender becomes aware of any Default or Event of
Default by Borrowers, it shall promptly notify Agent thereof PROVIDED, HOWEVER,
that Lenders shall not be deemed to have knowledge of any item until such time
as Lenders' officers responsible for administration of the Loans shall receive
written notice thereof or have actual knowledge of such event.
Section 10.3 ACCEPTANCE OF APPOINTMENT. The Agent hereby accepts its
appointment as Agent for each of the Lenders under this Agreement and the other
Loan Documents, but only on the terms set forth in this Agreement, including the
following:
(a) Agent makes no representation as to the value, validity or
enforceability of this Agreement or of any of the other Loan Documents or as to
the correctness of any statement contained in this Agreement or in any of the
other Loan Documents;
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(b) Agent may exercise its powers and perform its duties under
this Agreement and the other Loan Documents either directly or through its
agents or attorneys;
(c) Agent shall be entitled to obtain from counsel selected by it
with reasonable care advice with respect to legal matters pertaining to this
Agreement, or any of the other Loan Documents and shall not be liable for any
action taken, omitted to be taken or suffered in good faith in accordance with
the advice of such counsel;
(d) Agent shall not be required to use its own funds in the
performance of any of its duties or in the exercise of any of its rights or
powers, and Agent shall not be obligated to take any action which, in its
reasonable judgment, would involve it in any expense or liability unless it
shall have been furnished security or indemnity in an amount and in form and
substance satisfactory to it; and
(e) Agent, in performing its duties and functions under this
Agreement and the other Loan Documents on behalf of the Lenders, will exercise
the same care which it normally exercises in making and handling loans in which
it alone is interested, but does not assume further responsibility.
Section 10.4 COLLATERAL MATTERS.
(a) RELEASE OF COLLATERAL. Lenders hereby irrevocably authorize
Agent, at its option and in its discretion, to release any Lien granted to or
held by Agent upon any property covered by the Security Documents (i) upon
termination of the Credit Commitments and payment and satisfaction of all
Obligations; or (ii) constituting property being sold or disposed of if
Borrowers certify to Agent that the sale or disposition is made in compliance
with the provisions of this Agreement (and Agent may rely in good faith
conclusively on any such certificate, without further inquiry); or (iii)
constituting property leased to Borrowers under a lease which has expired or
been terminated in a transaction permitted under this Agreement or is about to
expire and which has not been, and is not intended by Borrowers to be, renewed
or extended. Upon request by Agent at any time, any Lender will confirm in
writing Agent's authority to release particular types or items of property
covered by the Security Documents pursuant to this Section 10.4(a).
(b) CONFIRMATION OF AUTHORITY; EXECUTION OF RELEASES. Without in
any manner limiting Agent's authority to act without any specific or further
authorization or consent by Requisite Lenders (as set forth in Section 10.4(a)),
each Lender agrees to confirm in writing, upon request by Borrowers, the
authority to release any property covered by the Security Documents conferred
upon Agent under clauses (i) through (iii) of Section 10.4(a). So long as no
Event of Default is then continuing, upon receipt by Agent of confirmation from
the Requisite Lenders of its authority to
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release any particular item or types of property covered by the Security
Documents, and upon at least five (5) Business Days prior written request by
Borrowers, Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to evidence the release of the Liens
granted to Agent for the benefit of Lenders herein or pursuant hereto upon such
Collateral; PROVIDED, HOWEVER, that (i) Agent shall not be required to execute
any such document on terms which, in Agent's opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty, and (ii) such release shall
not in any manner discharge, affect or impair the Obligations or any Liens upon
(or obligations of Borrowers, in respect of), all interests retained by
Borrowers, including (without limitation) the proceeds of any sale, all of which
shall continue to constitute part of the property covered by the Security
Documents.
(c) ABSENCE OF DUTY. Agent shall have no obligation whatsoever to
any Lender or any other Person to assure that the property covered by the
Security Documents exists or is owned by Borrowers or is cared for, protected or
insured or has been encumbered or that the Liens granted to Agent herein or
pursuant hereto have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Section 10.4 or in
any of the Loan Documents, it being understood and agreed that in respect of the
property covered by the Security Documents or any act, omission or event related
thereto, Agent may act in any manner it may deem appropriate, it its discretion,
given Agent's own interest in property covered by the Security Documents as one
of the Lenders and that Agent shall have no duty or liability whatsoever to any
of the other Lenders; provided that Agent shall exercise the same care which it
would in dealing with loans for its own account.
Section 10.5 AGENCY FOR PERFECTION. Each Lender hereby appoints each
other Lender as agent for the purpose of perfecting Lenders' security interest
in assets which, in accordance with Article 9 of the Uniform Commercial Code in
any applicable jurisdiction, can be perfected only by possession. Should any
Lender (other than Agent) obtain possession of any such Collateral, such Lender
shall notify Agent thereof, and, promptly upon Agent's request therefor, shall
deliver such Collateral to Agent or in accordance with Agent's instructions.
Each Lender agrees that it will not have any right individually to enforce or
seek to enforce any Security Document or to realize upon any collateral security
for the Loans, it being understood and agreed that such rights and remedies may
be exercised only by Agent.
Section 10.6 APPLICATION OF MONEYS. All moneys realized by the Agent
under the Loan Documents shall be held by Agent to apply in accordance with
Section 2.7(b) hereof.
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Section 10.7 RELIANCE BY THE AGENT. Agent shall be entitled to rely on
any notice, consent, certificate, affidavit, letter, telegram, telecopy,
facsimile or teletype message, statement, order, instrument or other document
believed by it to be genuine and correct and to have been signed or sent by the
proper Person or Persons. Agent shall deem and treat the payee of any Note as
the absolute owner thereof for all purposes hereof until such time as it
receives actual notice of an assignment permitted hereunder of such payee's
interest, together with the written agreement of the assignee in form and
substance satisfactory to Agent that such assignee is bound by this Agreement as
a "Lender" hereunder.
Section 10.8 EXCULPATORY PROVISIONS. Neither Agent nor any of its
shareholders, directors, officers, employees or agents shall be liable in any
manner to any of the Lenders for any action taken, omitted to be taken or
suffered in good faith by it or them under any of the Loan Documents or in
connection therewith, or be responsible for the consequences of any oversight or
error of judgment, except for losses due to gross negligence or willful
misconduct of such Agent, shareholder, director, officer, employee or agent.
Without limiting the generality of the foregoing sentence of this Section 10.8,
under no circumstances shall the Agent be subject to any liability to any Lender
on account of any action taken or omitted to be taken by such Agent in
compliance with the direction of the Requisite Lenders or all of the Lenders, as
the case may be as provided for hereunder.
Agent shall not be responsible in any manner to any of the Lenders for
the due execution, effectiveness, genuineness, validity or enforceability,
perfection or recording of this Agreement, any of the Notes, any of the other
Loan Documents or for any certificate, report or other document used under or in
connection with this Agreement or any of the other Loan Documents, or for the
truth or accuracy of any recitals, statements, warranties or representations
contained herein or in any certificate, report or other document at any time
hereafter furnished or purporting to have been furnished to it by or on behalf
of a Borrower, or any other Person, or be under any obligation to any of the
Lenders to ascertain or inquire as to the performance or observance by a
Borrower, or any other Person of any of the covenants, agreements or conditions
set forth in this Agreement, the Notes or any of the other Loan Documents or as
to the use of any moneys lent hereunder or thereunder.
Agent shall not be obligated to take any action or refrain from taking
any action under any Loan Document that might, in its judgment, involve it in
any expense or liability until it shall have been indemnified to its
satisfaction by or received an agreement to indemnify from each Person which
such Agent reasonably believes may be an intended recipient of such
distribution. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person to
whom any such distribution shall have been made shall either repay to the Agent
its proportionate share of the amount so adjudged to be repaid or shall pay over
the same in such manner and to such Persons as shall be determined by such
court.
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Section 10.9 ACTION BY THE AGENT. Except as otherwise expressly provided
under this Agreement or in any other of the Loan Documents, Agent will take such
action, assert such rights and pursue such remedies under this Agreement and the
other Loan Documents as the Requisite Lenders or all of the Lenders, as the case
may be as provided for hereunder shall direct. Except as otherwise expressly
provided in any of the Loan Documents, Agent will not (and will not be obligated
to) take any action, assert any rights or pursue any remedies under this
Agreement or any of the other Loan Documents in violation or contravention of
any express direction or instruction of the Requisite Lenders or all of the
Lenders, as the case may be as provided for hereunder. Agent may refuse (and
will not be obligated) to take any action, assert any rights or pursue any
remedies under this Agreement or any of the other Loan Documents without the
express written direction and instruction of the Requisite Lenders or all of the
Lenders, as the case may be as provided for hereunder. In the event Agent
fails, within a commercially reasonable time, to take such action, assert such
rights, or pursue such remedies as the Requisite Lenders or all of the Lenders,
as the case may be as provided for hereunder, direct, the Requisite Lenders or
all of the Lenders, as the case may be as provided for hereunder, shall have the
right to take such action, to assert such rights, or pursue such remedies on
behalf of all of the Lenders unless the terms hereof otherwise require the
consent of all the Lenders to the taking of such actions. All notices and other
material information required to be delivered by Borrowers to Agent hereunder
shall be delivered within a reasonable time (and in any event not more than five
(5) days) after Agent's receipt of same by Agent to each Lender. No Lender
(other than the Agent, acting in its capacity as Agent) shall be entitled to
take any enforcement action of any kind under any of the Loan Documents, except
as expressly provided in this Agreement. Action that may be taken by Requisite
Lenders or all of the Lenders, as the case may be as provided for hereunder may
be taken pursuant to a vote at a meeting (which may be held by telephone
conference call) of all of the Lenders, or pursuant to the written consent of
such Lenders.
Section 10.10 AMENDMENTS, WAIVERS AND CONSENTS. Subject to Section 11.5
hereof, any provision of this Agreement, the Notes or the other Loan Documents
may be amended or waived upon the consent of the Requisite Lenders, and after
such consent, Agent, on behalf of the Lenders, may execute and deliver to
Borrowers a written instrument waiving or amending such provision; PROVIDED,
HOWEVER, that neither this Agreement, the Notes, nor any of the other Loan
Documents may be amended, waived or a variation therefrom or forbearance with
respect to such variation consented to without the written consent of the Agent
and all of Lenders which effect (i) a change in the Maximum Revolving
Commitment; (ii) a change in any Lender's Credit Commitment; (iii) a reduction
in the interest rates or reduction of the principal set forth in the Notes; (iv)
the extension of the maturity date on the Notes; (v) a change in the payment
schedule or scheduled date for the payment of or amount of any interest or
principal; (vi) any change in Article 7; (vii) a change in this Section 10.10,
the definition of Requisite Lender or any provision of this Agreement which
requires consent or action of all the Lenders for action thereunder; (viii) a
change in the obligations and
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liabilities of Agent; (ix) a change which increases the obligations of any
Lender; or (x) a change in any fees or charges hereunder or in Sections 2.11
or 11.6 hereof.
Section 10.11 INDEMNIFICATION. Each Lender agrees to indemnify Agent (to
the extent Agent is not promptly reimbursed by Borrowers), in accordance with
its Participation Percentage from and against any and all liabilities,
obligations, losses, damages, penalties, interests, actions, judgments and suits
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against Agent relating to or arising out of this Agreement or any of
the other Loan Documents or relating to any action taken or omitted by such
Agent under this Agreement or any of the other Loan Documents, PROVIDED that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, interest, actions, judgments or suits resulting from Agent's
own gross negligence or willful misconduct.
Section 10.12 REIMBURSEMENT OF THE AGENT. Each Lender further agrees to
reimburse Agent, in accordance with its Participation Percentage, for any
reasonable out-of-pocket costs or expenses incurred by Agent in connection with
its duties under this Agreement (including, but not limited to, reasonable fees
and disbursements of counsel, travel and living expenses away from home of
employees or agents of the Agent and compensation of agents or of experts
employed by the Agent to render services for the Lenders hereunder), but only to
the extent such fees, disbursements, expenses and compensation have not been
promptly reimbursed to the Agent by Borrowers. If any such sums are reimbursed
to the Agent by Borrowers after one or more of the Lenders have reimbursed the
Agent for such sums, the Agent will refund such sums ratably to the Lenders who
contributed such sums.
Section 10.13 SHARING OF FUNDS RECEIVED. Each Lender and Agent agrees
with Agent and each of the other Lenders that if such Lender shall receive from
a Borrower or any other Person or Persons, whether by payment received otherwise
than in accordance with the terms of the Loan Documents, exercise of the right
of set-off, counterclaim, cross-claim, enforcement of any claim, or proceedings
against any Borrower or any other Person or Persons, proof of claim in
bankruptcy, reorganization, liquidation, receivership or other similar
proceedings, or otherwise, and shall retain and apply to the payment of any of
the Obligations owing to such Lender any amount in excess of its Pro Rata Share
of the payments received by all of the Lenders and the Agent in respect of all
of the Obligations, such Lender will promptly make such dispositions and
arrangements with the other Lenders and the Agent with respect to such excess,
either by way of distribution, PRO TANTO assignment of claim, subrogation or
otherwise, as shall result in each of the Lenders receiving in respect of the
Obligations owing to it, its Pro Rata Share of such payments.
Section 10.14 DEALING WITH LENDERS. Agent may at all times deal solely
with the several Lenders for all purposes of this Agreement and the protection,
enforcement and collection of the
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Notes, including without limitation the acceptance and reliance upon any
certificate, consent or other document executed on behalf of one or more of
the Lenders and the division of payments pursuant to Sections 2.5, 2.6, 2.7,
10.6, and 10.14 hereof. The Agent shall not have a fiduciary relationship in
respect of any Lender by reason of this Agreement. The Agent shall have no
implied duties to the Lenders, or any obligation to the Lenders to take any
action hereunder except any action specifically provided by this Agreement to
be taken by the Agent.
Section 10.15 AGENT AS LENDER. Provident shall have, in its capacity as a
Lender under the Loan Documents, the same obligations and the same rights,
remedies, powers and privileges under this Agreement and the other Loan
Documents as it would have were it not also an Agent.
Section 10.16 DUTIES NOT TO BE INCREASED. The duties and liabilities of
Agent under this Agreement and the other Loan Documents shall not be increased
or otherwise changed without its express prior written consent. The Agent shall
have no duty to provide information to the Lenders except as expressly set forth
herein.
Section 10.17 LENDER CREDIT DECISIONS. Each Lender acknowledges that it
has, independently of and without reliance upon Agent or any of the other
Lenders, made its own credit analysis and decision to enter into this Agreement
and the other Loan Documents to which it is a party. Each Lender also
acknowledges that it will, independently of and without reliance upon Agent or
any of the other Lenders, continue to make its own credit decisions in taking or
not taking action under this Agreement or any of the other Loan Documents and in
determining the compliance or lack thereof by any Borrower and any other Person
with any provision of any Loan Document or other document or agreement.
Section 10.18 RESIGNATION OF AGENT. Provident and any successor Agent may
resign as such at any time by giving thirty (30) days' prior written notice of
resignation to each Lender and the Borrowers, such resignation to be effective
on the date which is specified in such notice. Upon any such resignation by
Provident as Agent, or in the event the office of Agent shall thereafter become
vacant for any other reason, the Requisite Lenders shall appoint a successor
Agent, by an instrument in writing signed by such Lenders and delivered to such
successor Agent and the Borrowers whereupon, such successor Agent shall succeed
to all of the rights and obligations of the retiring Agent as if originally
named. The retiring Agent shall duly assign, transfer and deliver to such
successor Agent all moneys at the time held by the retiring Agent hereunder
after deducting therefrom its expenses for which it is entitled to be
reimbursed. Upon such succession of any such successor Agent, the retiring
Agent shall be discharged from its duties and obligations hereunder, except for
its gross negligence or willful misconduct arising prior to its retirement or
removal hereunder. After any Agent's resignation, the provisions of this
Article 10 shall continue in effect
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for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as Agent.
Section 10.19 ASSIGNMENT OF NOTES; PARTICIPATION.
(a) Each Lender may, with concurrent notice to Agent and
Holdings, assign all or a portion of its rights and obligations under this
Credit Agreement and the Notes to an Eligible Assignee; PROVIDED that (i) for
each such assignment, the parties thereto shall execute and deliver to an
assignment and assumption agreement, in form and substance acceptable to Agent,
together with any Notes subject to such assignment; (ii) no such assignment
shall reduce the assigning Lender's Credit Commitment to less that Fifty-One
Percent (51%) of such Lender's original Credit Commitment without the consent of
Agent; and (iii) no such assignment shall be for less than Five Million and
00/100 Dollars ($5,000,000.00) of the aggregate of the Lender's Credit
Commitment, unless such assignment is to a then-current holder of a Note or with
the written consent of Agent. Upon such execution and delivery of such
assignment and assumption agreement to Agent, substantially in the form of
Exhibit K hereto, from and after the date specified as the effective date in
such Agreement (the "Acceptance Date"), (x) the assignee thereunder shall be a
party hereto, and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such agreement, such assignee shall have the rights
and obligations of a Lender hereunder and (y) the assignor thereunder shall, to
the extent that rights and obligations hereunder have been assigned by it
pursuant to such agreement, relinquish its rights (other than any rights it may
have pursuant to Section 11.6 which will survive) and be released from its
obligations under this Agreement (and, in the case of an assignment covering all
or the remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto).
(b) Each Lender may sell participations of up to forty-nine
percent (49%) of its rights and obligations under the Loan Documents (including,
without limitation, up to such portion of its Credit Commitment, the Loans owing
to it and the Note held by it); PROVIDED, HOWEVER, that (i) such Lenders'
obligations under the Loan Documents (including, without limitation, its Credit
Commitment to the Borrowers hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Lender shall remain the holder of any such Note
for all purposes of the Loan Documents, (iv) the participating banks or other
entities shall be entitled to the cost protection provisions of Sections 2.11
and 11.6 hereof, but a participant shall not be entitled to receive pursuant to
such provisions an amount larger than its share of the amount to which the
Lender granting such participation would have been entitled, (v) the Borrowers,
the Agent and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under the
Loan Documents, and (vi) no such transfer shall include the transfer of any of
such Lender's rights to grant consents or approve amendments or modifications to
the Loan Documents except with respect to
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those items requiring the action of or consent by all of the Lenders or
affecting the rights and obligations of Agent. It is understood and agreed that
each Lender may share any and all information received by it from or on behalf
of the Borrowers pursuant to this Agreement or any of the other Loan Documents
with any participant or prospective participant of such Lender.
ARTICLE 11
PROVISIONS OF GENERAL APPLICATION
Section 11.1 TERM OF AGREEMENT. This Agreement shall continue in full
force and effect and the duties, covenants, and liabilities of Borrowers
hereunder and all the terms, conditions, and provisions hereof relating thereto
shall continue to be fully operative until all Obligations to Agent and each
Lender have been satisfied in full.
Section 11.2 NOTICES.
(a) All notices and other communications pursuant to this
Agreement shall be in writing, either delivered in hand or sent by first-class
mail, postage prepaid, or sent by telex, telecopier, facsimile transmission or
telegraph, addressed as follows:
(i) If to Borrowers, at:
Eco Soil Systems, Inc.
10890 Thornmint Road
Suite 200
San Diego, California 92127
Attn: William Adams
Fax Number: (619) 592-7642
with copies to:
Latham & Watkins
701 B Street, Suite 2100
San Diego, California 92101-8197
Attn: Bruce P. Shepherd, Esq.
Fax Number: (619) 686-7419
(ii) If to Agent, at:
<PAGE>
- 95 -
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Attn: Eric L. Jeffries
Fax Number: (513) 579-2858
with a copy to:
Keating, Muething & Klekamp, P.L.L.
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attn: J. David Rosenberg
Fax Number: (513) 579-6457
(iii) If to a Lender, at such address set forth on
Schedule 1;
or to such other addresses or by way of such telex and other numbers as any
party hereto shall have designated in a written notice to the other parties
hereto.
(b) Except as otherwise expressly provided herein, any notice or
other communication pursuant to this Agreement or any other Loan Document shall
be deemed to have been duly given or made and to have become effective when
delivered in hand to the party to which it is directed, or, if sent by
first-class mail, postage prepaid, or by telex, telecopier, facsimile
transmission or telegraph, and properly addressed in accordance with
Section 11.2(a), (i) when received by the addressee; or (ii) if sent by first
class mail, postage prepaid, on the third (3rd) Business Day following the day
of the dispatch thereof, whichever of (i) or (ii) shall be the earlier.
Section 11.3 SURVIVAL OF REPRESENTATIONS. All representations and
warranties made by or on behalf of each Borrower in this Agreement, or any of
the other Loan Documents shall be deemed to have been relied upon by Agent and
each Lender notwithstanding any investigation made by Agent or any Lender and
shall survive the making of each of the Loans.
Section 11.4 POWER OF ATTORNEY. Each Borrower acknowledges and agrees
that their appointments of Agent as their attorney and agent-in-fact for the
purposes specified in this Agreement is an appointment coupled with an interest
and shall be irrevocable until all of the Obligations are satisfied and this
Agreement is terminated.
<PAGE>
- 96 -
Section 11.5 AMENDMENTS. Each of the Loan Documents may be modified,
amended or supplemented in any respect whatever, only with the prior written
consent or approval of Holdings, Agent and the Requisite Lenders or all of the
Lenders (as the case may be) and each other Person (other than a Lender) which
is a party to such Loan Document, all in accordance with the terms of Section
10.10 hereof.
Section 11.6 COSTS, EXPENSES, TAXES AND INDEMNIFICATION.
(a) Subject to Section 2.11 hereof, Borrowers absolutely and
unconditionally agree to pay to the Agent, for the respective pro rata account
of the Agent and each Lender, upon demand by Agent or any Lender at any time and
as often as the occasion therefor may require, whether or not all or any of the
transactions contemplated by any of the Loan Documents are ultimately
consummated (i) all reasonable out-of-pocket costs and expenses which shall at
any time be incurred or sustained by Agent or any of its directors, officers,
employees or agents as a consequence of, on account of, in relation to or any
way in connection with the preparation, negotiation, execution and delivery of
the Loan Documents and the perfection and continuation of the rights of the
Lenders and Agent in connection with the Loan, as well as the preparation,
negotiation, execution, or delivery or in connection with the amendment or
modification of any of the Loan Documents or as a consequence of, on account of,
in relation to or any way in connection with the granting by Agent or any of the
Lenders of any consents, approvals or waivers under any of the Loan Documents
including, but not limited to, reasonable attorneys' fees and disbursements;
(ii) all reasonable out-of-pocket costs and expenses which shall be incurred or
sustained by Agent or any of the Lenders or any of their directors, officers,
employees or agents as a consequence of, on account of, in relation to or any
way in connection with the exercise, protection or enforcement (whether or not
suit is instituted) any of its rights, remedies, powers or privileges under any
of the Loan Documents or in connection with any litigation, proceeding or
dispute in any respect related to any of the relationships under, or any of the
Loan Documents (including, but not limited to, all of the reasonable fees and
disbursements of consultants, legal advisers, accountants, experts and agents
for Agent or any of the Lenders, the reasonable travel and living expenses away
from home of employees, consultants, experts or agents of Agent or any of the
Lenders, and the reasonable fees of agents, consultants and experts not in the
full-time employ of Agent or any of the Lenders for services rendered on behalf
of Agent or any of the Lenders); and (iii) upon the failure of Borrowers to
provide or cause to be provided the insurance required under Section 6.2(b),
Agent, on behalf of the Lenders, shall have the option to procure and maintain
such insurance without notice to Borrowers.
(b) Borrowers shall absolutely and unconditionally indemnify and
hold harmless Agent and each Lender against any and all claims, demands, suits,
actions, causes of action, damages, losses, settlement payments, obligations,
costs, expenses and all other liabilities
<PAGE>
- 97 -
whatsoever which shall at any time or times be incurred or sustained by Agent
or any Lender or by any of their shareholders, directors, officers, employees,
subsidiaries, Affiliates or agents on account of, or in relation to, or in any
way in connection with, any of the arrangements or transactions contemplated by,
associated with or ancillary to this Agreement or any of the other Loan
Documents, whether or not all or any of the transactions contemplated by,
associated with or ancillary to this Agreement, or any of such Loan Documents
are ultimately consummated, except to the extent such claim, demand, suit,
action, cause of action, damage, loss, settlement payment, obligation, cost,
expense or other liability if found in a final, non-appealable judgment by a
court of competent jurisdiction to have resulted from the Agent's or such
Lender's gross negligence or willful misconduct.
(c) Borrowers hereby covenant and agree that any sums expended by
Agent or any Lender which Agent or any Lender is entitled to be reimbursed for
pursuant to this Section 11.6, shall be immediately due and payable upon demand
by Agent or any Lender, and shall bear interest at the applicable Default
Interest Rate from the date Agent or any such Lender incurred such expense until
the date such payment is made in full to Agent or such Lender.
Section 11.7 LANGUAGE. All notices, applications, certificates, reports,
financial statements and other financial information, correspondence and all
other communications from any Borrower to Agent or any Lender pursuant to this
Agreement or any of the other Loan Documents shall be in the English language or
shall be accompanied by an English translation thereof completely satisfactory
to Agent or such Lender.
Section 11.8 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors in title and assigns; PROVIDED, HOWEVER, that (i) no Borrower may
assign or delegate any of its rights or obligations hereunder to any Person or
Persons without the express prior written consent of the Agent and all of the
Lenders; and (ii) no Lender may assign or delegate its rights or obligation
hereunder to any Person or Persons except in accordance with Section 10.19
hereof.
Section 11.9 GOVERNING LAW; JURISDICTION AND VENUE. THE AGENT ACCEPTS
THIS AGREEMENT, ON BEHALF OF ITSELF AND THE LENDERS, AT CINCINNATI, OHIO BY
ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN BORROWERS AND THE
AGENT, ANY LENDER, OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE SUBSTANTIVE INTERNAL LAWS AND STATUTES OF
<PAGE>
- 98 -
LIMITATION (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF
OHIO.
The Agent, each Lender and each Borrower hereby designate all courts of
record sitting in Cincinnati, Ohio, both state and federal, as forums where any
action, suit or proceeding in respect of or arising out of this Agreement, the
Notes, Loan Documents, or the transactions contemplated by this Agreement shall
be prosecuted as to all parties, their successors and assigns, and by the
foregoing designations the Agent, each Lender, and each Borrower consents to
the jurisdiction and venue of such courts. EACH BORROWER WAIVES ANY AND ALL
PERSONAL RIGHTS UNDER THE LAWS OF ANY OTHER STATE TO OBJECT TO JURISDICTION
WITHIN THE STATE OF OHIO FOR THE PURPOSES OF LITIGATION TO ENFORCE SUCH
OBLIGATIONS OF BORROWERS. In the event such litigation is commenced, each
Borrower agrees that service of process may be made and personal jurisdiction
over each Borrower obtained by service of a copy of the summons, complaint and
other pleadings required to commence such litigation upon Borrowers' appointed
Agent for Service of Process in the State of Ohio, which the undersigned hereof
designates to be: CT Corporation Systems, Cincinnati, Ohio. Each Borrower
recognizes and agrees that the agency has been created for the benefit of each
Borrower, Agent and each Lender and agree that this agency shall not be revoked,
withdrawn, or modified without the consent of the Agent.
Section 11.10 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED
INDUCEMENT FOR THE LENDERS TO EXTEND CREDIT TO EACH BORROWER, AND AFTER HAVING
THE OPPORTUNITY TO CONSULT COUNSEL, EACH BORROWER HEREBY EXPRESSLY WAIVES THE
RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO THIS AGREEMENT
OR ARISING IN ANY WAY FROM THE OBLIGATIONS.
Section 11.11 WAIVERS. Each Borrower waives notice of nonpayment, demand,
notice of demand, presentment, protest and notice of protest with respect to the
Obligations, or notice of acceptance hereof, notice of the Loans made, issued,
credit extended, or any other action taken in reliance hereon, and all other
demands and notices of any description, except such as are expressly provided
for herein.
Section 11.12 INTERPRETATION AND PROOF OF LOAN DOCUMENTS. Whenever
possible, the provisions of each Loan Document will be construed in such a
manner as to be consistent with this Agreement and each other Loan Document. If
any of the provisions of any Loan Document are inconsistent with this Agreement,
such provisions of this Agreement will supersede such provisions of such Loan
Document. This Agreement, the Loan Documents and all documents relating hereto,
including, without limitation, (a) consents, waivers and modifications which may
hereafter be executed, (b) documents received by the Agent or any Lender at the
closing or otherwise, and (c) financial statements, certificates and other
information previously or hereafter furnished to the Agent
<PAGE>
- 99 -
or any Lender, may be reproduced by the Agent or such Lender by an photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process and the Agent or such Lender may destroy any original document so
reproduced. The Borrowers agree and stipulate that any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Agent of such Lender in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
Section 11.13 INTEGRATION OF SCHEDULES AND EXHIBITS. The Exhibits and
Schedules annexed to this Agreement are an integral part of this Agreement and
are incorporated herein by reference.
Section 11.14 HEADINGS. The headings of the Articles, Sections and
paragraphs of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be a part of this Agreement.
Section 11.15 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
agreement. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one counterpart hereof signed by each of the
parties hereto.
Section 11.16 SEVERABILITY. Any provision of this Agreement which is
prohibited and 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 or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 11.17 ONE GENERAL OBLIGATION. All Loans and advances by Lenders
to Borrowers under this Agreement constitute one loan, and all Obligations of
Borrowers to Agent and the Lenders under this Agreement constitute one general
obligation. It is expressly understood and agreed that all of the rights of
Agent and each Lender contained in this Agreement shall likewise apply insofar
as applicable to any modification of or supplement to this Agreement.
Section 11.18 CONFIDENTIALITY. (a) Borrower acknowledges that from time
to time financial advisory, investment banking and other services may be offered
or provided to Borrower or one or more of its Affiliates (in connection with
this Agreement or otherwise) by Agent or any Lender or by one or more Affiliates
of Agent or any Lender and Borrower hereby authorizes each Agent and each Lender
to share any information delivered to them by Borrower and its Affiliates
pursuant to this Agreement, or in connection with the decision of Agent or each
Lender to enter into this Agreement, to any such Affiliate of Agent or Lender,
it being understood that any such Affiliate
<PAGE>
- 100 -
receiving such information shall be bound by the provisions of clause (b) below
as if it were a Lender hereunder.
(b) Each Lender and the Agent agrees (on behalf of itself and
each of its Affiliates, directors, officers, employees and representatives) to
use reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of this nature and in
accordance with safe and sound practices, any non-public information supplied to
it by Borrower pursuant to this Agreement which is identified by Borrower as
being confidential at the time the same is delivered to Agent or any Lender;
PROVIDED, that nothing herein shall limit the disclosure of any such information
(i) to the extent required by statute, rule, regulation or judicial process,
(ii) to counsel for any of the Lenders or the Agent, (iii) to regulatory
personnel, auditors or accountants, (iv) to the Agent or any other Lender, (v)
in connection with any litigation to which any one or more of the Lenders or the
Agent is a party, (vi) to an Affiliate of Agent or any Lender as provided in
clause (a) above, or (vii) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective
assignee or participant) agrees to be bound by the provisions hereof.
<PAGE>
- 101 -
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
or on behalf of each of the parties as of the day and in the year first above
written in Cincinnati, Ohio.
SIGNED IN THE PRESENCE OF: BORROWERS:
ECO SOIL SYSTEMS, INC.
/s/ Brett P. Rosenblatt By: /s/ William B. Adams
- ---------------------------------- ------------------------------------
Brett P. Rosenblatt Name: William B. Adams
- ---------------------------------- ----------------------------------
Title: Chief Executive Officer
---------------------------------
ASPEN CONSULTING COMPANIES, INC.
/s/ Brett P. Rosenblatt By: /s/ William B. Adams
- ---------------------------------- ------------------------------------
Brett P. Rosenblatt Name: William B. Adams
- ---------------------------------- ----------------------------------
Title: Vice President
---------------------------------
TURF SPECIALTY, INC.
/s/ Brett P. Rosenblatt By: /s/ William B. Adams
- ---------------------------------- ------------------------------------
Brett P. Rosenblatt Name: William B. Adams
- ---------------------------------- ----------------------------------
Title: President
---------------------------------
TURF ACQUISITION SUB., INC.
/s/ Brett P. Rosenblatt By: /s/ William B. Adams
- ---------------------------------- ------------------------------------
Brett P. Rosenblatt Name: William B. Adams
- ---------------------------------- ----------------------------------
Title: Chief Executive Officer
---------------------------------
<PAGE>
- 102 -
ECO TURF PRODUCTS, INC.
/s/ Brett P. Rosenblatt By: /s/ William B. Adams
- ---------------------------------- ------------------------------------
Brett P. Rosenblatt Name: William B. Adams
- ---------------------------------- ----------------------------------
Title: President
---------------------------------
AGRICULTURAL SUPPLY, INC. (f.k.a.
AGRICULTURAL ACQUISITION SUB.,
INC.)
/s/ Brett P. Rosenblatt By: /s/ William B. Adams
- ---------------------------------- ------------------------------------
Brett P. Rosenblatt Name: William B. Adams
- ---------------------------------- ----------------------------------
Title: Chief Executive Officer
---------------------------------
MITIGATION SERVICES, INC.
/s/ Brett P. Rosenblatt By: /s/ William B. Adams
- ---------------------------------- ------------------------------------
Brett P. Rosenblatt Name: William B. Adams
- ---------------------------------- ----------------------------------
Title: Chief Executive Officer
---------------------------------
BENHAM CHEMICAL CORPORATION
/s/ Brett P. Rosenblatt By: /s/ William B. Adams
- ---------------------------------- ------------------------------------
Brett P. Rosenblatt Name: William B. Adams
- ---------------------------------- ----------------------------------
Title: Chief Executive Officer
---------------------------------
<PAGE>
- 103 -
YUMA ACQUISITION SUB., INC.
/s/ Brett P. Rosenblatt By: /s/ William B. Adams
- ---------------------------------- ------------------------------------
Brett P. Rosenblatt Name: William B. Adams
- ---------------------------------- ----------------------------------
Title: Chief Executive Officer
---------------------------------
THE LENDERS:
THE PROVIDENT BANK
By: /s/ Christopher B. Gribble
- ---------------------------------- ------------------------------------
Name:
- ---------------------------------- ----------------------------------
Title:
---------------------------------
AGENT:
THE PROVIDENT BANK, as Agent
By: /s/ Christopher B. Gribble
- ---------------------------------- ------------------------------------
Name:
- ---------------------------------- ----------------------------------
Title:
---------------------------------
<PAGE>
- 104 -
SCHEDULE 1
<TABLE>
<CAPTION>
CREDIT PARTICIPATION
LENDER COMMITMENT PERCENTAGE
<S> <C> <C>
THE PROVIDENT BANK Revolving Credit Loan
One East Fourth Street
Seventh Floor $20,000,000.00 100%
Cincinnati, Ohio 45202
Attn: Eric L. Jeffries
(513) 579-2236
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ECO SOIL SYSTEMS, INC.
$15,000,000
12.00% Senior Subordinated Notes due 2003
----------------------------
NOTE AND WARRANT
PURCHASE AGREEMENT
----------------------------
Dated as of August 25, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Authorization of Notes and Warrants . . . . . . . . . . . . . . . . . 6
2. Sale and Purchase of Notes and Warrants . . . . . . . . . . . . . . . 6
2.1. Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2. Issue Price . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. Closing; Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2. Transaction Fees. . . . . . . . . . . . . . . . . . . . . . . . 8
3.3. Legal Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1. Representations and Warranties. . . . . . . . . . . . . . . . . 8
4.2. Performance; No Default . . . . . . . . . . . . . . . . . . . . 8
4.3. Compliance Certificate. . . . . . . . . . . . . . . . . . . . . 9
4.4. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . 9
4.5. Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6. Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . . 9
4.7. Satisfaction of Company Obligations . . . . . . . . . . . . . . 9
4.8. Consents, Agreements. . . . . . . . . . . . . . . . . . . . . . 10
4.9. Compliance with Securities Laws . . . . . . . . . . . . . . . . 10
4.10. No Adverse U.S. Legislation, Action or Decision, etc. . . . . . 10
4.11. No Actions Pending. . . . . . . . . . . . . . . . . . . . . . . 10
4.12. Purchase Permitted By Applicable Law, etc . . . . . . . . . . . 10
4.13. Proceedings and Documents . . . . . . . . . . . . . . . . . . . 11
4.14. Sale of Other Notes . . . . . . . . . . . . . . . . . . . . . . 11
4.15. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5. Representations and Warranties. . . . . . . . . . . . . . . . . . . . 11
5.1. Organization, Standing, etc.. . . . . . . . . . . . . . . . . . 11
5.2. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3. Qualification . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4. Business; Financial Statements. . . . . . . . . . . . . . . . . 12
5.5. Changes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6. Tax Returns and Payments. . . . . . . . . . . . . . . . . . . . 13
5.7. Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8. Capital Stock and Related Matters . . . . . . . . . . . . . . . 14
5.9. Title to Properties; Liens. . . . . . . . . . . . . . . . . . . 14
5.10. Litigation, etc.. . . . . . . . . . . . . . . . . . . . . . . . 15
5.11. Compliance with Other Instruments, etc. . . . . . . . . . . . . 15
5.12. Governmental Consent. . . . . . . . . . . . . . . . . . . . . . 16
5.13. Patents, Trademarks, Authorizations, etc. . . . . . . . . . . . 16
5.14. Offer of Notes. . . . . . . . . . . . . . . . . . . . . . . . . 16
5.15. Federal Reserve Regulations . . . . . . . . . . . . . . . . . . 16
5.16. Environmental Matters . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.17. Status Under Certain Federal Statutes . . . . . . . . . . . . . 18
5.18. Foreign Assets Control Regulations, etc.. . . . . . . . . . . . 18
5.19. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . 19
5.20. Certain Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.21. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6. Purchaser Representations . . . . . . . . . . . . . . . . . . . . . . 21
6.1. Purchase Intent . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2. Status of Purchaser . . . . . . . . . . . . . . . . . . . . . . 21
6.3. Source of Funds . . . . . . . . . . . . . . . . . . . . . . . . 21
7. Accounting; Financial Statements and Other Information. . . . . . . . 21
8. Inspection; Confidentiality . . . . . . . . . . . . . . . . . . . . . 26
8.1. Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 26
9. Prepayment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1. Optional Prepayments with Premium . . . . . . . . . . . . . . . 27
9.2. Contingent Prepayments Upon Change of Control . . . . . . . . . 27
9.3. Premium Table . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.4. Notice of Optional Prepayments; Officers' Certificate . . . . . 28
9.5. Allocation of Partial Prepayments . . . . . . . . . . . . . . . 28
9.6. Maturity; Surrender, etc. . . . . . . . . . . . . . . . . . . . 28
9.7. Acquisition of Notes. . . . . . . . . . . . . . . . . . . . . . 29
10. Business and Financial Covenants . . . . . . . . . . . . . . . . . . 29
10.1. Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . 29
10.3. Liens, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.4. Investments, Guaranties, etc. . . . . . . . . . . . . . . . . . 32
10.5. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . 34
10.6. Transactions with Affiliates. . . . . . . . . . . . . . . . . . 35
10.7. Consolidation, Merger, Sale of Assets, etc. . . . . . . . . . . 35
10.8. Subsidiary Stock and Indebtedness . . . . . . . . . . . . . . . 38
10.9. Corporate Existence, etc.; Business . . . . . . . . . . . . . . 38
10.10. Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . 39
10.11. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . 39
10.12. Maintenance of Properties; Insurance. . . . . . . . . . . . . . 40
10.13. Additional Guaranties . . . . . . . . . . . . . . . . . . . . . 41
10.14. Other Loan Agreements . . . . . . . . . . . . . . . . . . . . . 41
10.15. Restrictions Affecting Subsidiaries . . . . . . . . . . . . . . 42
10.16. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 42
10.17. Non U.S. Assets . . . . . . . . . . . . . . . . . . . . . . . . 42
11. Events of Default; Acceleration . . . . . . . . . . . . . . . . . . . 42
12. Remedies on Default, etc. . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
13. Subordination of Subordinated Notes . . . . . . . . . . . . . . . . . 46
13.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
13.2. Superior Debt . . . . . . . . . . . . . . . . . . . . . . . . . 46
13.3. Blockage of Payments on Subordinated Debt . . . . . . . . . . . 47
13.4. Insolvency, etc.. . . . . . . . . . . . . . . . . . . . . . . . 50
13.5. Subordinated Debt Payments and Remedies . . . . . . . . . . . . 52
13.6. Payments and Distributions Received . . . . . . . . . . . . . . 52
13.7. No Prejudice or Impairment. . . . . . . . . . . . . . . . . . . 53
13.8. Payment of Superior Debt, Subrogation, etc. . . . . . . . . . . 54
13.9. Reliance of Holders of Superior Debt. . . . . . . . . . . . . . 54
13.10. Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.11. Changes in Holders of Superior Debt . . . . . . . . . . . . . . 54
14. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
15. Registration, Transfer and Substitution of Notes; Action by
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
15.1. Note Register; Ownership of Notes . . . . . . . . . . . . . . . 66
15.2. Transfer and Exchange of Notes. . . . . . . . . . . . . . . . . 66
15.3. Replacement of Notes. . . . . . . . . . . . . . . . . . . . . . 67
15.4. Notes held by Company, etc., Deemed Not Outstanding . . . . . . 67
16. Payments on Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 67
16.1. Place of Payment. . . . . . . . . . . . . . . . . . . . . . . . 67
16.2. Home Office Payment . . . . . . . . . . . . . . . . . . . . . . 68
17. Expenses, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
18. Survival of Representations and Warranties. . . . . . . . . . . . . . 69
19. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . 69
20. Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
21. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
22. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
SCHEDULE A Schedule of Purchasers
SCHEDULE B Schedule of Debt and Liens
SCHEDULE C Schedule of Subsidiaries
SCHEDULE D Schedule of Outstanding Options
SCHEDULE E Schedule of Investments
SCHEDULE F Schedule of Earn Out Obligations
EXHIBIT A Form of 12.00% Senior Subordinated Note
EXHIBIT B Form of Warrant
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EXHIBIT C-1 Form of Opinion of Counsel to Company
EXHIBIT C-2 Form of Opinion of Nebraska Counsel to Company
EXHIBIT C-3 Form of Opinion of Counsel to Purchaser
EXHIBIT D Form of Guaranty Agreement
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ECO SOIL SYSTEMS, INC.
10890 THORNMINT ROAD
SUITE 200
SAN DIEGO, CALIFORNIA 92127
12.00% Senior Subordinated Notes due August 25, 2003
Warrants to Purchase Common Stock
Dated as of August 25, 1998
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A
Ladies and Gentlemen:
Eco Soil Systems, Inc., a Nebraska corporation (the "Company"), agrees
with you as follows:
1. AUTHORIZATION OF NOTES AND WARRANTS. The Company will authorize
the issue and sale of (a) $15,000,000 aggregate principal amount of its 12.00%
Senior Subordinated Notes due August 25, 2003 (the "Notes", such term to include
any such notes issued in substitution therefor pursuant to section 15), to be
substantially in the form of the Note set out in Exhibit A, with such changes
therefrom, if any, as may be approved by you and the Company, and (b) warrants
(the "Warrants", such term to include any warrants issued in substitution
therefor pursuant to section 15) to purchase 262,500 shares of the Common Stock,
par value $.005 per share (the "Common Stock"), of the Company at an initial
exercise price of $0.01 per share, to be substantially in the form of the
Warrant set out in Exhibit B, with such changes therefrom, if any, as may be
approved by you and the Company. Certain capitalized terms used in this
Agreement are defined in section 14; references to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement.
2. SALE AND PURCHASE OF NOTES AND WARRANTS. 2.1. PURCHASE PRICE.
The Company will issue and sell to you and, subject to the terms and conditions
of this Agreement, you will purchase from the Company, at the Closing provided
for in section 3, (a) Notes in the principal amount specified opposite your name
in Schedule A and (b) Warrants for the number of shares of Common Stock
specified opposite your name in Schedule A; at the purchase price of 100% of the
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principal amount of such Notes. Contemporaneously with entering into this
Agreement, the Company is entering into a separate Note Agreement (the "Other
Agreement") identical with this Agreement with the other purchaser named in
Schedule A (the "Other Purchaser"), providing for the sale to the Other
Purchaser, at such Closing, of Notes in the principal amount specified opposite
its name in Schedule A.
2.2. ISSUE PRICE. The Company and you agree for U.S. federal income
tax purposes (a) that (x) the present value as of the Closing Date of all
payments under the Notes, using a discount rate based on a yield which the
Company and you agree is the original yield of comparable debt instruments not
issued as part of an investment unit (which rate is not less than the applicable
federal rate on the date the Notes are issued), is $930 per $1,000 principal
amount, and that (y) the aggregate "issue price" under Section 1273(b) of the
Code of all of the Notes to be issued hereunder and under the Other Agreement is
$13,950,000; and (b) that the aggregate purchase price under Section 1273(b) of
the Code of all of the Warrants to be issued hereunder and under the Other
Agreement is $1,050,000. The Company and you agree to use the foregoing issue
price, purchase price, value and the yield which results in such issue price for
U.S. federal income tax purposes with respect to this transaction.
3. CLOSING; FEES. 3.1. CLOSING. The sales of the Notes and the
Warrants to be purchased by you shall take place at the offices of Becker,
Glynn, Melamed & Muffly LLP, at 10:00 a.m., New York City time, at a closing
(the "Closing") on August 25, 1998 or on such other Business Day thereafter as
may be agreed upon by the Company and you. At the Closing the Company will
deliver to you (a) the Notes to be purchased by you in the form of a single Note
(or such greater number of Notes in denominations of at least $100,000 as shall
be set forth in Schedule A or as you may request) dated the date of the Closing
and registered in your name (or in the name of your nominee), and (b) the
Warrants to be purchased by you in the form of a single warrant certificate (or
such greater number of warrant certificates as shall be set forth in Schedule A
or as you may request) dated the date of the Closing and registered in your name
(or in the name of your nominee); against delivery by you to the Company or its
order of immediately available funds in the amount of the purchase price
therefor. If at the Closing the Company shall fail to tender such Notes or such
Warrants to you as provided above in this section 3, or
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any of the conditions specified in section 4 shall not have been fulfilled to
your satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any other rights you
may have by reason of such failure or such nonfulfillment.
3.2. TRANSACTION FEES. On the date of the Closing, the Company will
pay to you (or to the Person designated by you for payment in Schedule A), in
immediately available funds, a transaction fee equal to 1.0% of the aggregate
purchase price for the Notes and Warrants purchased by you on the Closing Date,
by crediting the account specified below your name in Schedule A for the payment
of transaction fees.
3.3. LEGAL FEES. On the date of the Closing, the Company will pay
the reasonable fees and disbursements of your special counsel incurred in
connection with the transactions contemplated by this Agreement and set forth in
a statement delivered to the Company on or prior to the date of the Closing, and
thereafter the Company will pay, promptly upon receipt of a supplemental
statement therefor, additional reasonable fees and disbursements of your special
counsel, if any, incurred in connection with such transactions.
4. CONDITIONS TO CLOSING. Your obligation to purchase and pay for
the Notes and Warrants to be sold to you at the Closing is subject to the
fulfillment to your satisfaction, prior to or at the Closing, of the following
conditions:
4.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement and those otherwise made
in writing by or on behalf of the Company in connection with the transactions
contemplated by this Agreement shall be correct when made and at the time of the
Closing, except as affected by the consummation of such transactions.
4.2. PERFORMANCE; NO DEFAULT. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by it prior to or at the Closing and at the
time of the Closing no Event of Default or Potential Event of Default shall have
occurred and be continuing.
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4.3. COMPLIANCE CERTIFICATE. The Company shall have delivered to you
an Officers' Certificate, dated the date of the Closing, certifying that the
conditions specified in sections 4.1 and 4.2 have been fulfilled and
demonstrating that, after giving effect to the issuance of all of the Notes and
Warrants, the Company will be in compliance in all material respects with the
most stringent limitations on the incurrence or maintenance of Debt contained in
any instrument or agreement applicable to or binding on the Company.
4.4. OPINIONS OF COUNSEL. You shall have received (a) from Latham &
Watkins, counsel for the Company, (b) from Fitzgerald, Schorr, Barmettler &
Brennan, P.C., Nebraska counsel for the Company, and (c) from Becker, Glynn,
Melamed & Muffly LLP, your special counsel in connection with the transactions
contemplated by this Agreement, favorable opinions substantially in the forms
set forth in Exhibits C-1, C-2 and C-3, respectively, and covering such other
matters incident to such transactions as you may reasonably request, each
addressed to you, dated the date of the Closing and otherwise satisfactory in
substance and form to you.
4.5. GUARANTIES. Each of the Company's United States Subsidiaries
shall have executed and delivered to you the Guaranty Agreement, substantially
in the form of Exhibit D, unconditionally and irrevocably guaranteeing to you
the full and prompt payment and performance of the Company's obligations under
the Notes.
4.6. CREDIT AGREEMENT. The Credit Agreement shall have been executed
and delivered by the Company, Provident Bank, as Agent, and the lenders named
therein, and shall be satisfactory in form and substance to you. You shall have
received a copy of the Credit Agreement, certified as a true and complete copy
thereof by an officer of the Company.
4.7. SATISFACTION OF COMPANY OBLIGATIONS. All of the obligations of
the Company shown on Schedule B as obligations that are required or intended to
be satisfied on or prior to the Closing Date shall have been satisfied in full
and all Liens securing any of such obligations shall have been released. The
Company shall have received payoff letters, reasonably satisfactory in form and
substance to you, from the holders of the Company's Debt being retired, each
stating that upon the payment of the amount set forth
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<PAGE>
in such letter, all of the Company's obligations with respect to such Debt
will be fully and irrevocably discharged.
4.8. CONSENTS, AGREEMENTS. The Company shall have obtained all
consents and waivers, under any term of any material agreement or instrument to
which it is a party or by which it or any of its properties is bound, or any
term of any applicable law, ordinance, rule or regulation of any governmental
authority, or any term of any applicable order, judgment or decree of any court,
arbitrator or governmental authority, necessary or appropriate in connection
with the transactions contemplated by this Agreement, and such consents and
waivers shall be in full force and effect on the Closing Date. A complete and
correct copy of each of such consents and waivers shall have been delivered to
you.
4.9. COMPLIANCE WITH SECURITIES LAWS. The offering and sale of the
Notes and Warrants to you and the Other Purchaser shall have complied with all
applicable requirements of federal and state securities laws and you shall have
received evidence thereof in form and substance reasonably satisfactory to you.
4.10. NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION, ETC.. No
legislation shall have been enacted by either house of Congress or favorably
reported by any committee thereof, no other action shall have been taken by any
governmental authority, whether by order, regulation, rule, ruling or otherwise,
and no decision shall have been rendered by any court of competent jurisdiction,
which would materially and adversely affect the Notes or the Warrants being
purchased by you hereunder.
4.11. NO ACTIONS PENDING. There shall be no suit, action,
investigation, inquiry or other proceeding by any governmental body or any other
Person or any other legal or administrative proceeding pending or, to the
Company's knowledge, threatened which questions the validity or legality of the
transactions contemplated by this Agreement or the other Operative Agreements or
which seeks damages or injunctive or other equitable relief in connection
therewith.
4.12. PURCHASE PERMITTED BY APPLICABLE LAW, ETC. On the date of the
Closing your purchase of Notes and Warrants (a) shall be permitted by the laws
and regulations
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<PAGE>
of each jurisdiction to which you are subject and (b) shall not subject you to
any additional tax, penalty or, in your reasonable judgment, other onerous
condition by reason of any change after the date of this Agreement in any
applicable law or governmental regulation. If requested by you, you shall have
received, at least five Business Days prior to the Closing, an Officers'
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.13. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory to you and your special counsel, and you and your special counsel
shall have received all such counterpart originals or certified or other copies
of such documents as you or they may reasonably request.
4.14. SALE OF OTHER NOTES. Contemporaneously with the Closing, the
Company shall sell to the Other Purchaser the Notes and Warrants to be purchased
by it at the Closing as specified in Schedule A.
4.15. FEES. The fees required to be paid by sections 3.2 and 3.3
shall have been paid as therein provided.
5. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants that:
5.1. ORGANIZATION, STANDING, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nebraska and has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into this Agreement, to issue and sell the Notes and the
Warrants and to carry out the terms of this Agreement, the Notes and the
Warrants.
5.2. SUBSIDIARIES. Schedule C correctly lists as to each Subsidiary
on the date of this Agreement (a) its name, (b) the jurisdiction of its
incorporation and (c) the percentage of its issued and outstanding shares owned
by the Company or another Subsidiary (specifying such other Subsidiary). Each
Subsidiary is a corporation duly
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<PAGE>
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and operate its properties, to carry on its business as now
conducted and as proposed to be conducted, to enter into the Guaranty Agreement
and to carry out the terms of the Guaranty Agreement. All the outstanding
shares of capital stock of each Subsidiary are validly issued, fully paid and
non-assessable, and all such shares indicated in Schedule C as owned by the
Company or by any other Subsidiary are so owned beneficially and of record by
the Company or by such other Subsidiary free and clear of any Lien.
5.3. QUALIFICATION. Each of the Company and its Subsidiaries is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction (other than the jurisdiction of its incorporation)
in which the nature of its activities or the character of the properties it owns
or leases makes such qualification necessary and in which the failure so to
qualify would have a materially adverse effect on the Company.
5.4. BUSINESS; FINANCIAL STATEMENTS. The Company has delivered to
you complete and correct copies of (a) its annual report to stockholders for the
fiscal year ended December 31, 1997 (the "Annual Report"), (b) its annual report
on Form 10-KSB for such fiscal year as filed with the Securities and Exchange
Commission (the "Form 10-K") and (c) the Private Placement Memorandum. The
Annual Report, the Form 10-K and the Private Placement Memorandum correctly
describe, in all material respects, as of their respective dates, the business
then conducted and proposed to be conducted by the Company. There are included
in the Form 10-K financial statements of the Company for the fiscal year ended
December 31, 1997, accompanied by the opinion thereon of Ernst & Young L.L.P.,
independent public accountants. The Company has also delivered to you complete
and correct copies of its quarterly reports to stockholders sent or made
available to stockholders, and its quarterly reports on Form 10-QSB filed with
the Securities and Exchange Commission, in each case for fiscal periods
subsequent to December 31, 1997, and current reports on Form 8-K, proxy
statements, registration statements and prospectuses, if any, filed by the
Company with the Securities and Exchange Commission since such date. All
financial statements included in the foregoing materials delivered to you
(except as otherwise specified therein) have been prepared in accordance with
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<PAGE>
generally accepted accounting principles applied on a consistent basis
throughout the periods specified, subject (in the case of the financial
statements included in such quarterly reports) to normal and customary year-end
audit adjustments, and present fairly the financial position of the Company and
its Subsidiaries as of the respective dates specified and the results of their
operations and cash flows for the respective periods specified.
5.5. CHANGES, ETC. Since December 31, 1997, (a) there has been no
change in the assets, liabilities or financial condition of the Company or any
of its Subsidiaries, other than changes in the ordinary course of business which
have not been, either in any case or in the aggregate, materially adverse to the
Company or any of its Subsidiaries, (b) neither the business, operations or
affairs nor any of the properties or assets of the Company or its Subsidiaries
have been affected by any occurrence or development (whether or not insured
against) which has been, either in any case or in the aggregate, materially
adverse to the Company or any of its Subsidiaries and (c) the Company has not as
of the date of this Agreement directly or indirectly declared, ordered, paid,
made or set apart any sum or property for any Restricted Payment or agreed to do
so.
5.6. TAX RETURNS AND PAYMENTS. The Company and its Subsidiaries have
filed all material tax returns required by law to be filed by them and have paid
all taxes, assessments and other governmental charges levied upon the Company
and its Subsidiaries, and any of their respective properties, assets, income or
franchises which are due and payable, other than those presently payable without
penalty or interest and those presently being contested in good faith by
appropriate proceedings diligently conducted for which such reserves or other
appropriate provision, if any, as shall be required by generally accepted
accounting principles shall have been made. The Federal income tax liabilities
of the Company and its Subsidiaries have been finally determined by the Internal
Revenue Service and satisfied, or the time for audit has expired, for all fiscal
periods through December 31, 1993. The charges, accruals and reserves on the
books of the Company and its Subsidiaries in respect of Federal, state and
foreign income taxes for all fiscal periods are adequate in all material
respects in the opinion of the Company, and the Company knows of no unpaid
assessment for additional Federal, state
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or foreign income taxes for any period or any basis for any such assessment.
5.7. DEBT. Schedule B-1 correctly describes all secured and
unsecured Debt of the Company and its Subsidiaries outstanding in a principal
amount greater than $100,000, or for which the Company or any of its
Subsidiaries has commitments, on the date of this Agreement, and identifies the
collateral securing any secured Debt. Schedule B-2 correctly describes all such
Debt that, on the Closing Date and after giving effect to the transactions
contemplated by this Agreement, will remain outstanding. Neither the Company
nor any of its Subsidiaries is in default with respect to any Debt or any
instrument or agreement relating thereto.
5.8. CAPITAL STOCK AND RELATED MATTERS. As of the Closing Date, the
authorized capital stock of the Company will consist of 50,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock, par value $.005 per share.
On the Closing Date after giving effect to the transactions contemplated by this
Agreement and the Operative Agreements, 16,648,414 shares of the Common Stock
and no shares of such Preferred Stock will be issued and outstanding. The
shares of Common Stock issuable upon exercise of the Warrants have been duly
authorized and validly reserved for issuance upon such exercise and, when so
issued, will be validly issued, fully paid and non-assessable. As of the
Closing Date, the Company will not have outstanding securities convertible into
or exchangeable for any shares of its capital stock, nor will it have
outstanding any rights to subscribe for or to purchase, or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any shares of its capital stock or any securities convertible into or
exchangeable for any shares of its capital stock, other than those listed on
Schedule D.
5.9. TITLE TO PROPERTIES; LIENS. Each of the Company and its
Subsidiaries has good and sufficient title to its properties and assets,
including the properties and assets reflected in the financial statements
referred to in section 5.4 (except properties and assets disposed of since such
date in the ordinary course of business and properties and assets held under
Capital Leases referred to in Schedule B), and none of such properties or assets
is subject to any Liens except such as are of the character permitted by
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section 10.3. The Company and its Subsidiaries enjoy peaceful and
undisturbed possession under all leases necessary in any material respect for
the operation of their respective properties and assets, and all such leases
are valid and subsisting and are in full force and effect. Except to perfect
and protect security interests of the character permitted by section 10.3, no
presently effective financing statement under the Uniform Commercial Code
which names the Company or any Subsidiary as debtor is on file in any
jurisdiction and neither the Company nor any Subsidiary has signed any
presently effective financing statement or any presently effective security
agreement authorizing any secured party thereunder to file any such financing
statement.
5.10. LITIGATION, ETC. There is no action, proceeding or
investigation pending or threatened (or any basis therefor known to the Company)
which questions the validity of this Agreement, the Notes or the Warrants or any
action taken or to be taken pursuant to this Agreement, the Notes or the
Warrants, or which might result, either in any case or in the aggregate, in any
material adverse change in the business, operations, affairs, condition
(financial or otherwise), properties or assets of the Company or any of its
Subsidiaries, or in any liability on the part of the Company or any of its
Subsidiaries, which would be material to the Company or any of its Subsidiaries.
5.11. COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the Company
nor any of its Subsidiaries is in violation of any term of its certificate or
articles of incorporation or by-laws, and neither the Company nor any of its
Subsidiaries is in violation of any term of any agreement or instrument to which
it is a party or by which it is bound or, to the best of the Company's
knowledge, any term of any applicable law, ordinance, rule or regulation of any
governmental authority or any term of any applicable order, judgment or decree
of any court, arbitrator or governmental authority, the consequences of which
violation would have a materially adverse effect on the business, operations,
affairs, condition (financial or otherwise), properties or assets of the Company
or any of its Subsidiaries; the execution, delivery and performance of this
Agreement, the Notes and the Warrants will not result in any violation of or be
in conflict with or constitute a default under any such term or result in the
creation of (or impose any obligation on the Company or any of its Subsidiaries
to create) any Lien upon any of the properties
15
<PAGE>
or assets of the Company or any of its Subsidiaries pursuant to any such term;
and there is no such term which materially adversely affects the business,
operations, affairs, condition (financial or otherwise), properties or assets of
the Company or any of its subsidiaries.
5.12. GOVERNMENTAL CONSENT. No consent, approval or authorization
of, or declaration or filing with, any governmental authority on the part of the
Company or any of its Subsidiaries is required for the valid execution and
delivery of this Agreement or the valid offer, issue, sale and delivery of the
Notes or the Warrants pursuant to this Agreement.
5.13. PATENTS, TRADEMARKS, AUTHORIZATIONS, ETC. The Company and its
Subsidiaries own or possess all patents, trademarks, service marks, trade names,
copyrights, licenses and authorizations, and all rights with respect to the
foregoing, necessary for the conduct of their respective businesses as now
conducted, without any known material conflict with the rights of others.
5.14. OFFER OF NOTES. Neither the Company nor CIBC Oppenheimer Corp.
(the only Person authorized or employed by the Company as financial adviser or
otherwise as agent in connection with the offering or sale of the Notes or
Warrants or any similar securities of the Company) has directly or indirectly
offered the Notes or the Warrants or any part thereof or any similar securities
for sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, anyone other than you and not
more than 50 other institutional investors. Neither the Company nor anyone
acting on its behalf has taken or will take any action which would subject the
issuance and sale of the Notes or the Warrants to the registration and
prospectus delivery provisions of the Securities Act.
5.15. FEDERAL RESERVE REGULATIONS. The Company will not, directly or
indirectly, use any of the proceeds of the sale of the Notes and Warrants for
the purpose, whether immediate, incidental or ultimate, of buying a "margin
stock" or of maintaining, reducing or retiring any indebtedness originally
incurred to purchase a stock that is currently a "margin stock", or for any
other purpose which might constitute this transaction a "purpose credit", in
each case within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System (12 C.F.R. 207, as
16
<PAGE>
amended) or Regulation U of such Board (12 C.F.R. 221, as amended), or otherwise
take or permit to be taken any action which would involve a violation of such
Regulation G or Regulation U or of Regulation T (12 C.F.R. 220, as amended) or
Regulation X (12 C.F.R. 224, as amended) or any other regulation of such Board.
No Debt being reduced or retired out of the proceeds of the sale of the Notes
and Warrants was incurred for the purpose of purchasing or carrying any such
"margin stock", and neither the Company nor any of its Subsidiaries either owns
or has any present intention of acquiring any such "margin stock".
5.16. ENVIRONMENTAL MATTERS. (a) Each of the Company and its
Subsidiaries has complied and is in compliance with all Environmental Laws in
all material respects.
(b) Each of the Company and its Subsidiaries has obtained and
complied with, and is in compliance with, all permits, licenses and other
authorizations that are required pursuant to Environmental Laws for the
occupation of its facilities and the operation of its business, without
transfer, reissuance, or other governmental approval or action.
(c) Neither the Company nor any of its Subsidiaries has received any
written claim, complaint, citation, report or other written or oral notice
regarding any liabilities or potential liabilities, including any investigatory,
remedial or corrective obligations, arising under Environmental Laws.
(d) No underground storage tanks or surface impoundments or
asbestos-containing material in any form or condition exists at any property
owned or occupied by the Company or any of its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled, or released any substance, including without limitation any hazardous
substance, or owned or operated any facility or property, in a manner that would
reasonably be expected to give rise to liabilities of the Company or any of its
Subsidiaries for response costs, natural resource damages or attorneys' fees
pursuant to CERCLA or other Environmental Laws.
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(f) No facts, events or conditions relating to the past or present
facilities, properties or operations of the Company or its Subsidiaries will
prevent, hinder or limit continued compliance with Environmental Laws, give rise
to any investigatory, remedial or corrective obligations pursuant to
Environmental Laws, or give rise to any other liabilities pursuant to
Environmental Laws, including without limitation any relating to onsite or
offsite Releases (as defined in CERCLA) or threatened Releases of hazardous or
otherwise regulated materials, substances or wastes, personal injury, property
damage or natural resources damage.
(g) Neither the Company nor any of its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any liability or
corrective or remedial obligation of any other Person relating to Environmental
Laws.
5.17. STATUS UNDER CERTAIN FEDERAL STATUTES. The Company is not
(a) an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended;
(b) a "holding company" or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended; (c) a "public utility" as such term is defined in the Federal
Power Act, as amended; or (d) a "rail carrier or a person controlled by or
affiliated with a rail carrier", within the meaning of Title 49, U.S.C., or a
"carrier" to which 49 U.S.C. Section 11301(b)(1) is applicable.
5.18. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the issue and
sale of the Notes and Warrants by the Company nor its use of the proceeds
thereof as contemplated by this Agreement will violate the Foreign Assets
Control Regulations, the Transaction Control Regulations, the Cuban Assets
Control Regulations, the Foreign Funds Control Regulations, the Iranian Assets
Control Regulations, the Iranian Transactions Regulations, the Iraqi Sanctions
Regulations, the Libyan Sanctions Regulations, or any similar foreign assets
control or export control regulations of the United States Treasury Department
(31 C.F.R., Subtitle B, Chapter V as amended) or the restrictions set forth in
Executive Orders No. 8389, 9193, 12543 (Libya), 12544 (Libya), 12801 (Libya),
12722 (Iraq) or 12724 (Iraq),
18
<PAGE>
as amended, of the President of the United States of America or of any rules or
regulations issued thereunder.
5.19. COMPLIANCE WITH ERISA. (a) Neither the Company nor any of its
Subsidiaries has breached the fiduciary rules of ERISA or engaged in any
non-exempt prohibited transaction in connection with which the Company or any of
its Subsidiaries could be subjected to (in the case of any such breach) a suit
for damages or (in the case of any such prohibited transaction) either a civil
penalty assessed under section 502(i) of ERISA or a tax imposed by section 4975
of the Code, which suit, penalty or tax, in any case, would be materially
adverse to the Company or any of its Subsidiaries.
(b) No Plan (other than a Multiemployer Plan) or any trust created
under any such Plan has been terminated since September 2, 1974. Neither the
Company nor any Related Person has within the past six years contributed to a
single employer plan which has at least two contributing sponsors who are not
Related Persons, or ceased operations at a facility in a manner which could
result in liability under section 4062(e) of ERISA. No liability to the PBGC
has been or is expected by the Company to be incurred with respect to any Plan
(other than a Multiemployer Plan) by the Company or any Subsidiary which is or
would be materially adverse to the Company or such Subsidiary. There has been
no reportable event (within the meaning of section 4043(c) of ERISA) or any
other event or condition with respect to any Plan (other than a Multiemployer
Plan) which presents a risk of termination of any such Plan by the PBGC under
circumstances which in any case could result in liability which would be
materially adverse to the Company or any of its Subsidiaries.
(c) Full payment has been made of all amounts which the Company or
any Related Person is required under the terms of each Plan to have paid as
contributions to such Plan as of the last day of the most recent fiscal year of
such Plan ended prior to the date hereof, and no accumulated funding deficiency
(as defined in section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Plan (other than a Multiemployer Plan).
(d) The present value of all vested accrued benefits under all Plans
(other than Multiemployer Plans), determined as of the end of the Company's most
recently ended fiscal year on the basis of reasonable actuarial
19
<PAGE>
assumptions, did not exceed the current value of the assets of such Plans
allocable to such vested accrued benefits. The terms "present value", "current
value", and "accrued benefit" have the meanings specified in section 3 of ERISA.
(e) The Company is not and has never been obligated to contribute to
any "multiemployer plan" (as such term is defined in section 4001(a)(3) of
ERISA).
(f) The execution and delivery of this Agreement and the issue and
sale of the Notes hereunder will not involve any transaction which is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975 of the Code. The representation by the
Company in the preceding sentence is made in reliance upon and subject to the
accuracy of your representation in section 6.3 of this Agreement as to the
source of the funds used to pay the purchase price of the Notes purchased by
you. The Company has delivered to you, if requested by you, a complete and
correct list of all employee benefit plans with respect to which the Company is
a party in interest and with respect to which its securities are employer
securities. As used in this section 5.19(f), the terms "employee benefit
plans" and "party in interest" have the respective meanings specified in section
3 of ERISA and the term "employer securities" has the meaning specified in
section 407(d)(1) of ERISA.
5.20. CERTAIN FEES. Except for the fees referred to in section 3 and
except for a placement fee payable to CIBC Oppenheimer Corp. in the amount of
$1,050,000, no broker's or finder's fee or commission has been paid or will be
payable by the Company with respect to the offer, issue and sale of the Notes or
the Warrants.
5.21. DISCLOSURE. Neither this Agreement, the Private Placement
Memorandum, the Annual Reports, the Form 10-K nor any other document,
certificate or instrument delivered to you by or on behalf of the Company in
connection with the transactions contemplated by this Agreement contains (in
each case, as of its date) any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained in
this Agreement and in such other documents, certificates or instruments not
misleading. There is no fact (other than matters of a general economic or
political nature which do not affect the Company uniquely) known to the Company
which materially adversely affects or in the future may (so far as
20
<PAGE>
the Company can now foresee) materially adversely affect the business,
operations, affairs, condition (financial or otherwise), properties or assets of
the Company which has not been set forth in this Agreement or in the other
documents, certificates and instruments delivered to you by or on behalf of the
Company specifically for use in connection with the transactions contemplated by
this Agreement.
6. PURCHASER REPRESENTATIONS. 6.1. PURCHASE INTENT. You represent
that you are purchasing the Notes and Warrants hereunder for your own account,
not with a view to the distribution thereof or with any present intention of
distributing or selling any of such Notes or Warrants except in compliance with
the Securities Act and any applicable state securities laws, PROVIDED that the
disposition of your property shall at all times be within your control.
6.2. STATUS OF PURCHASER. You represent that you are an "accredited
investor" within the meaning of Rule 502 of the Securities Act, with such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of a prospective investment in the Notes and
Warrants and that you are capable of bearing the economic risks of such
investment. You understand that no public market now exists for the Notes or
the Warrants and there can be no assurance that a public market will ever exist
for such securities. You represent that you have had an opportunity to discuss
the Company's business, management and financial affairs with the Company's
management and an opportunity to review the Company's facilities.
6.3. SOURCE OF FUNDS. You represent that all or a portion of the
funds to be used by you to pay the purchase price of the Notes and Warrants
consists of funds which do not constitute assets of any employee benefit plan
and the remaining portion, if any, of such funds consists of funds which may be
deemed to constitute assets of one or more specific employee benefit plans,
complete and accurate information as to the identity of each of which you have
delivered to the Company. As used in this section 6.3, the terms "employee
benefit plan" and "government plan" shall have the respective meanings assigned
to such terms in section 3 of ERISA.
7. ACCOUNTING; FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Company will maintain, and will cause each
21
<PAGE>
of its Subsidiaries to maintain, a system of accounting established and
administered in accordance with generally accepted accounting principles, and
will accrue, and will cause each of its Subsidiaries to accrue, all such
liabilities as shall be required by generally accepted accounting principles.
The Company will deliver (in duplicate) to you, so long as you shall be entitled
to purchase Notes under this Agreement or you or your nominee shall be the
holder of any Notes, and to each other holder of any Notes:
(a) not later than two business days following the earlier to occur
of (i) the forty-fifth day after the end of each of the first three
quarterly fiscal periods in each fiscal year of the Company and (ii) the
date of the filing thereof with the Securities and Exchange Commission,
consolidated balance sheets of the Company and its Subsidiaries as at the
end of such period and the related consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for
such period and (in the case of the second and third quarterly periods) for
the period from the beginning of the current fiscal year to the end of such
quarterly period, setting forth in each case in comparative form the
consolidated figures for the corresponding periods of the previous fiscal
year, all in reasonable detail and certified by a principal financial
officer of the Company as presenting fairly, in accordance with generally
accepted accounting principles (except for the absence of notes thereto)
applied (except as specifically set forth therein) on a basis consistent
with such prior fiscal periods, the information contained therein, subject
to changes resulting from normal year-end audit adjustments; PROVIDED that
so long as the Company is subject to the reporting provisions of the
Exchange Act, the timely filing (including all permissible extension
periods provided under Rule 12b-25 under the Exchange Act) and the delivery
of copies of the Company's quarterly report on Form 10-Q or 10-QSB for such
period will satisfy the requirements of this paragraph (a);
(b) not later than two business days following the earlier to occur
of (i) the ninetieth day after the end of each fiscal year of the Company
and (ii) the date of the filing thereof with the Securities and Exchange
Commission, consolidated balance sheets of the
22
<PAGE>
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income, stockholders' equity and cash flows of
the Company and its Subsidiaries for such fiscal year, setting forth in
each case in comparative form the consolidated figures for the previous
fiscal year, all in reasonable detail and accompanied by a report thereon
of Ernst & Young L.L.P. or other "Big Five" independent public accountants,
which report shall state that such consolidated financial statements
present fairly the financial position of the Company and its Subsidiaries
as at the dates indicated and the results of their operations and their
cash flows for the periods indicated in conformity with generally accepted
accounting principles applied on a basis consistent with prior years
(except as otherwise specified in such report) and that the audit by such
accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards;
PROVIDED that so long as the Company is subject to the reporting provisions
of the Exchange Act, the timely filing (including all permissible extension
periods provided under Rule 12B-25 under the Exchange Act) and the delivery
of copies of the Company's annual report on Form 10-K or Form 10-KSB for
such period will satisfy the requirements of this paragraph (b);
(c) together with each delivery of financial statements pursuant to
subdivisions (a) and (b) of this section 7, an Officers' Certificate (i)
stating that the signers have reviewed the terms of this Agreement and of
the Notes and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition of the
Company and its Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do not
have knowledge of the existence as at the date of the Officers'
Certificate, of any condition or event which constitutes an Event of
Default or Potential Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof
and what action the Company has taken or is taking or proposes to take with
respect thereto, and (ii) demonstrating in reasonable detail compliance
during and at the end of such accounting period with
23
<PAGE>
the restrictions contained in sections 10.1, 10.2 and 10.3;
(d) together with each delivery of financial statements pursuant to
subdivision (b) of this section 7, a written statement by the independent
public accountants giving the report thereon (i) stating that their audit
examination has included a review of the terms of this Agreement and of the
Notes as they relate to accounting matters and that such review is
sufficient to enable them to make the statement referred to in clause (iii)
of this subdivision (d) (it being understood that no special audit
procedures, other than those required by generally accepted auditing
standards, shall be required), (ii) stating whether, in the course of their
audit examination, they obtained knowledge (and whether, as of the date of
such written statement, they have knowledge) of the existence of any
condition or event which constitutes an Event of Default or Potential Event
of Default, and, if so, specifying the nature and period of existence
thereof, and (iii) stating that they have examined the Officers'
Certificate delivered in connection therewith pursuant to subdivision (c)
of this section 7 and that the matters set forth in such Officers'
Certificate pursuant to clauses (ii) and (iii) of such subdivision (c) have
been properly stated in accordance with the terms of this Agreement;
(e) in addition to the financial statements required by subdivisions
(a) and (b) of this section 7.1, within 30 days after the end of each
month, consolidated balance sheets of the Company and its Subsidiaries as
at the end of such month and the related consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for
such month and (in the case of the second through twelfth month of the
fiscal year) for the period from the beginning of the current fiscal year
to the end of such month, setting forth in each case in comparative form
the consolidated figures for the corresponding periods of the previous
fiscal year, all in reasonable detail and certified by a principal
financial officer of the Company as having been prepared in accordance with
generally accepted accounting principles (except for the absence of notes
thereto) applied (except as specifically set forth therein) on a basis
consistent with such prior fiscal
24
<PAGE>
periods, subject to changes resulting from normal year-end audit
adjustments;
(f) promptly upon receipt thereof, copies of all final reports
submitted to the Company by independent public accountants in connection
with each annual, interim or special audit of the books of the Company or
any Subsidiary made by such accountants, including, without limitation, the
comment letter submitted by such accountants to management in connection
with their annual audit;
(g) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its public security holders, of all regular and
periodic reports and all registration statements and prospectuses filed by
the Company or any Subsidiary with any securities exchange or with the
Securities and Exchange Commission or any governmental authority succeeding
to any of its functions, and of all press releases and other statements
made available generally by the Company or any Subsidiary to the public
concerning material developments in the business of the Company or its
Subsidiaries;
(h) within two business days following any principal officer of the
Company or any other officer of the Company involved in its financial
administration obtaining knowledge of any condition or event which
constitutes an Event of Default or Potential Event of Default, or that the
holder of any Note has given any notice or taken any other action with
respect to a claimed Event of Default or Potential Event of Default under
this Agreement or that any Person has given any notice to the Company or
any Subsidiary or taken any other action with respect to a claimed default
or event or condition of the type referred to in section 11(f), an
Officers' Certificate describing the same and the period of existence
thereof and what action the Company has taken, is taking and proposes to
take with respect thereto;
(i) within two business days following any principal officer of the
Company or any other officer of the Company involved in its financial
administration obtaining knowledge of the occurrence of any (i) "reportable
event", as such term is defined in section
25
<PAGE>
4043 of ERISA, or (ii) non-exempt "prohibited transaction", as such term is
defined in section 4975 of the Code, in connection with any Plan or any
trust created thereunder, a written notice specifying the nature thereof,
what action the Company has taken, is taking and proposes to take with
respect thereto, and, when known, any action taken or threatened by the
Internal Revenue Service or the PBGC with respect thereto, PROVIDED that,
with respect to the occurrence of any "reportable event" as to which the
PBGC has waived the 30-day reporting requirement, such written notice need
be given only at the time notice is given to the PBGC; and
(j) with reasonable promptness, such other financial reports and
information and data with respect to the Company or any of its Subsidiaries
as from time to time may be reasonably requested.
8. INSPECTION; CONFIDENTIALITY. 8.1. INSPECTION. The Company will
permit any authorized representatives designated by you, so long as you shall be
entitled to purchase Notes under this Agreement or you or your nominee shall be
the holder of any Notes, or by any other holder of at least 5% of the original
principal amount of the Notes, without expense to the Company, to visit and
inspect any of the properties of the Company or any of its Subsidiaries,
including its and their books of account, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants, all at such reasonable
times and as often as may be reasonably requested.
8.2. CONFIDENTIALITY. You agree that you will not disclose without
the prior consent of the Company (other than to your employees, officers,
directors, advisors, auditors or counsel or to another holder of the Notes) any
information with respect to the Company or any Subsidiary which is furnished
pursuant to section 7 or this section 8 and which is designated by the Company
to you in writing as confidential, PROVIDED that you may disclose any such
information (a) as has become generally available to the public, (b) as may be
required in any report, statement or testimony submitted to any municipal, state
or Federal regulatory body having or claiming to have jurisdiction over you or
to the National Association of Insurance Commissioners or similar organizations
or their successors,
26
<PAGE>
(c) as may be required in response to any summons or subpoena or in connection
with any litigation, (d) in order to comply with any law, order, regulation or
ruling applicable to you or (e) to any prospective transferee in connection with
any contemplated transfer of any of the Notes by you who has, prior to your
disclosure of information to such transferee, agreed to be bound by the terms of
this section 8.2 as if such transferee were a party to this Agreement.
9. PREPAYMENT OF NOTES. 9.1. OPTIONAL PREPAYMENTS WITH PREMIUM.
The Company may, at its option, upon notice as provided in section 9.4, prepay
at any time all, or from time to time any part (in an amount of at least
$1,000,000 in the aggregate or an integral multiple of $1,000 in excess thereof)
of, the Notes at the principal amount so prepaid, plus the premium determined in
accordance with 9.3.
9.2. CONTINGENT PREPAYMENTS UPON CHANGE OF CONTROL. In the event of
the occurrence of a Change of Control, the Company shall give prompt written
notice thereof to each holder of the Notes, by facsimile transmission or
registered mail (and shall confirm such notice by prompt telephonic advice to an
investment officer of each such holder), which notice shall contain a written,
irrevocable offer by the Company to prepay, on a date specified in such notice
(which date shall be not less than 30 days and not more than 60 days after the
date of such notice), the Notes held by such holder in full (and not in part).
Upon the acceptance of such offer by such holder mailed to the Company at least
10 days prior to the date of prepayment specified in the Company's offer, such
prepayment shall be made at the principal amount of the Notes so prepaid, plus a
premium equal to 1.0% of the principal amount of the Notes so prepaid. Any
offer by the Company to prepay the Notes pursuant to this section 9.2 shall be
accompanied by an Officers' Certificate certifying that the conditions of this
section 9.2 have been fulfilled and specifying the particulars of such
fulfillment. If the holder of any Notes shall accept such offer, the principal
amount of such Notes shall become due and payable on the date specified in such
offer. In the event that there shall have been a partial prepayment of the
Notes under this section 9.2, the Company shall promptly give notice to the
holders of the Notes, accompanied by an Officers' Certificate setting forth the
principal amount of each of
27
<PAGE>
the Notes that was prepaid and specifying how each such amount was determined.
9.3. PREMIUM TABLE. For the purposes of sections 9.1, 9.2 and 11,
whenever a premium is required to be paid upon prepayment of any Note, or upon
the acceleration of the maturity of any Note, the applicable premium shall be
determined in accordance with the following table, depending upon the period in
which the date fixed for such prepayment, or the date of such acceleration,
occurs:
<TABLE>
<CAPTION>
12-Month Period
Commencing August 25, 1998 Premium
-------------------------- -------
<S> <C>
1998 Make-Whole Premium
1999 Make-Whole Premium
2000 6.0%
2001 3.0%
2002 0.0%
</TABLE>
9.4. NOTICE OF OPTIONAL PREPAYMENTS; OFFICERS' CERTIFICATE. The
Company will give each holder of any Notes written notice of each optional
prepayment under section 9.1 not less than 30 days and not more than 60 days
prior to the date fixed for such prepayment, in each case specifying such date,
the aggregate principal amount of the Notes to be prepaid, the principal amount
of each Note held by such holder to be prepaid, and the premium, if any,
applicable to such prepayment. Such notice shall be accompanied by an Officers'
Certificate certifying that the conditions of such section have been fulfilled
and specifying the particulars of such fulfillment.
9.5. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each partial
prepayment paid or to be prepaid (except a prepayment pursuant to section 9.2 of
the Notes held by some but not all holders), the principal amount of the Notes
to be prepaid shall be allocated (in integral multiples of $1,000) among all of
the Notes at the time outstanding in proportion, as nearly as practicable, to
the respective unpaid principal amounts thereof not theretofore called for
prepayment, with adjustments, to the extent practicable, to compensate for any
prior prepayments not made exactly in such proportion.
9.6. MATURITY; SURRENDER, ETC. In the case of each prepayment, the
principal amount of each Note to be
28
<PAGE>
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the applicable premium, if any. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest and premium, if any, as aforesaid, interest on such
principal amount shall cease to accrue. Any Note paid or prepaid in full shall
be surrendered to the Company and canceled and shall not be reissued, and no
Note shall be issued in lieu of any prepaid principal amount of any Note.
9.7. ACQUISITION OF NOTES. The Company will not, and will not permit
any Subsidiary or Affiliate to, purchase, redeem or otherwise acquire, directly
or indirectly, any Note except upon the payment or prepayment thereof in
accordance with the terms of this Agreement and such Note or pursuant to a
purchase offer made pro rata to all of the holders of the Notes.
10. BUSINESS AND FINANCIAL COVENANTS. The Company covenants that
from the date of this Agreement through the Closing and thereafter so long as
any of the Notes are outstanding:
10.1. DEBT. The Company will not, and will not permit any Subsidiary
to, directly or indirectly, create, incur, assume, guarantee, or otherwise
become or remain directly or indirectly liable with respect to, any Debt, except
that the Company and any Subsidiary may become and remain liable with respect to
Debt if, on the date the Company or such Subsidiary becomes liable with respect
to such Debt and immediately after giving effect thereto and to the concurrent
retirement of any other Debt, the Company would be in compliance with all of the
terms of section 10.2 as if compliance with the terms of section 10.2 were
determined as of such date.
For the purposes of this section 10.1, any Person becoming a
Subsidiary after the date of this Agreement shall be deemed to have incurred all
of its then outstanding Debt at the time it becomes a Subsidiary, and any Person
extending, renewing or refunding any Debt shall be deemed to have incurred such
Debt at the time of such extension, renewal or refunding.
10.2. FINANCIAL COVENANTS. (a) LIMITATION ON SENIOR SECURED FUNDED
DEBT. The Company will not permit the
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<PAGE>
ratio of (i) Senior Secured Funded Debt as of each date listed in the table
below, to (ii) Consolidated EBITDA for the period of four consecutive fiscal
quarters of the Company ending on such date, to be greater than the ratio set
forth opposite such date in the table below:
<TABLE>
<CAPTION>
Quarter End Date Ratio
---------------- -----
<S> <C>
September 30, 1998 3.75 to 1.0
December 31, 1998 3.00 to 1.0
March 31, 1999 3.00 to 1.0
June 30, 1999 3.00 to 1.0
September 30, 1999 3.00 to 1.0
December 31, 1999 3.00 to 1.0
March 31, 2000 2.50 to 1.0
June 30, 2000 2.50 to 1.0
September 30, 2000 2.50 to 1.0
December 31, 2000 2.50 to 1.0
March 31, 2001 2.50 to 1.0
and thereafter
</TABLE>
(b) LIMITATION ON TOTAL FUNDED DEBT. The Company will not permit the
ratio of (i) total Funded Debt as of each date listed in the table below, to
(ii) Consolidated EBITDA for the period of four consecutive fiscal quarters of
the Company ending on such date, to be greater than the ratio set forth opposite
such date in the table below:
<TABLE>
<CAPTION>
Quarter End Date Ratio
---------------- -----
<S> <C>
September 30, 1998 7.00 to 1.0
December 31, 1998 5.00 to 1.0
March 31, 1999 5.00 to 1.0
June 30, 1999 4.50 to 1.0
September 30, 1999 4.50 to 1.0
December 31, 1999 4.50 to 1.0
March 31, 2000 3.50 to 1.0
June 30, 2000 3.50 to 1.0
September 30, 2000 3.50 to 1.0
December 31, 2000 3.50 to 1.0
March 31, 2001 3.50 to 1.0
June 30, 2001 3.50 to 1.0
September 30, 2001 3.50 to 1.0
December 31, 2001 3.50 to 1.0
March 31, 2002 3.50 to 1.0
June 30, 2002 3.50 to 1.0
September 30, 2002 3.00 to 1.0
and thereafter
</TABLE>
30
<PAGE>
(c) MINIMUM INTEREST COVERAGE. The Company will not permit the ratio
of (i) Consolidated EBITDA for the period of four consecutive fiscal quarters of
the Company ending on each date listed in the table below, to (ii) Interest
Expense for such period, to be less than the ratio set forth opposite such date
in the table below:
<TABLE>
<CAPTION>
Quarter End Date Ratio
---------------- -----
<S> <C>
September 30, 1998 1.60 to 1.0
December 31, 1998 2.00 to 1.0
March 31, 1999 2.50 to 1.0
June 30, 1999 2.50 to 1.0
September 30, 1999 2.50 to 1.0
December 31, 1999 2.50 to 1.0
March 31, 2000 2.50 to 1.0
June 30, 2000 2.50 to 1.0
September 30, 2000 2.50 to 1.0
and thereafter
</TABLE>
(d) LIMITATION ON CAPITAL EXPENDITURES. The Company will not make or
commit to make any Capital Expenditure if the amount thereof, taken together
with all other Capital Expenditures made by the Company during the then fiscal
year, would exceed $17,500,000.
10.3. LIENS, ETC. The Company will not, and will not permit any
Subsidiary to, directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any property or asset (including any document or
instrument in respect of goods or accounts receivable) of the Company or any
Subsidiary, whether now owned or held or hereafter acquired, or any income or
profits therefrom, except:
(a) Liens for taxes, assessments or other governmental charges the
payment of which is not at the time required by section 10.10;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business for
sums not yet due or the payment of which is not at the time required by
section 10.10;
(c) Liens (other than any Lien imposed by ERISA or the Code in
connection with a Plan) incurred or deposits made (i) in connection with
workers' compensation, unemployment insurance and other types of
31
<PAGE>
social security, or (ii) to secure (or to obtain letters of credit that
secure) the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, performance bonds, purchase, construction or
sales contracts and other similar obligations, in each case not incurred or
made in connection with the borrowing of money, the obtaining of advances
or credit or the payment of the deferred purchase price of property;
(d) any attachment or judgment Lien, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay;
(e) leases or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case
incidental to, and not interfering with, the ordinary conduct of the
business of the Company or any Subsidiary;
(f) Liens incurred to secure the Debt (other than subordinated Debt)
of the Company outstanding in compliance with section 10.1; and
(g) Liens existing on the date of this Agreement and securing the
Debt of the Company and its Subsidiaries referred to in the first and third
items of Schedule B-2.
For the purposes of this section 10.3, any Person becoming a Subsidiary after
the date of this Agreement shall be deemed to have incurred all of its then
outstanding Liens at the time it becomes a Subsidiary, and any Person extending,
renewing or refunding any Debt secured by any Lien shall be deemed to have
incurred such Lien at the time of such extension, renewal or refunding.
10.4. INVESTMENTS, GUARANTIES, ETC. The Company will not, and will
not permit any Subsidiary to, directly or indirectly make or own any Investment
in any Person, or create or become or be liable with respect to any Guaranty,
except:
32
<PAGE>
(a) the Company and its Subsidiaries may make and own Investments in
(i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by any agency
thereof maturing within one year from the date of acquisition thereof,
(ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year
from the date of acquisition thereof and having as at any date of
determination the highest rating obtainable from either Standard &
Poor's Corporation or Moody's Investors Service, Inc.,
(iii) commercial paper maturing no more than 270 days from the
date of creation thereof and having as at any date of determination
the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.,
(iv) certificates of deposit maturing within one year from the
date of acquisition thereof issued by commercial banks incorporated
under the laws of the United States of America or any state thereof or
the District of Columbia, each having as at any date of determination
combined capital and surplus of not less than $300,000,000 ("Permitted
Banks") or a foreign branch thereof,
(v) bankers' acceptances eligible for rediscount under
requirements of The Board of Governors of the Federal Reserve System
and accepted by Permitted Banks,
(vi) obligations of the type described in clauses (i) through
(iv) above purchased from a securities dealer designated as a "primary
dealer" by the Federal Reserve Bank of New York or a Permitted Bank as
counterparty pursuant to a repurchase agreement obligating such
counterparty to repurchase such obligations not later than 14 days
after the purchase thereof and which provides that the obligations
which are the subject thereof are held for the benefit of the Company
and its
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Subsidiaries by a custodian which is a Permitted Bank and which is not
the counterparty to the repurchase agreement in question, and
(vii) the securities of any investment company registered under
the Investment Company Act of 1940 which is a "money market fund"
within the meaning of regulations of the Securities and Exchange
Commission, or an interest in a pooled fund maintained by a Permitted
Bank having comparable investment restrictions;
(b) the Company and its Wholly-Owned Subsidiaries may make and own
Investments in any Wholly-Owned Subsidiary or any Person which
simultaneously therewith becomes a Wholly-Owned Subsidiary, if such
Wholly-Owned Subsidiary or such Person is a corporation organized under the
laws of the United States or any state thereof or the District of Columbia
or Canada or Mexico and substantially all of whose assets are located and
substantially all of whose business is conducted within the United States,
Canada or Mexico (subject to section 10.17);
(c) the Company and its Subsidiaries may continue to own their
respective Investments in Persons listed on Schedule E;
(d) the Company's Subsidiaries may become and remain liable with
respect to Guaranties of the Notes set forth in the Guaranty Agreement; and
(e) the Company's Subsidiaries may become and remain liable with
respect to Guaranties of Debt of the Company outstanding under subdivisions
(b) and (d) of section 10.11.
Notwithstanding the foregoing, no Guaranty shall be permitted by this section
10.4 unless either the maximum dollar amount of the obligation being guaranteed
is readily ascertainable by the terms of such obligation or the agreement or
instrument evidencing such Guaranty specifically limits the dollar amount of the
maximum exposure of the guarantor thereunder.
10.5. RESTRICTED PAYMENTS. The Company will not, and will not permit
any Subsidiary to, directly or indirectly declare, order, pay, make or set apart
any sum or
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property for any Restricted Payment unless, immediately after giving effect
to any such proposed action:
(a) no condition or event shall exist which constitutes an Event of
Default or Potential Event of Default; and
(b) the aggregate amount of all sums and property included in all
Restricted Payments directly or indirectly declared, ordered, paid, made or
set apart by the Company during the period from the Closing Date to and
including the date of such proposed action shall not exceed (x) $1,000,000
or (y) 25% (but, in the case of a deficit, 100%) of Consolidated Net Income
for such period, whichever is greater.
10.6. TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any Subsidiary to, directly or indirectly, engage in any transaction
(or series of related transactions) material to the Company or any of its
Subsidiaries (including, without limitation, the purchase, sale or exchange of
assets or the rendering of any service) with any Affiliate of the Company,
except upon fair and reasonable terms that are no less favorable to the Company
or such Subsidiary, as the case may be, than those which might be obtained, in
the good faith judgment of the Company, in an arm's length transaction at the
time from Persons which are not such an Affiliate.
10.7. CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. The Company will
not, and will not permit any Subsidiary to, directly or indirectly,
(a) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into it, except that:
(i) any Subsidiary may consolidate with or merge into the
Company or a Wholly-Owned Subsidiary if the Company or such
Wholly-Owned Subsidiary, as the case may be, shall be the surviving
corporation and if, immediately after giving effect to such
transaction, no condition or event shall exist which constitutes an
Event of Default or Potential Event of Default;
(ii) any corporation (other than a Subsidiary) may consolidate
with or merge into the
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Company if the Company shall be the surviving corporation and if,
immediately after giving effect to such transaction, (x) no condition
or event shall exist which constitutes an Event of Default or
Potential Event of Default, (y) substantially all of the assets of the
Company shall be located and substantially all of its business shall
be conducted within the United States, Canada and Mexico (subject to
section 10.17), and (z) the Company could incur at least $1.00 of
additional Debt in compliance with section 10.1;
(iii) any corporation may consolidate with or merge into any
Subsidiary, or any Subsidiary may consolidate with or merge into
another corporation, if the surviving corporation shall be a
Wholly-Owned Subsidiary following the consolidation or merger, and if,
immediately after giving effect to the transaction, (x) no condition
or event shall exist which constitutes an Event of Default or
Potential Event of Default, (y) substantially all of the assets of
such Wholly-Owned Subsidiary shall be located and substantially all of
its business shall be conducted within the United States, Canada and
Mexico (subject to section 10.17), and (z) the Company could incur at
least $1.00 of additional Debt in compliance with section 10.1; and
(iv) the Company may consolidate with or merge into any other
corporation if (x) the surviving corporation is a corporation
organized and existing under the laws of the United States of America
or a state thereof or Canada, with substantially all of its assets
located and substantially all of its business conducted within the
United States, Canada and Mexico (subject to section 10.17), (y) such
corporation expressly assumes, by an agreement satisfactory in
substance and form to the holders of more than 60% of the Notes
outstanding (subject to section 15.4) (which agreement may require the
delivery in connection with such assumption of such opinions of
counsel as such holders may reasonably require), the obligations of
the Company under this Agreement and under the Notes, (z) immediately
after giving effect to such transaction (and such assumption)
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(a) such corporation shall not be liable with respect to any Debt or
allow its property to be subject to any Lien which it could not become
liable with respect to or allow its property to become subject to
under this Agreement on the date of such transaction, (b) such
corporation could incur at least $1.00 of additional Debt in
compliance with section 10.1 and (c) no condition or event shall exist
which constitutes an Event of Default or a Potential Event of Default;
or
(b) sell, lease, abandon or otherwise dispose of all or substantially
all its assets, except that:
(i) any Subsidiary may sell, lease or otherwise dispose of all
or substantially all its assets to the Company or a Wholly-Owned
Subsidiary;
(ii) the Company may sell, lease or otherwise dispose of all or
substantially all its assets to any corporation into which the Company
could be consolidated or merged in compliance with subdivision (a)(iv)
of this section 10.7, PROVIDED that (x) each of the conditions set
forth in such subdivision (a)(iii) shall have been fulfilled, and (y)
no such disposition shall relieve the Company from its obligations
under this Agreement or the Notes; or
(c) sell, lease, abandon or otherwise dispose of any of its assets
(except in a transaction permitted by subdivision (b) or (d) of this
section 10.7), except that (i) the Company and its Subsidiaries may sell
their goods in the ordinary course of business, (ii) the Company and its
Subsidiaries may dispose of obsolete equipment in the ordinary course of
business and (iii) the Company may sell the capital stock or all or
substantially all of the assets of its Subsidiary Aspen Consulting, Inc.;
or
(d) enter into, or permit any of its Subsidiaries to enter into, any
sale and leaseback transaction; provided that the Company may enter into a
sale and leaseback transaction if (i) the Company could have (a) incurred
Debt pursuant to section 10.1 in an amount equal to the capitalized amount
in respect of such transaction that would appear on the balance sheet of
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the Company in accordance with generally accepted accounting principles
relating to such sale and leaseback transaction and (b) incurred a Lien to
secure such Debt pursuant to the provisions of section 10.3 hereof, and
(ii) the gross cash proceeds of such sale and leaseback transaction are at
least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to
the holders of the Notes) of the property that is the subject of such sale
and leaseback transaction.
10.8. SUBSIDIARY STOCK AND INDEBTEDNESS. The Company will not, and
will not permit any Subsidiary to:
(a) directly or indirectly sell, assign, pledge or otherwise dispose
of any shares of stock of (or warrants, rights or options to acquire stock
of) any Subsidiary except to a Wholly-Owned Subsidiary or a corporation
that becomes a Wholly-Owned Subsidiary upon consummation of the
transaction, or as directors' qualifying shares if required by applicable
law;
(b) permit any Subsidiary directly or indirectly to sell, assign,
pledge or otherwise dispose of any shares of stock of (or warrants, rights
or options to acquire stock of) any other Subsidiary, except to the Company
or a Wholly-Owned Subsidiary or as directors' qualifying shares if required
by applicable law;
(c) permit any Subsidiary to have outstanding any shares of Preferred
Stock other than shares of Preferred Stock which are owned by the Company
or a Wholly-Owned Subsidiary; or
(d) permit any Subsidiary directly or indirectly to issue or sell
(including, without limitation, in connection with a merger or
consolidation of a Subsidiary otherwise permitted by section 10.7(a)) any
shares of its stock (or warrants, rights or options to acquire its stock)
except to the Company, a Wholly-Owned Subsidiary or a corporation that
becomes a Wholly-Owned Subsidiary upon consummation of the transaction, or
as directors' qualifying shares if required by applicable law.
10.9. CORPORATE EXISTENCE, ETC.; BUSINESS. The Company will at all
times preserve and keep in full force
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and effect its corporate existence, and rights and franchises deemed material
to its business, and those of each of its Subsidiaries, except as otherwise
specifically permitted by section 10.7 and except that the corporate
existence of any Subsidiary may be terminated if, in the good faith judgment
of the Board, such termination is in the best interest of the Company and is
not disadvantageous to the holders of the Notes. The Company will not, and
will not permit any Subsidiary to, engage in any business other than the
business of developing, marketing and selling proprietary biological and
traditional chemical products for application to turf and crop problems in
the golf and agriculture industries, and other activities incidental or
related to such business.
10.10. PAYMENT OF TAXES AND CLAIMS. The Company will, and will cause
each Subsidiary to, pay all material taxes, assessments and other governmental
charges imposed upon it or any of its properties or assets or in respect of any
of its franchises, business, income or profits before any penalty or interest
accrues thereon, and all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums which have become due and
payable and which by law have or might become a Lien upon any of its properties
or assets, PROVIDED that no such charge or claim need be paid if being contested
in good faith by appropriate proceedings promptly initiated and diligently
conducted and if such reserves or other appropriate provision, if any, as shall
be required by generally accepted accounting principles shall have been made
therefor.
10.11. COMPLIANCE WITH ERISA. The Company will not, and will not
permit any Subsidiary to,
(a) engage in any transaction in connection with which the Company or
any Subsidiary could be subject to either a civil penalty assessed pursuant
to section 502(i) of ERISA or a tax imposed by section 4975 of the Code,
terminate or withdraw from any Plan (other than a Multiemployer Plan) in a
manner, or take any other action with respect to any such Plan (including,
without limitation, a substantial cessation of operations within the
meaning of section 4062(e) of ERISA), which could result in any liability
of the Company or any Subsidiary to the PBGC or to a trustee appointed
under section 4042(b) or (c) of ERISA, incur any liability on account of a
termination of a Plan
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under section 4064 of ERISA, fail to make full payment when due of all
amounts which, under the provisions of any Plan, the Company or any
Subsidiary is required to pay as contributions thereto, or permit to exist
any accumulated funding deficiency, whether or not waived, with respect to
any Plan (other than a Multiemployer Plan), if, in any such case, such
penalty or tax or such liability, or the failure to make such payment, or
the existence of such deficiency, as the case may be, could have a material
adverse effect on the Company or any of its Subsidiaries;
(b) permit the present value of all vested accrued benefits under all
Plans maintained at such time by the Company and any Subsidiary (other than
Multiemployer Plans) guaranteed under Title IV of ERISA to exceed the
current value of the assets of such Plans allocable to such vested accrued
benefits by more than $1,000,000;
(c) permit the aggregate complete or partial withdrawal liability
under Title IV of ERISA with respect to Multiemployer Plans incurred by the
Company and its Subsidiaries to exceed $1,000,000; or
(d) permit the sum of (i) the amount by which the current value of
all vested accrued benefits referred to in subdivision (b) of this section
10.11 exceeds the current value of the assets referred to in such
subdivision (b) and (ii) the amount of the aggregate incurred withdrawal
liability referred to in subdivision (c) of this section 10.11 to exceed
$1,000,000.
For the purposes of subdivisions (c) and (d) of this section 10.11, the amount
of the withdrawal liability of the Company and its Subsidiaries at any date
shall be the aggregate present value of the amount claimed to have been incurred
less any portion thereof as to which the Company reasonably believes, after
appropriate consideration of possible adjustments arising under sections 4219
and 4221 of ERISA, it and its Subsidiaries will have no liability, PROVIDED that
the Company shall obtain prompt written advice from independent actuarial
consultants supporting such determination.
10.12. MAINTENANCE OF PROPERTIES; INSURANCE. The Company will
maintain or cause to be maintained in good
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repair, working order and condition all properties used or useful in the
business of the Company and its Subsidiaries and from time to time will make
or cause to be made all appropriate repairs, renewals and replacements
thereof, except where the failure to make any repairs, renewals, or
replacements would not have a material adverse effect on the Company. The
Company will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business and
the properties and business of its Subsidiaries against loss or damage of the
kinds customarily insured against by corporations of established reputation
engaged in the same or similar business and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances by
such other corporations. Such insurance may be subject to co-insurance,
deductibility or similar clauses which, in effect, result in self-insurance
of certain losses, PROVIDED that such self-insurance is in accord with the
approved practices of corporations similarly situated and adequate insurance
reserves are maintained in connection with such self-insurance.
10.13. ADDITIONAL GUARANTIES. The Company shall cause any Person
that hereafter becomes a Subsidiary of the Company to execute and deliver to the
holders of the Notes a Guaranty Agreement with respect to the obligations of the
Company hereunder and under the Notes, substantially in the form of Exhibit D,
with such changes to such form as may be appropriate to reflect the identity and
circumstances of the guarantor.
10.14. OTHER LOAN AGREEMENTS. The Company will not enter into any
amendment or modification of the Credit Agreement that would:
(a) accelerate the amount or the time of any prepayment or payment of
the principal amount of Debt outstanding under the Credit Agreement; or
(b) provide for per annum interest rates payable on the Debt
outstanding under the Credit Agreement at any time in excess of 2.00% over
the per annum interest rates that would otherwise be payable on such Debt
at such time in accordance with the applicable provisions of the Credit
Agreement as in effect on the Closing Date; or
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(c) reduce the commitment of the lenders under the Credit Agreement
to provide revolving credit loans to the Company or it Subsidiaries
(excluding a voluntary reduction by the Company of the revolving credit
commitment pursuant to the terms of the Credit Agreement);
without, in each case, obtaining the prior written consent to such amendment or
change of the holders of more than 60% in principal amount of the Notes
outstanding (subject to section 15.4).
10.15. RESTRICTIONS AFFECTING SUBSIDIARIES. The Company will not,
and will not permit any Subsidiary to, create or otherwise permit to exist any
restriction on the ability of any Subsidiary to pay dividends or make any other
distributions on its capital stock or any other interest in its profits owned by
the Company or any other Subsidiary, or pay any Debt owed to the Company or any
other Subsidiary, other than restrictions contained in the Credit Agreement as
in effect on the date of this Agreement.
10.16. USE OF PROCEEDS. The Company will apply the proceeds of the
sale of the Notes and Warrants, simultaneously with the Closing, (a) to the
repayment in full of the Company's existing revolving credit facility, term loan
and other bank debt, and certain promissory notes, in the aggregate amount of
approximately $12,000,000, (b) to the payment of fees and expenses incurred in
connection with the offering and sale of the Notes and Warrants in the aggregate
amount of approximately $1,250,000 and (c) the balance to working capital needs.
10.17. NON U.S. ASSETS. Not more than 10% of the assets of the
Company and its Subsidiaries will be owned at any time by Subsidiaries that are
not domiciled in the United States.
11. EVENTS OF DEFAULT; ACCELERATION. If any of the following
conditions or events ("Events of Default") shall occur and be continuing:
(a) if the Company shall default in the payment of any principal of
or premium, if any, on any Note when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration or
otherwise; or
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(b) if the Company shall default in the payment of any interest on
any Note for more than five days after the same becomes due and payable; or
(c) if the Company shall default in the performance of or compliance
with any term contained in sections 10.2, 10.5 and 10.7; or
(d) if the Company shall default in the performance of or compliance
with any term contained in this Agreement other than those referred to
above in this section 11 and such default shall not have been remedied
within 30 days after such failure shall first have become known to any
officer of the Company or written notice thereof shall have been received
by the Company from any holder of any Note; or
(e) if any representation or warranty made in writing by or on behalf
of the Company in this Agreement or in any instrument furnished in
compliance with this Agreement shall prove to have been false or incorrect
in any material respect on the date as of which made; or
(f) if the Company or any Subsidiary shall default (as principal or
guarantor or other surety) in the payment of any principal of or premium or
interest on any Debt which is outstanding in a principal amount of at least
$500,000 (other than the Notes), or if any event shall occur or condition
shall exist in respect of any such Debt which is outstanding in a principal
amount of at least $500,000 or under any evidence of any such Debt or of
any mortgage, indenture or other agreement relating thereto, and as a
result of such default, event or condition the holder or holders of such
Debt shall have caused the acceleration of the payment of such Debt before
its regularly scheduled dates of payment; or
(g) Any Guaranty Agreement shall be unenforceable or shall cease to
be in full force and effect as to any Subsidiary; or
(h) if a final judgment or judgments shall be rendered against the
Company or any Subsidiary for the payment of money in excess of $500,000
(in excess of insurance coverage) in the aggregate and any one of such
judgments shall not be discharged or execution
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thereon stayed pending appeal, within 60 days after entry thereof, or, in
the event of such a stay, such judgment shall not be discharged within 60
days after such stay expires; or
(i) if the Company or any Subsidiary shall (i) be generally not
paying its debts as they become due, (ii) file, or consent by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, (iii) make an assignment for the benefit of its creditors,
(iv) consent to the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) be adjudicated insolvent or (vi) take
corporate action for the purpose of any of the foregoing; or
(j) if a court or governmental authority of competent jurisdiction
shall enter an order appointing, without consent by the Company or any
Subsidiary, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or if an order for relief shall be entered in any case or
proceeding for liquidation or reorganization or otherwise to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any Subsidiary, or
if any petition for any such relief shall be filed against the Company or a
Subsidiary and such petition shall not be dismissed within 60 days;
then, (x) upon the occurrence of any Event of Default described in subdivision
(i) or (j) of this section 11 with respect to the Company (other than such an
Event of Default described in clause (i) of subdivision (i) or described in
clause (vi) of subdivision (i) by virtue of the reference in such clause (vi) to
such clause (i)), the unpaid principal amount of and accrued interest on the
Notes shall automatically become due and payable or (y) upon the occurrence of
any other Event of Default, any holder or holders of more than 60% in principal
amount of the Notes at the time outstanding (subject to section 15.4) may at any
time (unless all defaults shall theretofore have been remedied) at its or their
option, by written notice or
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notices to the Company, declare all the Notes to be due and payable,
whereupon the Notes shall forthwith mature and become due and payable,
together with interest accrued thereon; and, in the case of any Event of
Default described in this section 11, there shall also be due and payable, to
the extent permitted by applicable law, a premium equal to the Default
Premium, all without presentment, demand, protest or notice, which are hereby
waived; PROVIDED that during the existence of an Event of Default described
in subdivision (a) or (b) of this section 11, then, irrespective of whether
the holder or holders of more than 60% in principal amount of Notes then
outstanding shall have declared all the Notes to be due and payable pursuant
to this section 11, any holder of the Notes may, at its option, by notice in
writing to the Company, declare the Notes then held by such holder to be due
and payable, whereupon the Notes then held by such holder shall forthwith
mature and become due and payable, together with interest accrued thereon
and, to the extent permitted by applicable law, a Default Premium, without
presentment, demand, protest or notice, all of which are hereby waived.
At any time after the principal of, and interest accrued on, any or
all of the Notes are declared due and payable, the holders of not less than
60% in aggregate principal amount of the Notes then outstanding (subject to
section 15.4), by written notice to the Company may rescind and annul any
such declaration and its consequences if (x) the Company has paid all overdue
interest on the Notes, the principal of and premium, if any, on any Notes
which have become due otherwise than by reason of such declaration, and
interest on such overdue principal and premium and (to the extent permitted
by applicable law) any overdue interest in respect of the Notes at the rate
of 14% per annum, (y) all Events of Default, other than non-payment of
amounts which have become due solely by reason of such declaration, and all
conditions and events which constitute Events of Default or Potential Events
of Default have been cured or waived pursuant to section 19, and (z) no
judgment or decree has been entered for the payment of any monies due
pursuant to the Notes or this Agreement; but no such rescission and annulment
shall extend to or affect any subsequent Event of Default or Potential Event
of Default or impair any right consequent thereon.
12. REMEDIES ON DEFAULT, ETC. In case any one or more Events of
Default or Potential Events of Default shall occur and be continuing, the holder
of any Note at the time
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outstanding may proceed to protect and enforce the rights of such holder by
an action at law, suit in equity or other appropriate proceeding, whether for
the specific performance of any agreement contained herein or in such Note,
or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or
by law or otherwise. In case of a default in the payment of any principal of
or premium, if any, or interest on any Note, the Company will pay to the
holder thereof such further amount as shall be sufficient to cover the cost
and expenses of collection, including, without limitation, reasonable
attorneys' fees, expenses and disbursements. No course of dealing and no
delay on the part of any holder of any Note in exercising any right, power or
remedy shall operate as a waiver thereof or otherwise prejudice such holder's
rights, powers or remedies. No right, power or remedy conferred by this
Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or
hereafter available at law, in equity, by statute or otherwise.
13. SUBORDINATION OF SUBORDINATED NOTES. 13.1. GENERAL. The
Notes and any obligation with respect to any Guaranty of the Notes (the
"Subordinated Debt") shall be subordinate and junior in right of payment to
all Superior Debt (as defined in section 13.2) to the extent and in the
manner provided in this section 13.
13.2. SUPERIOR DEBT. As used in this section 13, the term
"Superior Debt" shall mean (a) all principal of and interest on Debt of the
Company outstanding from time to time under the Credit Agreement and all
fees, expenses, reimbursements and other amounts payable by the Company or
any Subsidiary under the Credit Agreement and any obligation with respect to
any Guaranty of any such amounts, and (b) other Debt of the Company
outstanding in compliance with section 10.1 other than (i) Debt which by its
terms is subordinated to any other Debt of the Company and (ii) Debt
outstanding between the Company and any Affiliate of the Company or between
any Subsidiary and another Subsidiary or Affiliate of the Company. The
Superior Debt shall continue to be Superior Debt and entitled to the benefits
of these subordination provisions irrespective of any amendment, modification
or waiver of any term of the Superior Debt or extension or renewal of the
Superior Debt.
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13.3. BLOCKAGE OF PAYMENTS ON SUBORDINATED DEBT. (a) SUPERIOR
DEBT PAYMENT DEFAULT. In the event that the Company shall default in the
payment of any principal of, premium, if any, or interest on, or any fees in
respect of, any Superior Debt when the same shall have become due and
payable, whether at maturity, at a date fixed for prepayment or otherwise,
then, unless and until such default shall have been cured or waived in a
writing received by the Company or shall have ceased to exist or all such
payments shall have been made in full or the stated maturity of the Superior
Debt shall have been accelerated, no direct or indirect payment or
distribution of any kind or character (in cash, securities (except securities
which are subordinate and junior in right of payment to the payment of
Superior Debt at least to the extent provided in this section 13) or other
property or otherwise) shall be made or agreed to be made on or in respect of
any Subordinated Debt. All payments in respect of the Subordinated Debt
postponed under this section 13.3(a) shall be immediately due and payable
upon the termination of such postponement (together with such additional
interest as is provided herein and in the Notes for late payment of
principal, premium or interest); the remittance in full of such payments by
the Company in accordance with the terms of this Agreement and the acceptance
thereof by the holders of the Notes shall be deemed to constitute a cure by
the Company and a waiver by the holders of the Notes of any Event of Default
that existed immediately prior to such remittance and acceptance to the
extent that such Event of Default existed solely as a consequence of the
previous non-payment of such postponed payments during such period of
postponement.
(b) ACCELERATION OF SUPERIOR DEBT. In the event that the holders
of any Superior Debt shall declare such Superior Debt to be due and payable
prior to its stated maturity in accordance with the Superior Debt Agreement,
no payment or distribution of any kind or character (whether in cash,
securities (except securities which are subordinate and junior in right of
payment to the payment of Superior Debt at least to the extent provided in
this section 13) or other property) shall be made on or in respect of any
Subordinated Debt, and no holder of Subordinated Debt shall take or receive
from the Company, directly or indirectly, in cash, securities (except such
subordinated securities) or other property or by way of set-off or in any
other manner, payment of all or any of the Subordinated Debt until the
earlier of (i) the payment in full of such Superior Debt or (ii) the
rescission or termination of such declaration by
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the appropriate majority of holders of Superior Debt, as required under the
Superior Debt Agreement, or as otherwise provided for in the Superior Debt
Agreement or effected by operation of applicable law. All payments in
respect of the Subordinated Debt postponed under this section 13.3(b) shall
be immediately due and payable upon the termination of such postponement
(together with such additional interest as is provided herein and in the
Notes for late payment of principal, premium or interest); the remittance in
full of such payments by the Company in accordance with the terms of the this
Agreement and the acceptance thereof by the holders of the Notes shall be
deemed to constitute a cure by the Company and a waiver by the holders of the
Notes of any Event of Default that existed immediately prior to such
remittance and acceptance to the extent that such Event of Default existed
solely as a consequence of the previous non-payment of such postponed
payments during such period of postponement.
(c) SUPERIOR DEBT EVENT OF DEFAULT. In the event and during the
continuance of any "Event of Default" (after the expiration of any grace
period in respect thereof and the giving of any notice with respect thereto)
under, and as defined in, the Superior Debt Agreement (a "Superior Debt Event
of Default") and before the declaration of the Superior Debt to be due and
payable prior to its stated maturity, the holders of such Superior Debt
acting through an agent or otherwise may give to the Company written notice
referring to the Notes and this Agreement and specifying that it is a notice
of a Superior Debt Event of Default (a "Superior Debt Event of Default
Notice") and, thereafter, no payment or distribution of any kind or character
(whether in cash, securities (except securities which are subordinate and
junior in right of payment to the payment of Superior Debt at least to the
extent provided in this section 13) or other property) shall be made on or in
respect of any Subordinated Debt, and no holder of Subordinated Debt shall
take or receive from the Company, directly or indirectly, in cash, securities
(except such subordinated securities) or other property or by way of set-off
or in any other manner, payment of all or any of the Subordinated Debt during
the period (a "Superior Debt Event of Default Blockage Period") commencing on
the date of receipt by the Company of such notice and ending on the earliest
of (i) the date of the repayment in full of such Superior Debt, (ii) the date
on which such Superior Debt shall have been declared due and payable prior to
its stated maturity, (iii) the date on which such Superior Debt Event of
Default shall have been
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<PAGE>
cured or waived and written notice thereof received by the Company from the
holders of the Superior Debt acting through an agent or otherwise, (iv) the
date on which such holders of such Superior Debt, acting through an agent or
otherwise, shall have delivered to the Company and each holder of
Subordinated Debt a notice referring to the Notes and the immediately
preceding Superior Debt Event of Default Notice and stating that such
Superior Debt Event of Default Notice has been withdrawn, or (v) the 179th
day following the giving of such Superior Debt Event of Default Notice
pursuant to this section 13.3(c). Any number of Superior Debt Event of
Default Notices may be given, PROVIDED that (w) only one Superior Debt Event
of Default Notice may be given with respect to any single occurrence of a
Superior Debt Event of Default, (x) no Superior Debt Event of Default Notice
may be given in respect of any Superior Debt Event of Default that was
continuing during a previous Superior Debt Event of Default Blockage Period,
(y) no Superior Debt Event of Default Notice shall be effective at any time
to prevent any payment from being made by or on behalf of the Company for or
on account of any Subordinated Debt (and any such Superior Debt Event of
Default Notice shall be or become null and void ab initio) if, within the
360-day period ending immediately prior to the date on which such Superior
Default Notice shall have been delivered to the Company and each holder of
Subordinated Debt, a Superior Debt Event of Default Blockage Period was in
effect for all or part of such period and (z) not more than five Superior
Debt Event of Default periods may be imposed under this section 13.3(c)
during the term of the Notes. All payments in respect of the Subordinated
Debt postponed during any Superior Debt Event of Default Blockage Period
shall be immediately due and payable upon the termination thereof (together
with such additional interest at the default rate of interest provided in the
Notes for late payment of principal, premium, or interest); the remittance in
full of such payments by the Company in accordance with the terms of this
Agreement and the acceptance thereof by the holders of the Notes shall be
deemed to constitute a cure by the Company and a waiver by the holders of the
Notes of any Event of Default that existed immediately prior to such
remittance and acceptance to the extent that such Event of Default existed
solely as a consequence of the previous non-payment of such postponed
payments during such period of postponement.
(d) ACCELERATION OF SUBORDINATED DEBT. In the event that any
Subordinated Debt is declared due and payable before its stated maturity, then
and in such event the
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<PAGE>
holders of Superior Debt outstanding at the time such Subordinated Debt so
becomes due and payable shall be entitled to receive payment in full on all
amounts due or to become due on or in respect of such Superior Debt, before
the Company may make, and before any holder of Subordinated Debt is entitled
to receive, any payment or distribution of assets of the Company of any kind
or character, whether in cash, securities (except securities which are
subordinate and junior in right of payment to the payment of Superior Debt at
least to the extent provided in this section 13) or other property on account
of any Subordinated Debt. All payments in respect of the Subordinated Debt
postponed under this section 13.3(d) shall be immediately due and payable
upon the termination of such postponement (together with such additional
interest as is provided herein and in the Notes for late payment of
principal, premium or interest); the remittance in full of such payments by
the Company in accordance with the terms of the this Agreement and the
acceptance thereof by the holders of the Notes shall be deemed to constitute
a cure by the Company and a waiver by the holders of the Notes of any Event
of Default that existed immediately prior to such remittance and acceptance
to the extent that such Event of Default existed solely as a consequence of
the previous non-payment of such postponed payments during such period of
postponement.
(e) NOTICE BY COMPANY. The Company shall give prompt written
notice to each holder of Subordinated Debt of its receipt of any notice
received by it from any holder of Superior Debt (or any agent acting on its
behalf) under this section 13.3. The Company shall include with each notice
given to a holder of Subordinated Debt under this clause (e) a copy of the
applicable notice received by the Company from any holder or holders of
Superior Debt (or any agent acting on its or their behalf). All such notices
and copies shall be delivered by the Company as provided for in section 20.
13.4. INSOLVENCY, ETC. In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company, its creditors as such or its property,
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings,
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(c) any assignment by the Company for the benefit of creditors, or
(d) any other marshaling of the assets of the Company,
all Superior Debt shall first be paid in full in cash or cash equivalents (or
with other assets acceptable to the holders of the Superior Debt) before
payment or distribution, whether in cash, securities or other property, shall
be made to any holder of any Subordinated Debt on account of any Subordinated
Debt. Any payment or distribution, whether in cash, securities or other
property (other than securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment the payment of which
is subordinate, at least to the extent provided in this section 13 with
respect to the Subordinated Debt, to the payment of all Superior Debt at the
time outstanding and to any securities issued in respect thereof under any
such plan of reorganization or readjustment), which would otherwise (but for
these subordination provisions) be payable or deliverable in respect of
Subordinated Debt shall be paid or delivered directly to the holders of
Superior Debt in accordance with the priorities then existing among such
holders until all Superior Debt (including any interest thereon accruing at
the contract rate after the commencement of any such proceedings) shall have
been paid in full in cash or cash equivalents (or with other assets
acceptable to the holders of the Superior Debt). Each holder of Subordinated
Debt shall duly and promptly take such action as is reasonably necessary to
file appropriate claims or proofs of claims in any of the proceedings
referred to above in this Section 13.4 and to execute and deliver such other
instruments and take such other actions as may be reasonably necessary to
prove or realize upon such claims and to have the proceeds of such claims
paid as provided in this section 13.4, and, in the event any holder of
Subordinated Debt shall not have made any such filing on or prior to the date
10 days before the expiration of the time for such filing or shall not have
timely executed or delivered any such other instruments and taken such other
actions, the holders of Superior Debt, acting through an agent or otherwise,
are hereby irrevocably authorized and empowered (but shall have no
obligation), as the agent and attorney-in-fact for such holder for the
specific and limited purpose set forth in this paragraph, to file such proof
of claim for or on behalf of such holder, execute and deliver such other
instrument for or on behalf
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<PAGE>
of such holder and take such other action as may be necessary under
applicable law to collect any amounts due in respect of such claim in such
proceeding. Anything contained in this paragraph notwithstanding, the right
to vote any claim or claims in respect of any Subordinated Debt in connection
with any proceedings referred to above in this section 13.4 is exclusively
reserved to the holder of such Subordinated Debt.
13.5. SUBORDINATED DEBT PAYMENTS AND REMEDIES. Nothing contained
in this section 13 shall prevent the Company from making, or any holder of
Subordinated Debt from accepting, at any time except as expressly provided in
section 13.3 and section 13.4, payments of principal of (and premium, if any)
or interest on the Notes and other payments in respect thereof in accordance
with the terms thereof. Nothing contained in this section 13 is intended to
or shall prevent any holder of Subordinated Debt from exercising any rights
or remedies provided by applicable law, at equity, hereunder or under the
Notes upon an Event of Default or Potential Event of Default, subject to the
rights under the provisions of section 13.3 and section 13.4 of the holders
of the Superior Debt to receive cash, securities or other property otherwise
payable or deliverable to the holders of Subordinated Debt, PROVIDED that,
the foregoing notwithstanding, no holder of Subordinated Debt may declare, or
join in the declaration of, any Subordinated Debt to be due and payable prior
to its stated maturity or otherwise accelerate the maturity of the principal
of its Notes, accrued interest thereon or premium or other amounts due
thereunder, or commence, or join in any commencement of, any administrative,
legal or equitable action against the Company (except that the holders of
Subordinated Debt may join in any bankruptcy or similar proceeding commenced
or joined in by the holders of the Superior Debt), at any time during any
period not in excess of 179 days in respect of which payment on the
Subordinated Debt shall have been suspended pursuant to section 13.3(a) or
section 13.3(c); for the avoidance of doubt, the holders of Subordinated Debt
may take the actions referred to in the immediately preceding proviso at any
time when any suspension period in respect of section 13.3(a) or section
13.3(c) shall exceed 179 days (or at any time when any such suspension period
shall have ended if it shall have continued for less than 179 days).
13.6. PAYMENTS AND DISTRIBUTIONS RECEIVED. If (a) any payment or
distribution of any character or any
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<PAGE>
security, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least
to the extent provided in this section 13 with respect to Subordinated Debt,
to the payment of all Superior Debt at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment), shall be received by any holder of any Subordinated Debt in
contravention of any of the terms hereof and before all the Superior Debt
shall have been paid in full in cash or cash equivalents (or with other
assets acceptable to the holders of the Superior Debt), and (b) any holder of
such Superior Debt shall have notified such holders of Subordinated Debt,
within 179 days of any such payment or distribution, of facts by reason of
which such collection or receipt so contravenes this section 13, such payment
or distribution or security shall be received in trust for the benefit of,
and shall be paid over or delivered and transferred to, the holders of the
Superior Debt at the time outstanding in accordance with the priorities then
existing among such holders for application to the payment of all Superior
Debt remaining unpaid, to the extent necessary to pay all such Superior Debt
in full in cash (or with other assets acceptable to the holders of the
Superior Debt). If after any amount is delivered to the holders of Superior
Debt pursuant to this section 13.6, whether or not such amount has been
applied to the payment of Superior Debt, the outstanding Superior Debt shall
thereafter be paid in full by the Company or otherwise than pursuant to this
section 13.6, the holders of the Superior Debt shall return to such holders
of Subordinated Debt an amount equal to the amount delivered to such holders
of Superior Debt pursuant to this section 13.6 (net of the amount, if any, so
applied to the payment of such Superior Debt).
13.7. NO PREJUDICE OR IMPAIRMENT. No present or future holder of
any Superior Debt shall be prejudiced in the right to enforce subordination
of the Subordinated Debt by any act or failure to act on the part of the
Company or the holders of the Subordinated Debt. Nothing contained herein
shall impair, as between the Company and the holder of any Subordinated Debt,
the obligation of the Company to pay to the holder thereof the principal
thereof and interest thereon as and when the same shall become due and
payable in accordance with the terms thereof and of this Agreement, or
prevent the holder of any Subordinated Debt from exercising
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<PAGE>
all rights, powers and remedies otherwise permitted by applicable law or
hereunder upon a Potential Event of Default or Event of Default hereunder,
all subject to the terms of this section 13 and the rights of the holders of
the Superior Debt to receive cash, securities or other property otherwise
payable or deliverable to the holders of Subordinated Debt.
13.8. PAYMENT OF SUPERIOR DEBT, SUBROGATION, ETC. Upon the payment
in full of all Superior Debt in cash (or with other assets acceptable to the
holders of the Superior Debt), the holders of Subordinated Debt shall be
subrogated to all rights of any holders of Superior Debt to receive any
further payments or distributions applicable to the Superior Debt until the
Subordinated Debt shall have been paid in full, and, for the purposes of such
subrogation, no payment or distribution received by the holders of Superior
Debt of cash, securities, or other property to which the holders of
Subordinated Debt would have been entitled except for this section 13 shall,
as between the Company and its creditors other than the holders of Superior
Debt, on the one hand, and the holders of Subordinated Debt, on the other, be
deemed to be a payment or distribution by the Company on account of Superior
Debt.
13.9. RELIANCE OF HOLDERS OF SUPERIOR DEBT. Each holder of
Subordinated Debt by its acceptance thereof shall be deemed to acknowledge
and agree that the foregoing subordination provisions are, and are intended
to be, an inducement to and a consideration of each holder of Superior Debt,
whether such Superior Debt was created or acquired before or after the
creation of the Subordinated Debt, to acquire and hold, or to continue to
hold, such Superior Debt, and such holder of Superior Debt shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
holding, or in continuing to hold, such Superior Debt.
13.10. SECURITY. Each holder of Subordinated Debt agrees with and
for the benefit of each holder of Superior Debt, but not with or for the
benefit of the Company, that until the Superior Debt is paid in full, it will
not take any action to obtain or accept, without the consent of the holders
of Superior Debt, any Lien upon any assets of the Company or any of its
Subsidiaries.
13.11. CHANGES IN HOLDERS OF SUPERIOR DEBT. Upon the Company's
being informed of any new holder of Superior
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<PAGE>
Debt, the Company shall promptly inform the holders of Subordinated Debt of
the names and addresses of such new holders. Upon the Company's being
informed of the change in the addresses of any holder or holders of Superior
Debt, the Company shall promptly inform the holders of Subordinated Debt of
the same.
14. DEFINITIONS. As used herein the following terms have the
following respective meanings:
AFFILIATE: any Person directly or indirectly controlling or
controlled by or under common control with the Company or any Subsidiary,
including (without limitation) any Person beneficially owning or holding 10%
or more of any class of voting securities of the Company or any Subsidiary or
any other corporation of which the Company or any Subsidiary owns or holds
10% or more of any class of voting securities, PROVIDED that, for purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or
otherwise, and PROVIDED, FURTHER, that neither you nor any other Person which
is an institution shall be deemed to be an Affiliate of the Company or any of
its Subsidiaries solely by reason of ownership of the Notes or other
securities issued in exchange for the Notes or by reason of having the
benefits of any agreements or covenants of the Company contained in this
Agreement.
BOARD: the Board of Directors of the Company or a committee of
three or more directors lawfully exercising the relevant powers of the Board.
BUSINESS DAY: any day except a Saturday, a Sunday or other day on
which commercial banks in New York City are required or authorized by law to
be closed.
CAPITAL EXPENDITURE: any amount paid or incurred in connection
with the purchase of real estate, plant, machinery, equipment or other
similar expenditure (including all renewals, improvements and replacements
thereto, and all obligations under any lease of any of the foregoing) which
would be required to be capitalized and shown on the consolidated balance
sheet of the Company in accordance with
55
<PAGE>
generally accepted accounting principles; PROVIDED, HOWEVER, amounts paid or
incurred in connection with Permitted Acquisitions and amounts paid or
incurred pursuant to the San Diego Property Acquisition Agreement shall be
excluded from Capital Expenditures.
CAPITAL LEASE: as applied to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee which would, in
accordance with generally accepted accounting principles, be required to be
classified and accounted for as a capital lease on a balance sheet of such
Person, other than, in the case of the Company or a Subsidiary, any such
lease under which the Company or a Wholly-Owned Subsidiary is the lessor.
CAPITAL LEASE OBLIGATION: with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder which would, in accordance
with generally accepted accounting principles, appear on a balance sheet of
such lessee in respect of such Capital Lease.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time.
CHANGE OF CONTROL: (a) the sale, lease or transfer of all or
substantially all of the Company's assets to any Person or "group" (within
the meaning of Section 13(d) of the Exchange Act (hereinafter a "Group"))
together with any Affiliates thereof, (b) the liquidation of the Company, (c)
the acquisition by any Person or Group, together with any Affiliates thereof,
of in excess of 30% of the Voting Stock of the Company, or (d) the first day
on which a majority of the members of the Board are not Continuing Directors.
CODE: the Internal Revenue Code of 1986, as amended from time to
time.
COMMON STOCK: the meaning specified in section 1.
CONSOLIDATED EBITDA: for any period, without duplication, (i) Net
Income, PLUS (ii) for such period, any Interest Expense deducted in the
determination of Net Income; PLUS (iii) any income, ad valorem, and franchise
taxes paid in cash and deducted in the determination of Net Income; PLUS (iv)
amortization and depreciation and other non-cash charges deducted in the
determination of Net Income
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<PAGE>
for such period; PLUS (v) immaterial extraordinary losses, losses on sales of
assets (other than sales of inventory in the ordinary course of business) and
unrealized gains from changes in currency; plus (vi) non-recurring charges of
the Company or its Subsidiaries for Permitted Acquisitions; minus (vii) the
sum for such period of interest income, extraordinary gains, gains from sales
of assets (other than sales of inventory in the ordinary course of business)
and unrealized losses from changes in currency; PROVIDED that, if the Company
or any of its Subsidiaries completes a Permitted Acquisition during any
Reference Period, EBITDA for such Reference Period shall be reasonably
determined on a pro forma basis, as if such Permitted Acquisition was
completed on the first day thereof; and PROVIDED, FURTHER, that if the
Company or any of its Subsidiaries completes the sale of the capital stock or
all or substantially all of the assets of Aspen Consulting, Inc. during any
Reference Period, then EBITDA attributable to Aspen Consulting, Inc. shall be
excluded from the calculation of EBITDA for the Company on a pro forma basis.
CONSOLIDATED NET EARNINGS: for any period, the net earnings of the
Company for such period, determined in accordance with generally accepted
accounting principles, excluding extraordinary items (such as financing
charges related to the transactions contemplated by this Agreement).
CONTINUING DIRECTOR: as of any date of determination, any member
of the Board who (i) was a member of the Board on the date hereof or (ii) was
nominated for election or elected to the Board with the approval of a
majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
CREDIT AGREEMENT: the Credit Agreement, dated as of August 25,
1998, among the Company, Provident Bank, as Agent, and the lenders named
therein, as amended from time to time hereafter.
DEBT: as applied to any Person (without duplication):
(a) any indebtedness for borrowed money which such Person has
directly or indirectly created, incurred or assumed; and
(b) any indebtedness secured by any Lien in respect of property owned
by such Person, whether or
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<PAGE>
not such Person has assumed or become liable for the payment of such
indebtedness; and
(c) any indebtedness with respect to which such Person has become
directly or indirectly liable and which represents or has been incurred to
finance the purchase price (or a portion thereof) of any property or
services or business acquired by such Person, whether by purchase,
consolidation, merger or otherwise; and
(d) any indebtedness of any other Person of the character referred to
in subdivision (a), (b) or (c) of this definition with respect to which the
Person whose Debt is being determined has become liable by way of a
Guaranty;
PROVIDED, that, at any time of determination, the term "Debt" shall not include
any Earn Out Obligations unless and until, and then only to the extent that, it
is then probable that such Earn Out Obligations will be payable in cash during
the immediately following 365-day period.
DEFAULT PREMIUM: with respect to the acceleration of the maturity
of any Note, a premium determined in accordance with the following table,
depending upon the date of such acceleration:
<TABLE>
<CAPTION>
12-Month Period
Commencing August 25, 1998 Premium
-------------------------- -------
<S> <C>
1998 Make-Whole Premium
1999 Make-Whole Premium
2000 6.0%
2001 3.0%
2002 0.0%
</TABLE>
PROVIDED that, in the case of the periods commencing August 25, 1998 and
1999, the "Make-Whole Premium" will be calculated as if August 25, 2000 were
the final maturity date of the Notes and a premium of 6% were payable on such
maturity date.
EARN OUT OBLIGATIONS: (a) the obligations of the Company under the
agreements referenced in Schedule F and (b) any obligations of the Company or
a Subsidiary of the Company incurred in connection with a Permitted
Acquisition and the amount of which is based upon post-acquisition
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<PAGE>
performance of the business or assets acquired from such Person in connection
with the Permitted Acquisition, or the post-acquisition performance of a
Subsidiary acquiring the business or assets in connection with the Permitted
Acquisition or of the Company.
ENVIRONMENTAL LAWS: Federal, state, provincial, local and foreign
laws, rules and regulations relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes into the environment (including,
without limitation, air, surface water, ground water or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended from time to time.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended from
time to time.
EVENT OF DEFAULT: the meaning specified in section 11.
FUNDED DEBT: collectively, Senior Secured Funded Debt and all
other Debt of the Company or a Subsidiary, in excess of $2,500,000, that is
or should be, in accordance with generally accepted accounting principles,
characterized as senior long-term Debt on a consolidated balance sheet of the
Company and its Subsidiaries, including (a) Debt with a final maturity more
than one year after the creation of thereof, (b) any portion thereof included
in current liabilities and (c) Debt outstanding under a revolving credit or
similar agreement providing for borrowings (and renewals and extensions
thereof) over a period of more than one year, notwithstanding that any such
debt may be payable on demand or within one year after the creation thereof;
but excluding contingent reimbursement obligations with respect to any letter
of credit issued for the account of the Company or a Subsidiary (unless, and
to the extent, such reimbursement obligations mature as a result of any
payment by the issuer of such letter of credit).
GUARANTY: as applied to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other
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<PAGE>
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business) or discounted or sold with
recourse by such Person, or in respect of which such Person is otherwise
directly or indirectly liable, including, without limitation, any such
obligation in effect guaranteed by such Person through any agreement
(contingent or otherwise) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency
or any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or services regardless of the non-delivery or
nonfurnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected against loss in respect
thereof. The amount of any Guaranty shall be equal to the outstanding
principal amount of the obligation guaranteed.
GUARANTY AGREEMENT: the Guaranty Agreement, dated as of August 25,
1998, executed and delivered by the United States Subsidiaries of the
Company, substantially in the form of Exhibit D.
INTEREST EXPENSE: for any period, the total amount of all charges
for the use of funds (whether characterized as interest, debt service or
otherwise) payable during such period with respect to all Debt of the Company
or a Subsidiary for such period, including the amortization of debt discount
and the amortization of all fees payable in connection with the incurrence of
such Debt.
INVESTMENT: as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of stock or other securities of
any other Person, or any direct or indirect loan, advance (other than
advances to employees for moving and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital
contribution by such Person to any other Person, including all Debt and
accounts receivable from such other Person which are not current assets or
did not arise from sales to such other Person in the ordinary course of
business. In
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computing the amount involved in any Investment at the time outstanding, (a)
undistributed earnings of, and interest accrued in respect of Debt owing by,
such other Person accrued after the date of such Investment shall not be
included, (b) there shall not be deducted from the amounts invested in such
other Person any amounts received as earnings (in the form of dividends,
interest or otherwise) on such Investment or as loans from such other Person,
and (c) unrealized increases or decreases in value, or write-ups, write-downs
or write-offs, of Investments in such other Person shall be disregarded.
LIEN: as to any Person, any mortgage, lien, pledge, adverse claim,
charge, security interest or other encumbrance in or on, or any interest or
title of any vendor, lessor, lender or other secured party to or of such
Person under any conditional sale or other title retention agreement or
Capital Lease with respect to, any property or asset owned or held by such
Person, or the signing or filing of a financing statement which names such
Person as debtor, or the signing of any security agreement authorizing any
other party as the secured party thereunder to file any financing statement.
MAKE-WHOLE PREMIUM: with respect to any Note, a premium equal to
the excess, if any, of the Discounted Value of the Called Principal of such
Note over the sum of (a) such Called Principal plus (b) interest accrued
thereon as of (including interest due on) the Settlement Date with respect to
such Called Principal. The Make-Whole Premium shall in no event be less than
zero. As used in this definition, the following terms have the following
meanings:
APPLICABLE SPREAD: if the Settlement Date occurs in the twelve month
period commencing August 25, 1998, zero; if the Settlement Date occurs on
or after August 25, 1999, 1.5%.
CALLED PRINCIPAL: with respect to any Note, the principal of such
Note that is to be prepaid, subject to a Make-Whole Premium, pursuant to
section 9.1 or 9.2 or is declared to be immediately due and payable
pursuant to section 11, as the context requires.
DISCOUNTED VALUE: with respect to the Called Principal of any Note,
the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective
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scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a discount
factor (applied on a semiannual basis) equal to the Reinvestment Yield with
respect to such Called Principal.
REINVESTMENT YIELD: with respect to the Called Principal of any Note,
the sum of (a) the Applicable Spread PLUS (b) the yield to maturity
determined by reference to the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have been reported
as of the Business Day next preceding the Settlement Date with respect to
such Called Principal, in Federal Reserve Statistical Release H.15 (519)
(or, if such Statistical Release is not published, any publicly available
source of similar market data acceptable to the holders of more than 50% in
principal amount of the Notes being prepaid or accelerated) for actively
traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date.
Such implied yield shall be determined, if necessary, (x) by converting
U.S. Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (y) by linear interpolation between
reported yields.
REMAINING AVERAGE LIFE: with respect to the Called Principal of any
Note, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (a) such Called Principal into (b) the sum of the
products obtained by multiplying (i) each Remaining Scheduled Payment of
such Called Principal (but not of interest thereon) by (ii) the number of
years (calculated to the nearest one-twelfth year) which will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
REMAINING SCHEDULED PAYMENTS: with respect to the Called Principal of
any Note, all payments of such Called Principal and interest thereon that
would be due on or after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made prior to its
scheduled due date.
SETTLEMENT DATE: with respect to the Called Principal of any Note,
the date on which such Called
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Principal is to be prepaid pursuant to section 9.1 or 9.2 or is declared
to be immediately due and payable pursuant to section 11, as the context
requires.
MULTIEMPLOYER PLAN: any Plan which is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
NET INCOME: for any period, the aggregate of the net income (or
net loss) of the Company and its Subsidiaries for such period, determined on
a consolidated basis without duplication in accordance with generally
accepted accounting principles.
OFFICERS' CERTIFICATE: a certificate executed on behalf of the
Company by the Chairman of the Board of Directors (if an officer) or its
President or one of its Vice Presidents and its Treasurer or one of its
Assistant Treasurers.
OPERATIVE AGREEMENTS: the Warrants and the Guaranty Agreement.
PBGC: the Pension Benefit Guaranty Corporation or any governmental
authority succeeding to any of its functions.
PERMITTED ACQUISITION: acquisitions (including by way of merger,
consolidation or amalgamation) by the Company or a Subsidiary of the Company
of the capital stock or other ownership interest of, or all or substantially
all of the assets of, any Person (or, in the case of an acquisition of
assets, (a) substantially all of the assets within a reasonably identifiable
business unit of such Person or (b) intellectual property of such person),
but only to the extent that (x) the Person whose capital stock has been
acquired or (y) the assets acquired reasonably relate to or are synergistic
with, the business of (or a business related to) developing, marketing or
selling proprietary biological and traditional chemical products for turf and
crop problems in the golf course and agricultural industries.
PERSON: a corporation, an association, a partnership, an
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
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PLAN: an "employee pension benefit plan" (as defined in section 3
of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by the Company or any of its Related
Persons, or an employee pension benefit plan as to which the Company or any
of its Related Persons would be treated as a contributory sponsor under
section 4069 of ERISA if it were to be terminated.
POTENTIAL EVENT OF DEFAULT: any condition or event which, with
notice or lapse of time or both, would become an Event of Default.
PREFERRED STOCK: as applied to any corporation, shares of such
corporation which shall be entitled to preference or priority over any other
shares of such corporation in respect of either the payment of dividends or
the distribution of assets upon liquidation or both.
PRIVATE PLACEMENT MEMORANDUM: the Information Memorandum prepared
by CIBC Oppenheimer Corp. for use in connection with the Company's private
placement of the Notes and Warrants.
PUBLIC OFFERING: an underwritten primary public offering of Common
Stock of the Company pursuant to an effective registration statement under
the Securities Act.
REFERENCE PERIOD: with respect to any date of computation under
section 10.2, the period of four consecutive calendar quarters ending on such
date.
RELATED PERSON: any trade or business that, together with the
Company as of any relevant measuring date under ERISA, was or is required to
be treated as a single employer under Section 414 of the Code.
RESTRICTED PAYMENT: (a) any declaration or payment of any dividend
or other distribution, direct or indirect, on account of any shares of any
class of capital stock of the Company, now or hereafter outstanding, except a
dividend payable solely in shares of stock of the Company and (b) any
redemption, retirement, purchase or other acquisition, direct or indirect, of
any shares of any class of capital stock of the Company now or hereafter
outstanding, or of any warrants, rights or options to acquire any such
shares, except to the extent that the
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consideration therefor consists of shares of stock of the Company.
SAN DIEGO PROPERTY: the improved real property which is the
subject of the San Diego Property Acquisition Agreement.
SAN DIEGO PROPERTY ACQUISITION AGREEMENT: that certain Standard
Offer, Agreement and Escrow Instructions for Purchase of Real Estate, dated
December 19, 1997, between the Company and DDC-4S, INC and any amendments
thereto executed prior to the Closing Date, and any amendments thereto after
the Closing Date.
SECURITIES ACT: the Securities Act of 1933, as amended from time
to time.
SENIOR SECURED INDEBTEDNESS: Debt of the Company which would, in
accordance with generally accepted accounting principles, constitute
long-term debt and have a security interest in any of the assets of the
Company or any of its Subsidiaries, including, without limitation, (a) any
debt with a maturity more than one year after the creation of such debt, (b)
any portion thereof included in current liabilities and (c) any debt
outstanding under a revolving credit or similar agreement providing for
borrowings (and any renewals and extensions thereof) over a period of more
than one year, notwithstanding that any such indebtedness may be payable on
demand or within one year after the creation thereof, and excluding all Debt
solely by and between two or more of the Company or its Subsidiaries.
SUBORDINATED DEBT: the meaning specified therefor in section 13.1.
SUBSIDIARY: any corporation at least 50% (by number of votes) of
the Voting Stock of which is at the time owned by the Company or by one or
more Subsidiaries or by the Company and one or more Subsidiaries.
SUPERIOR DEBT: the meaning specified therefor in section 13.2.
SUPERIOR DEBT AGREEMENT: with respect to any Superior Debt, the
agreement or instrument pursuant to which such Superior Debt is outstanding.
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VOTING STOCK: with reference to any corporation, stock of any
class or classes (or equivalent interests), if the holders of the stock of
such class or classes (or equivalent interests) are ordinarily, in the
absence of contingencies, entitled to vote for the election of the directors
(or Persons performing similar functions) of such corporation, even though
the right so to vote has been suspended by the happening of such a
contingency.
WARRANTS: the meaning specified in section 1.
WHOLLY-OWNED: as applied to any Subsidiary, a Subsidiary all the
outstanding shares (other than directors' qualifying shares, if required by
law) of every class of stock of which are at the time owned by the Company or
by one or more Wholly-Owned Subsidiaries or by the Company and one or more
Wholly-Owned Subsidiaries.
15. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES; ACTION BY
NOTEHOLDERS.
15.1. NOTE REGISTER; OWNERSHIP OF NOTES. The Company will keep at
its principal office a register in which the Company will provide for the
registration of Notes and the registration of transfers of Notes. The
Company may treat the Person in whose name any Note is registered on such
register as the owner thereof for the purpose of receiving payment of the
principal of and the premium, if any, and interest on such Note and for all
other purposes, whether or not such Note shall be overdue, and the Company
shall not be affected by any notice to the contrary. All references in this
Agreement to a "holder" of any Note shall mean the Person in whose name such
Note is at the time registered on such register.
15.2. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note
for registration of transfer or for exchange to the Company at its principal
office, the Company at its expense will execute and deliver in exchange
therefor a new Note or Notes in denominations of at least $100,000 (except
one Note may be issued in a lesser principal amount if the unpaid principal
amount of the surrendered Note is not evenly divisible by, or is less than
$100,000), as requested by the holder or transferee, which aggregate the
unpaid principal amount of such surrendered Note, registered as such holder
or transferee may request, dated so that there will be no loss of interest on
such surrendered Note and otherwise of like tenor. The Company will not be
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required to register the transfer of any Note unless the transferee is an
insurance company, bank, investment company, investment partnership or other
vehicle, CLO, CBO or similar fund, or other type of financial institution, or
a registered broker-dealer.
15.3. REPLACEMENT OF NOTES. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Note and, in the case of any such loss, theft or destruction of any Note,
upon delivery of an indemnity bond in such reasonable amount as the Company
may determine (or, in the case of any Note held by you or another
institutional holder or your or its nominee, of an indemnity agreement from
you or such other holder) or, in the case of any such mutilation, upon the
surrender of such Note for cancellation to the Company at its principal
office, the Company at its expense will execute and deliver, in lieu thereof,
a new Note in the unpaid principal amount of such lost, stolen, destroyed or
mutilated Note, dated so that there will be no loss of interest on such Note
and otherwise of like tenor. Any Note in lieu of which any such new Note has
been so executed and delivered by the Company shall not be deemed to be an
outstanding Note for any purpose of this Agreement.
15.4. NOTES HELD BY COMPANY, ETC., DEEMED NOT OUTSTANDING. For
the purposes of determining whether the holders of the Notes of the requisite
principal amount at the time outstanding have taken any action authorized by
this Agreement with respect to the giving of consents or approvals or with
respect to acceleration upon an Event of Default, any Notes directly or
indirectly owned by the Company or any of its Subsidiaries or Affiliates
shall be disregarded and deemed not to be outstanding.
16. PAYMENTS ON NOTES.
16.1. PLACE OF PAYMENT. Payments of principal, premium, if any,
and interest becoming due and payable on the Notes shall be made at the
principal office of The Chase Manhattan Bank, N.A., in the Borough of
Manhattan, the City and State of New York, unless the Company, by written
notice to each holder of any Notes, shall designate the principal office of
another bank or trust company in such Borough as such place of payment, in
which case the principal office of such other bank or trust company shall
thereafter be such place of payment.
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16.2. HOME OFFICE PAYMENT. So long as you or your nominee shall
be the holder of any Note, and notwithstanding anything contained in section
16.1 or in such Note to the contrary, the Company will pay all sums becoming
due on such Note for principal, premium, if any, and interest by the method
and at the address specified for such purpose in Schedule A, or by such other
method or at such other address as you shall have from time to time specified
to the Company in writing for such purpose, without the presentation or
surrender of such Note or the making of any notation thereon, except that any
Note paid or prepaid in full shall be surrendered to the Company at its
principal office or at the place of payment maintained by the Company
pursuant to section 16.1 for cancellation. Prior to any sale or other
disposition of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to
the Company in exchange for a new Note or Notes pursuant to section 15.2.
The Company will afford the benefits of this section 16.2 to any
institutional investor which is the direct or indirect transferee of any Note
purchased by you under this Agreement and which has made the same agreement
relating to such Note as you have made in this section 16.2.
17. EXPENSES, ETC. Whether or not the transactions contemplated
by this Agreement shall be consummated, the Company will pay all expenses in
connection with such transactions and in connection with any amendments or
waivers (whether or not the same become effective) under or in respect of
this Agreement or the Notes, including, without limitation: (a) the cost and
expenses of preparing and reproducing this Agreement and the Notes, of
furnishing all opinions by counsel for the Company (including any opinions
requested by your special counsel as to any legal matter arising hereunder)
and all certificates on behalf of the Company, and of the Company's
performance of and compliance with all agreements and conditions contained
herein on its part to be performed or complied with; (b) the cost of
delivering to your principal office, insured to your satisfaction, the Notes
sold to you hereunder and any Notes delivered to you upon any substitution of
Notes pursuant to section 15 and of your delivering any Notes, insured to
your satisfaction, upon any such substitution; (c) the reasonable fees,
expenses and disbursements of one special counsel for the holders of the
Notes (and, in addition, any local counsel determined by the holders of the
Notes to be
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necessary in the circumstances) in connection with such transactions and any
such amendments or waivers; and (d) the reasonable out-of-pocket expenses
incurred by you in connection with such transactions and any such amendments
or waivers. The Company also will pay, and will save you and each holder of
any Notes harmless from, all claims in respect of the fees, if any, of
brokers and finders and any and all liabilities with respect to any taxes
(including interest and penalties) which may be payable in respect of the
execution and delivery of this Agreement, the issue of the Notes and any
amendment or waiver under or in respect of this Agreement or the Notes. The
obligation of the Company under this section 17 shall survive any disposition
or payment of the Notes and the termination of this Agreement.
18. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement or made in writing
by or on behalf of the Company in connection with the transactions
contemplated by this Agreement shall survive the execution and delivery of
this Agreement, any investigation at any time made by you or on your behalf,
the purchase of the Notes by you under this Agreement and any disposition or
payment of the Notes. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement shall be deemed representations and warranties of the Company under
this Agreement.
19. AMENDMENTS AND WAIVERS. Any term of this Agreement or of the
Notes may be amended and the observance of any term of this Agreement or of
the Notes may be waived (either generally or in a particular instance and
either retroactively or prospectively) only with the written consent of the
Company and the holders of more than 60% in principal amount of the Notes at
the time outstanding (subject to section 15.4), PROVIDED that, without the
prior written consent of the holders of all the Notes at the time outstanding
(subject to section 15.4), no such amendment or waiver shall (a) change the
maturity or the principal amount of, or reduce the rate or change the time of
payment of interest on, or change the amount or the time of payment of any
principal or premium payable on any prepayment of, any Note, or change the
amount or the time of payment of any fee payable hereunder, (b) reduce the
aforesaid percentages of the principal amount of the Notes the holders of
which are required to consent to any such amendment or waiver,
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(c) change the percentage of the principal amount of the Notes the holders of
which may declare the Notes to be due and payable as provided in section 11,
(d) modify the proviso to the first sentence of section 11, or (e) decrease
the percentage of the principal amount of the Notes the holders of which may
rescind and annul any such declaration as provided in section 11. Any
amendment or waiver effected in accordance with this section 19 shall be
binding upon each holder of any Note at the time outstanding, each future
holder of any Note and the Company.
20. NOTICES, ETC. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing and
shall be delivered by facsimile transmission, hand or courier service, or
mailed by registered or certified mail, return receipt requested, addressed,
(a) if to you, at the address set forth in Schedule A or at such other
address as you shall have furnished to the Company in writing, except as
otherwise provided in section 16.2 with respect to payments on Notes held by
you or your nominee, or (b) if to any other holder of any Note, at such
address as such other holder shall have furnished to the Company in writing,
or, until any such other holder so furnishes to the Company an address, then
to and at the address of the last holder of such Note who has furnished an
address to the Company, or (c) if to the Company, at its address set forth at
the beginning of this Agreement, to the attention of Chief Financial Officer,
or at such other address, or to the attention of such other officer, as the
Company shall have furnished to you and each such other holder in writing.
Any notice so addressed and delivered by facsimile transmission, hand or
courier shall be deemed to be given when received, and any notice so
addressed and mailed by registered or certified mail shall be deemed to be
given three business days after being so mailed.
21. INDEMNIFICATION. The Company will indemnify and hold harmless
each of you and each person who controls you within the meaning of the
Securities Act or the Exchange Act and each of your subsidiaries and each of
your and their respective directors, officers, employees, agents, advisors
and partners (any and all of whom are referred to as the "Indemnified Party")
from and against any and all losses, claims, damages and liabilities, whether
joint or several (including all legal fees or other expenses reasonably
incurred by one counsel for any Indemnified Party in connection with the
preparation for or defense of any
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pending or threatened third party claim, action or proceeding, whether or not
resulting in any liability), to which such Indemnified Party may become
subject under any applicable federal or state law or otherwise, caused by or
arising out of, or allegedly caused by or arising out of, this Agreement or
any transaction contemplated hereby or thereby, other than, with respect to
any Indemnified Party, losses, claims, damages or liabilities that are the
result of any representation made by such Indemnified Party in section 6 or
the result of the gross negligence or willful misconduct of such Indemnified
Party. This section is not intended to provide to any Indemnified Party an
additional means of enforcement against the Company of the Debt evidenced by
the Notes.
Promptly after receipt by an Indemnified Party of notice of any
claim, action or proceeding with respect to which an Indemnified Party is
entitled to indemnity hereunder, such Indemnified Party will notify the
Company of such claim or the commencement of such action or proceeding,
PROVIDED that the failure of an Indemnified Party to give notice as provided
herein shall not relieve the Company of its obligations under this section 21
with respect to such Indemnified Party, except to the extent that the Company
is actually prejudiced by such failure. The Company will assume the defense
of such claim, action or proceeding and will employ counsel satisfactory to
the Indemnified Party and will pay the fees and expenses of such counsel.
Notwithstanding the preceding sentence, the Indemnified Party will be
entitled, at the expense of the Company, to employ counsel separate from
counsel for the Company and for any other party in such action if the
Indemnified Party reasonably determines upon advice of counsel that a
conflict of interest or other reasonable basis exists which makes
representation by counsel chosen by the Company not advisable, but the
Company will not be obligated to pay the fees and expenses of more than one
counsel for all Indemnified Parties.
22. MISCELLANEOUS. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and assigns
of the parties hereto, whether so expressed or not, and, in particular, shall
inure to the benefit of and be enforceable by any holder or holders at the
time of the Notes or any part thereof. Except as stated in section 18, this
Agreement embodies the entire agreement and understanding between you and the
Company and supersedes all prior agreements and
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understandings relating to the subject matter hereof. This Agreement and the
Notes shall be construed and enforced in accordance with and governed by the
law of the State of New York. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this letter and return one of
the same to the Company, whereupon this letter shall become a binding
agreement between you and the Company.
Very truly yours,
ECO SOIL SYSTEMS, INC.
By: /s/ William B. Adams
-------------------------------
Name: William B. Adams
Title: Chief Executive Officer
The foregoing Agreement is
hereby agreed to as of the
date thereof.
ALBION ALLIANCE MEZZANINE FUND, L.P.
By: Albion Alliance LLC,
its General Partner
By: /s/ Peter C. Gummeson
------------------------------------
Name: Peter C. Gummeson
Title: Senior Vice President
PARIBAS CAPITAL FUNDING LLC
By: /s/ Jeff Youle
-----------------------------------------
Name: Jeff Youle
Title: Managing Director
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SCHEDULE A
SCHEDULE OF PURCHASERS
Principal Amount of
Name and Address Notes; Number of
of Purchaser Warrants
------------ --------
ALBION ALLIANCE MEZZANINE FUND, L.P. Principal Amount of
Note:
(1) All payments by wire transfer of
immediately available funds (other than $8,000,000
in respect of transaction fees) to:
Number of Warrants:
The Chase Manhattan Bank, N.A.
110 West 52nd Street 140,000
New York, New York 10019
ABA No. 021-000-021
A/C Albion Alliance Mezzanine Fund,
L.P.
Account No. 910-2-795953
Tax ID No. 13-3975300
Each such wire transfer shall set forth
the name of the Company, the private
placement number, the due date of the
payment being made and if such payment
is a final payment.
Payments by wire transfer of immediately
available funds in respect of
transaction fees to:
IBJ Schroder Bank & Trust Co.
1 State Street Plaza
New York, New York 10004
ABA No. 026-007-825
A/C Albion Alliance LLC
Account No. 01098103
Tax ID No. 13-3903734
(2) All notices of payment and written
confirmation of such wire transfers to:
Albion Alliance Mezzanine Fund, L.P.
c/o Alliance Capital Management, L.P.
500 Plaza Drive
6th Floor
Secaucus, New Jersey 07094
Attention: Cash Operations
(3) All other communications to be sent to:
Albion Alliance Mezzanine Fund, L.P.
c/o Albion Alliance LLC
1345 Avenue of the Americas
41st Floor
New York, New York 10105
Attention: Pete Gummeson
(4) Private securities to be delivered to:
The Equitable Life Assurance Society of
the United States
1290 Avenue of the Americas
12th Floor
New York, New York 10104
Attention: Sherry Weitman
<PAGE>
PARIBAS CAPITAL FUNDING LLC Principal amount of
Note:
(1) All payments by wire transfer of
immediately available funds to: $7,000,000
State Street Bank & Trust Co. Number of Warrants:
Corporate Trust Department
Attention: Matt Callahan 122,500
ABA No. 011-00-0028
A/C Paribas Capital Funding LLC
Account No. 99039422
(2) All notices relating to financial
or legal information to:
Paribas Capital Funding LLC
787 Seventh Avenue
32nd Floor
New York, New York 10019
Telephone: 212-841-2544
Facsimile: 212-841-2144
Attention: Michael Weinberg
Alternate Contact:
Francois Gauvin
Telephone: 212-841-2548
Facsimile: 212-841-2144
(3) All other communications to be sent to:
Paribas Capital Funding LLC
787 Seventh Avenue
32nd Floor
New York, New York 10019
Telephone: 212-841-2544
Facsimile: 212-841-2144
Attention: Michael Weinberg
Alternate Contact:
Francois Gauvin
Telephone: 212-841-2548
Facsimile: 212-841-2144
With a copy to:
State Street Bank & Trust Co.
Corporate Trust Department
Telephone: 617-664-5477
Facsimile: 617-664-5466
5467
5468
Attention: Bill Connolly
<PAGE>
EXHIBIT 10.3
ECO SOIL SYSTEMS, INC.
12.00% SENIOR SUBORDINATED NOTE DUE AUGUST 25, 2003
PPN #278858 A A 3
R-2 New York, New York
$7,000,000 August 25, 1998
ECO SOIL SYSTEMS, INC., a Nebraska corporation (the "Company"), for
value received, hereby promises to pay to PARIBAS CAPITAL FUNDING LLC or
registered assigns, the principal amount of $7,000,000 on August 25, 2003, with
interest (computed on the basis of twelve 30-day months) on the unpaid balance
of such principal amount at the rate of 12.00% per annum from the date hereof,
payable quarterly on the 25th day of each February, May, August and November
after the date hereof, commencing November 25, 1998, until such unpaid balance
shall become due and payable (whether at maturity or at a date fixed for
prepayment or by declaration or otherwise), and with interest on any overdue
principal (including any overdue prepayment of principal) and premium, if any,
and (to the extent permitted by applicable law) on any overdue interest, at the
rate of 14.00% per annum until paid, payable semi-annually as aforesaid or, at
the option of the holder hereof, on demand. Payments of principal and interest
on this Note shall be made in lawful money of the United States of America at
the principal office of The Chase Manhattan Bank, N.A., in the Borough of
Manhattan, the City and State of New York, or at such other office or agency in
such Borough as the Company shall have designated by written notice to the
holder of this Note as provided in the Note and Warrant Purchase Agreements
referred to below.
This Note is one of the Company's 12.00% Senior Subordinated Notes due
August 25, 2003 (the "Notes"), originally issued in the aggregate principal
amount of $15,000,000 pursuant to the Note and Warrant Purchase Agreements, each
dated as of August 25, 1998, as from time to time amended, between the Company
and certain institutional investors named therein. The holder of this Note is
entitled to the benefits of such Note and Warrant Purchase Agreements, as from
time to time amended, and may enforce the agreements of the Company contained
therein and exercise the remedies provided for thereby or otherwise available in
respect thereof.
1
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This Note is a registered Note and is transferable only upon surrender
of this Note for registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed, by the holder hereof or such
holder's attorney duly authorized in writing. Reference in this Note to a
"holder" shall mean the person in whose name this Note is at the time registered
on the register kept by the Company as provided in such Note and Warrant
Purchase Agreements and the Company may treat such person as the owner of this
Note for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
The holder of this Note is entitled to the benefits of a certain
Guaranty Agreement, dated as of August 25, 1998, by AGRICULTURAL SUPPLY, INC.,
ECO TURF PRODUCTS, INC., MITIGATION SERVICES, INC., TURF ACQUISITION SUB., INC.,
TURF SPECIALTY, INC., and YUMA ACQUISITION SUB., INC., each a Delaware
subsidiary of the Company, and by ASPEN CONSULTING COMPANIES, INC., a Colorado
subsidiary of the Company, and BENHAM CHEMICAL CORPORATION, a Michigan
subsidiary of the Company.
The indebtedness evidenced by this instrument is subordinated to the
prior payment in full of the Superior Debt (as defined in such Note and Warrant
Purchase Agreements) pursuant to, and to the extent provided in, such Note and
Warrant Purchase Agreements.
The Notes are under certain circumstances subject to required and
optional prepayment, in whole or in part, in certain cases with a premium and in
other cases without a premium, all as specified in such Note and Warrant
Purchase Agreements.
In case an Event of Default, as defined in such Note and Warrant
Purchase Agreements, shall occur and be continuing, the unpaid balance of the
principal of this Note may become due and payable in the manner and with the
effect provided in such Note and Warrant Purchase Agreements.
2
<PAGE>
This Note is made and delivered in New York, New York, and shall be
governed by the laws of the State of New York.
ECO SOIL SYSTEMS, INC.
By: /s/ WILLIAM B. ADAMS
---------------------------------
Name: William B. Adams
Title: Chief Executive Officer
3
<PAGE>
CERTIFICATE OF GUARANTY
of
AGRICULTURAL SUPPLY, INC.
ASPEN CONSULTING COMPANIES, INC.
BENHAM CHEMICAL CORPORATION
ECO TURF PRODUCTS, INC.
MITIGATION SERVICES, INC.
TURF ACQUISITION SUB., INC.
TURF SPECIALTY, INC.
and
YUMA ACQUISITION SUB., INC.
Dated: August 25, 1998
AGRICULTURAL SUPPLY, INC., ECO TURF PRODUCTS, INC., MITIGATION
SERVICES, INC., TURF ACQUISITION SUB., INC., TURF SPECIALTY, INC., and YUMA
ACQUISITION SUB., INC., each a Delaware corporation, and ASPEN CONSULTING
COMPANIES, INC., a Colorado corporation, and BENHAM CHEMICAL CORPORATION, a
Michigan corporation (the "Guarantors"), for valuable consideration, hereby
jointly and severally, irrevocably and unconditionally guarantee the due and
punctual payment of the principal of and premium, if any, and interest on, and
any other amounts due under, the 12.00% Senior Subordinated Note due August 25,
2003 (the "Note") of ECO SOIL SYSTEMS, INC., a Nebraska corporation (the
"Company"), to which this Certificate of Guaranty is attached, when and as the
same shall become due and payable (whether at stated maturity or by required or
optional prepayment or by declaration or otherwise), in accordance with the
terms of, and subject to the limitations set forth in the Guaranty Agreement,
dated as of August 25, 1998, of the Guarantors. This guaranty is an absolute,
present and continuing guaranty of payment and not of collectibility, and if the
Company shall fail to pay punctually any payment required to be made by it in
respect of the Note, each Guarantor agrees immediately to pay the same to the
holder of the Note and in any event prior to the date on which such failure
shall constitute an Event of Default as defined in the Note and Warrant Purchase
Agreements, dated as of August 25, 1998, between the Company and the
institutional investors named therein, without demand, presentment, protest or
notice of any kind, all of which are unconditionally waived by the Guarantors.
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<PAGE>
The holder of the Note is entitled to the benefits of the Note and
Warrant Purchase Agreements referred to above.
AGRICULTURAL SUPPLY, INC.
By:
--------------------------------
Name:
Title:
ASPEN CONSULTING COMPANIES, INC..
By:
--------------------------------
Name:
Title:
BENHAM CHEMICAL CORPORATION
By:
--------------------------------
Name:
Title:
ECO TURF PRODUCTS, INC.
By:
--------------------------------
Name:
Title:
5
<PAGE>
MITIGATION SERVICES, INC.
By:
--------------------------------
Name:
Title:
TURF ACQUISITION SUB., INC.
By:
--------------------------------
Name:
Title:
TURF SPECIALTY, INC.
By:
--------------------------------
Name:
Title:
YUMA ACQUISITION SUB., INC.
By:
--------------------------------
Name:
Title:
SCHEDULE I
Eco Soil Systems, Inc. (the "Company") issued a substantially identical
12.00% Senior Subordinated Note Due August 25, 1998 to Albion Alliance Mezzanine
Fund, L.P. ("Albion"). In addition to the different holder, the Note issued to
Albion (the "Albion Note") differs from that issued to Paribas Capital Funding
LLC in the following respects:
1. The Albion Note is numbered R-1.
2. The Albion Note is in the principal amount of $8,000,000.
6
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ECO SOIL SYSTEMS, INC.
______________________________
COMMON STOCK PURCHASE WARRANT
______________________________
Expiring August 25, 2003
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <C>
1. Exercise of Warrant. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1. Manner of Exercise. . . . . . . . . . . . . . . . . . . . . . . . 3
1.2. When Exercise Deemed Effected . . . . . . . . . . . . . . . . . . 4
1.3. Delivery of Stock Certificates, etc.. . . . . . . . . . . . . . . 4
1.4. Company to Reaffirm Obligations . . . . . . . . . . . . . . . . . 4
1.5. Payment by Application of the Notes . . . . . . . . . . . . . . . 5
2. Adjustment of Common Stock Issuable Upon Exercise. . . . . . . . . . . 5
2.1. Number of Shares; Warrant Price.. . . . . . . . . . . . . . . . . 5
2.2. Adjustment of Warrant Price . . . . . . . . . . . . . . . . . . . 6
2.2.1. Issuance of Additional Shares of Common Stock. . . . . . . . 6
2.2.2. Extraordinary Dividends and Distributions. . . . . . . . . . 6
2.3. Treatment of Options and Convertible Securities. . . . . . . . . 7
2.4. Treatment of Stock Dividends, Stock Splits, etc. . . . . . . . . 9
2.5. Computation of Consideration . . . . . . . . . . . . . . . . . . 10
2.6. Adjustments for Combinations, etc. . . . . . . . . . . . . . . . 11
2.7. Dilution in Case of Other Securities . . . . . . . . . . . . . . 11
2.8. Minimum Adjustment of Warrant Price. . . . . . . . . . . . . . . 12
3. Consolidation, Merger, Sale of Assets, Reorganization, etc. . . . . . 12
4. Other Dilutive Events . . . . . . . . . . . . . . . . . . . . . . . . 13
5. No Dilution or Impairment . . . . . . . . . . . . . . . . . . . . . . 13
6. Accountants' Report as to Adjustments . . . . . . . . . . . . . . . . 14
7. Notices of Corporate Action . . . . . . . . . . . . . . . . . . . . . 15
8. Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . . . . 15
8.1. Restrictive Legends. . . . . . . . . . . . . . . . . . . . . . . 15
8.2. Notice of Proposed Transfer; Opinions of Counsel . . . . . . . . 16
8.3. Termination of Restrictions. . . . . . . . . . . . . . . . . . . 17
9. Registration under Securities Act, etc. . . . . . . . . . . . . . . . 17
9.1. Incidental Registration. . . . . . . . . . . . . . . . . . . . . 17
9.2. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . 19
9.3. Underwritten Offerings . . . . . . . . . . . . . . . . . . . . . 22
9.4. Preparation; Reasonable Investigation. . . . . . . . . . . . . . 23
9.5. Certain Rights of Holders. . . . . . . . . . . . . . . . . . . . 23
9.6. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 24
9.7. Covenants Relating to Rule 144 . . . . . . . . . . . . . . . . . 26
10. Availability of Information . . . . . . . . . . . . . . . . . . . . . 27
11. Reservation of Stock, etc.. . . . . . . . . . . . . . . . . . . . . . 27
1
<PAGE>
12. Listing on Securities Exchange. . . . . . . . . . . . . . . . . . . . 27
13. Ownership, Transfer and Substitution of Warrants. . . . . . . . . . . 27
13.1. Ownership of Warrants. . . . . . . . . . . . . . . . . . . . . . 27
13.2. Transfer and Exchange of Warrants. . . . . . . . . . . . . . . . 28
13.3. Replacement of Warrants. . . . . . . . . . . . . . . . . . . . . 28
14. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
15. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
16. No Rights or Liabilities as Stockholder . . . . . . . . . . . . . . . 34
17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
18. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
19. Expiration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
Form of Subscription
Form of Notice
Schedule of Outstanding Options
2
<PAGE>
Common Stock Purchase Warrant
Expiring August 25, 2003
New York, New York
August 25, 1998
PPN #278858 1 1 3
No. W-2
ECO SOIL SYSTEMS, INC., a Nebraska corporation (the "Company"), for
value received, hereby certifies that PARIBAS CAPITAL FUNDING LLC, or registered
assigns, is entitled to purchase from the Company 122,500 duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock, par value
$.005 per share, of the Company (the "Common Stock") at the purchase price per
share of $.01, at any time or from time to time on or after February 25, 2000
and prior to 3 P.M., New York City time, on August 25, 2003, all subject to the
terms, conditions and adjustments set forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants", such term to include all Warrants issued in substitution therefor)
originally issued in connection with the issue and sale by the Company of
$15,000,000 aggregate principal amount of its 12.00% Notes due August 25, 2003
(together with all notes issued in substitution therefor, the "Notes"), pursuant
to the Note and Warrant Purchase Agreements (collectively, the "Purchase
Agreement"), each dated as of August 25, 1998, between the Company and the
institutional investors named therein. The Warrants originally so issued
evidence rights to purchase an aggregate of 262,500 shares of Common Stock,
subject to adjustment as provided herein. Certain capitalized terms used in
this Warrant are defined in section 14.
1. EXERCISE OF WARRANT. 1.1. MANNER OF EXERCISE. This Warrant may
be exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day by surrender of this Warrant, with the form of
subscription at the end hereof (or a reasonable facsimile thereof) duly executed
by such holder, to the Company at its principal office (or, if such exercise
shall be in connection with an underwritten Public Offering of shares of Common
Stock (or Other Securities) subject to this Warrant, at the location at which
the Company shall have agreed to deliver the shares of Common Stock (or Other
Securities) subject to such offering), accompanied by payment, in cash or by
certified or official bank check payable to the order of the company or by the
application of Notes in the manner provided in section 1.5 (or by any
combination of such methods), in the amount obtained by multiplying (a) the
number of shares of Common Stock (without giving effect to any adjustment
therein) designated in such form of subscription by (b) $.01 and such holder
shall thereupon be
3
<PAGE>
entitled to receive the number of duly authorized, validly issued, fully paid
and nonassessable shares of Common Stock (or Other Securities) determined as
provided in sections 2 through 4.
1.2. WHEN EXERCISE DEEMED EFFECTED. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to the
Company as provided in section 1.1, and at such time the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
section 1.3 shall be deemed to have become the holder or holders of record
thereof.
1.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable
after the exercise of this Warrant, in whole or in part, and in any event within
five Business Days thereafter (unless such exercise shall be in connection with
an underwritten Public Offering of shares of Common Stock (or Other Securities)
subject to this Warrant, in which event concurrently with such exercise), the
Company at its expense (including the payment by it of any applicable taxes
other than transfer taxes) will cause to be issued in the name of and delivered
to the holder hereof or, subject to section 8, as such holder (upon payment by
such holder of any applicable transfer taxes) may direct,
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such holder would otherwise
be entitled, cash in an amount equal to the same fraction of the Market
Price per share of such Common Stock (or Other Securities) on the Business
Day next preceding the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock equal (without giving effect to any
adjustment therein) to the number of such shares called for on the face of
this Warrant minus the number of such shares designated by the holder upon
such exercise as provided in section 1.1.
1.4. COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time
of or at any time after each exercise of this Warrant, upon the request of the
holder hereof or of any shares of Common Stock (or Other Securities) issued upon
such exercise, acknowledge in writing its continuing obligation to afford to
such holder all rights (including, without limitation, any right of registration
of any shares of Common Stock (or Other Securities) issuable upon exercise of
this Warrant pursuant to section 9) to which such holder shall continue to be
entitled after such exercise in
4
<PAGE>
accordance with the terms of this Warrant, PROVIDED that if any such holder
shall fail to make any such request, the failure shall not affect the
continuing obligation of the Company to afford such rights to such holder.
1.5. PAYMENT BY APPLICATION OF THE NOTES. Upon any exercise of this
Warrant, the holder hereof may, at its option, instruct the Company, by so
specifying in the form of subscription submitted therewith as provided in
section 1.1, to apply to the payment required by section 1.1 all or any part of
the principal amount then unpaid and of the interest on such principal amount
then accrued on any one or more Notes at the time held by such holder, in which
case the Company will accept the aggregate amount of principal and accrued
interest on such principal specified in such form of subscription in
satisfaction of a like amount of such payment. In case less than the entire
unpaid principal amount of any Note shall be so specified, the principal amount
so specified shall be credited, as of the date of such exercise, against the
installments of principal then remaining unpaid on such Note either in the
inverse order of their maturity dates or in the direct order of their maturity
dates as such holder shall instruct in such form of subscription. Within five
days after receipt of any such notice, the Company will pay to the holder of the
Notes submitting such form of subscription, in the manner provided in such Notes
and the Purchase Agreement, all unpaid interest accrued to the date of exercise
of such Warrant on the principal amount so specified in such form of
subscription that is not applied to the payment required by section 1.1 under
this section 1.5. In the event that the entire unpaid principal amount of any
Note is applied to the payment required by section 1.1 under this section 1.5,
such Note shall be promptly surrendered and canceled in accordance with the
provisions of section 15 of the Purchase Agreement.
2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE. 2.1. NUMBER
OF SHARES; WARRANT PRICE. The number of shares of Common Stock which the holder
of this Warrant shall be entitled to receive upon each exercise hereof shall be
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to section 1.1, by a
fraction of which (i) the numerator is $.01 and (ii) the denominator is the
Warrant Price in effect on the date of such exercise. The "Warrant Price" shall
initially be $.01 per share, shall be adjusted and readjusted from time to time
as provided in this section 2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is required by this
section 2.
2.2. ADJUSTMENT OF WARRANT PRICE. 2.2.1. ISSUANCE OF ADDITIONAL
SHARES OF COMMON STOCK. In case the Company, at any time or from time to time
after August 25, 1998 (the "Initial Date"), shall issue or sell Additional
Shares of Common Stock (including Additional Shares of Common Stock deemed to be
issued
5
<PAGE>
pursuant to section 2.3 or 2.4) without consideration or for a consideration
per share less than the Base Price in effect, in each case, on the date of
and immediately prior to such issue or sale, then, and in each such case,
subject to section 2.8, such Warrant Price shall be reduced, concurrently
with such issue or sale, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Warrant Price by a fraction,
(a) the numerator of which shall be (i) the number of shares of
Common Stock outstanding immediately prior to such issue or sale plus (ii)
the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of such Additional Shares of
Common Stock so issued or sold would purchase at the Base Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
PROVIDED that, for the purposes of this section 2.2.1, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
and (y) treasury shares shall not be deemed to be outstanding.
2.2.2. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In case the Company
at any time or from time to time after the Initial Date shall declare, order,
pay or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on any Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or in Options for Common Stock or
(b) a regular, periodic dividend payable in cash and declared out of the earned
surplus of the Company as at the date hereof as increased by any credits (other
than credits resulting from a revaluation of property) and decreased by any
debits made thereto after such date, then, and in each such case, subject to
section 2.8, the Warrant Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
of securities entitled to receive such dividend or distribution shall be
reduced, effective as of the close of business on such record date, to a price
(calculated to the nearest .001 of a cent) determined by multiplying such
Warrant Price by a fraction,
(i) the numerator of which shall be the Current Market Price in
effect on such record date or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-dividend trading, less
the value of such dividend or distribution (as determined in good faith by
the
6
<PAGE>
Board of Directors of the Company) applicable to one share of Common Stock, and
(ii) the denominator of which shall be such Current Market Price.
2.3. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the
Company at any time or from time to time after the Initial Date shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to, any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be issued for purposes of
section 2.2.1 as of the time of such issue, sale, grant or assumption or, in
case such a record date shall have been fixed, as of the close of business on
such record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading), PROVIDED that such
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to section 2.5) of such shares
would be less than the Base Price in effect, in each case, on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be, and PROVIDED, FURTHER, that in any such case in
which Additional Shares of Common Stock are deemed to be issued,
(a) no further adjustment of the Warrant Price shall be made upon the
subsequent issue or sale of Additional Shares of Common Stock or
Convertible Securities upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of
7
<PAGE>
conversion or exchange under such Convertible Securities, which are outstanding
at such time;
(c) upon the expiration of any such Options or of the rights of conversion
or exchange under any such Convertible Securities which shall not have been
exercised (or upon purchase by the Company and cancellation or retirement of any
such Options which shall not have been exercised or of any such Convertible
Securities the rights of conversion or exchange under which shall not have been
exercised), the Warrant Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date, or date prior to
the commencement of ex-dividend trading, as the case may be, with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration (or such cancellation or retirement, as the case may be), be
recomputed as if:
(i) in the case of Options for Common Stock or of Convertible
Securities, the only Additional Shares of Common Stock issued or sold were
the Additional Shares of Common Stock, if any, actually issued or sold upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor was (x) an
amount equal to (A) the consideration actually received by the Company for
the issue, sale, grant or assumption of all such Options, whether or not
exercised, plus (B) the consideration actually received by the Company upon
such exercise, minus (C) the consideration paid by the Company for any
purchase of such Options which were not exercised, or (y) an amount equal
to (A) the consideration actually received by the Company for the issue,
sale, grant or assumption of all such Convertible Securities which were
actually converted or exchanged, plus (B) the additional consideration, if
any, actually received by the Company upon such conversion or exchange,
minus (C) the consideration paid by the Company for any purchase of such
Convertible Securities the rights of conversion or exchange under which
were not exercised, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the exercise
of such Options were issued at the time of the issue, sale, grant or
assumption of such Options, and the consideration received by the Company
for the Additional Shares of Common Stock deemed to have then been issued
was an amount equal to (x) the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus (y) the consideration deemed to have been
received by the Company (pursuant to section 2.5) upon the issue or sale
8
<PAGE>
of the Convertible Securities with respect to which such Options
were actually exercised, minus (z) the consideration paid by the
Company for any purchase of such Options which were not exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
In case at any time after the Initial Date the Company shall be
required to increase the number of Additional Shares of Common Stock subject to
any Option or into which any Convertible Securities (other than the Warrants)
are convertible or exchangeable pursuant to the operation of anti-dilution
provisions applicable thereto, such Additional Shares shall be deemed to be
issued for purposes of section 2.1 as of the time of such increase.
2.4. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the
Company at any time or from time to time after the Initial Date shall declare or
pay any dividend or other distribution on any class of stock of the Company
payable in Common Stock, or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock) ,
then, and in each such case, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend, immediately after the
close of business on the record date for the determination of holders of any
class of securities entitled to receive such dividend, or (b) in the case of any
such subdivision, at the close of business on the day immediately prior to the
day upon which such corporate action becomes effective.
2.5. COMPUTATION OF CONSIDERATION. For the purposes of this
section 2:
(a) The consideration for the issue or sale of any Additional Shares
of Common Stock or for the issue, sale, grant or assumption of any Options
or Convertible Securities, irrespective of the accounting treatment of such
consideration, shall
(i) insofar as it consists of cash, be computed at the amount of
cash received by the Company, after deducting any expenses paid or
incurred by the Company or
9
<PAGE>
any commissions or compensation paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services and any accrued interest or dividends in connection with
such issue or sale,
(ii) insofar as it consists of consideration (including
securities) other than cash, be computed at the Fair Value
thereof at the time of such issue or sale, after deducting any
expenses paid or incurred by the Company for any commissions or
compensation paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services and any
accrued interest or dividends in connection with such issue or
sale, and
(iii) in case Additional Shares of Common Stock are issued or
sold or Convertible Securities are issued, sold, granted or assumed
together with other stock or securities or other assets of the
Company for a consideration which covers both, be the proportion of
such consideration so received, computed as provided in
subdivisions (i) and (ii) above, allocable to such Additional
Shares of Common Stock or Convertible Securities, as the case may
be, all as determined in good faith by the Board of Directors of
the Company.
(b) All Options issued, sold, granted or assumed together with other
stock or securities or other assets of the Company for a consideration
which covers both, all Additional Shares of Common Stock, Options or
Convertible Securities issued in payment of any dividend or other
distribution on any class of stock of the Company and all Additional Shares
of Common Stock issued to effect a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common
Stock) shall be deemed to have been issued without consideration.
(c) Additional Shares of Common Stock deemed to have been issued for
consideration pursuant to section 2.3, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption
of the Options or Convertible Securities in question, plus the
minimum aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise in full of
such Options or the conversion or
10
<PAGE>
exchange of such Convertible Securities or, in the case of Options
for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, in each case computing such consideration
as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(d) Additional Shares of Common Stock issued or deemed to have been
issued pursuant to the operation of anti-dilution provisions applicable to
Convertible Securities (other than the Warrants), Options or other
securities of the Company (either as a result of the adjustments provided
for by the Warrants or otherwise) shall be deemed to have been issued
without consideration.
2.6. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7. DILUTION IN CASE OF OTHER SECURITIES. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
Warrants, so as to protect the holders of the Warrants against the effect of
such dilution.
2.8. MINIMUM ADJUSTMENT OF WARRANT PRICE. If the amount of any
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one one-hundredth (.01) of a cent, such amount shall be carried
forward and adjustment with respect
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thereto made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate at least one one-hundredth (.01) of a cent.
3. CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC.. In
case the Company, after the Initial Date, (a) shall consolidate with or merge
into any other Person and shall not be the continuing or surviving corporation
of such consolidation or merger, or (b) shall permit any other Person to
consolidate with or merge into the Company and the Company shall be the
continuing or surviving Person but, in connection with such consolidation or
merger, Common Stock or Other Securities shall be changed into or exchanged for
cash, stock or other securities of any other Person or any other property, or
(c) shall transfer all or substantially all of its properties and assets to any
other Person, or (d) shall effect a capital reorganization or reclassification
of Common Stock or Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the Warrant Price is provided in section 2.2.1 or 2.2.2),
then, and in the case of each such transaction, the Company shall give written
notice thereof to each holder of any Warrant not less than 30 days prior to the
consummation thereof and proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this section 3, the holder of this
Warrant, upon the consummation of such transaction, shall be entitled to
receive, at the aggregate Warrant Price in effect at the time of such
consummation for all Common Stock (or Other Securities) issuable upon such
exercise immediately prior to such consummation, in lieu of the Common Stock (or
Other Securities) issuable upon such exercise prior to such consummation, the
highest amount of cash, securities or other property to which such holder would
actually have been entitled as a shareholder upon such consummation if such
holder had exercised this Warrant immediately prior thereto, subject to
adjustments (subsequent to such consummation) as nearly equivalent as possible
to the adjustments provided for in section 2 and this section 3, PROVIDED that
if a purchase, tender or exchange offer shall have been made to and accepted by
the holders of Common Stock under circumstances in which, upon completion of
such purchase, tender or exchange offer, the maker thereof, together with
members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange
Act) of which such maker is a part, and together with any affiliate or associate
of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any
members of any such group of which any such affiliate or associate is a part,
own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more
than 50% of the outstanding shares of Common Stock, and if the holder of this
Warrant so designates in such notice given to the Company, the holder of this
Warrant shall be entitled to receive the highest amount of cash, securities or
other property to which such holder would actually have been entitled as a
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shareholder if the holder of this Warrant had exercised this Warrant prior to
the expiration of such purchase, tender or exchange offer, accepted such offer
and all of the Common Stock held by such holder had been purchased pursuant to
such purchase, tender or exchange offer, subject to adjustments (from and after
the consummation of such purchase, tender or exchange offer) as nearly
equivalent as possible to the adjustments provided for in section 2 and this
section 3.
4. OTHER DILUTIVE EVENTS. In case any event shall occur as to which
the provisions of section 2 or section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent public accountants of recognized national standing (which
may be the regular auditors of the Company), which shall give their opinion upon
the adjustment, if any, on a basis consistent with the essential intent and
principles established in sections 2 and 3, necessary to preserve, without
dilution, the purchase rights represented by this Warrant. Upon receipt of such
opinion the Company will promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustments described therein.
5. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, 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 holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock upon the exercise of all of
the Warrants from time to time outstanding, (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of shares of Common Stock
(or other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise and,
(d) will not issue any capital stock of any class which has the right to more
than one vote per share or which is preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary dissolution, liquidation or
winding-up, unless such stock is sold for a cash consideration at least equal
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to the amount of its preference upon voluntary or involuntary dissolution,
liquidation or winding-up and the rights of the holders thereof shall be
limited to a fixed percentage (not exceeding 15%) of such cash consideration
in respect of participation in dividends.
6. ACCOUNTANTS' REPORT AS TO ADJUSTMENTS. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable upon the exercise of the Warrants, the Company at its
expense will promptly compute such adjustment or readjustment in accordance
with the terms of the Warrants and cause independent public accountants of
recognized national standing selected by the Company (which may be the
regular auditors of the Company) to verify such computation and prepare a
report setting forth such adjustment or readjustment and showing in
reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based, including without limitation a
statement of (a) the consideration received or to be received by the Company
for any Additional Shares of Common Stock issued or sold or deemed to have
been issued, (b) the number of shares of Common Stock outstanding or deemed
to be outstanding, and (c) the Warrant Price in effect immediately prior to
such issue or sale and as adjusted and readjusted (if required by section 2)
on account thereof. The Company will forthwith mail a copy of each such
report to each holder of a Warrant and will, upon the written request at any
time of any holder of a Warrant, furnish to such holder a like report setting
forth the Warrant Price at the time in effect and showing in reasonable
detail how it was calculated. The Company will also keep copies of all such
reports at its principal office and will cause the same to be available for
inspection at such office during normal business hours by any holder of a
Warrant or any prospective purchaser of a Warrant designated by the holder
thereof.
7. NOTICES OF CORPORATE ACTION. In the event of
(a) 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 regular periodic dividend
payable in cash out of earned surplus) or other distribution, or 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,
or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
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(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which
any such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up is to take place and
the time, if any such time is to be fixed, as of which the holders of record
of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation
or winding-up. Such notice shall be mailed at least 20 days prior to the
date therein specified, in the case of any date referred to in the foregoing
subdivision (i), and at least 90 days prior to the date therein specified, in
the case of the date referred to in the foregoing subdivision (ii).
8. RESTRICTIONS ON TRANSFER. 8.1. RESTRICTIVE LEGENDS. Except
as otherwise permitted by this section 8, each Warrant originally issued
pursuant to the Purchase Agreement and each Warrant issued upon direct or
indirect transfer or in substitution for any Warrant pursuant to section 13
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933 and may
not be transferred in the absence of such registration or an exemption
therefrom under such Act."
Except as otherwise permitted by this section 8, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant and each
certificate issued upon the direct or indirect transfer of any such Common
Stock (or Other Securities) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred in the absence
of such registration or an exemption therefrom under such Act. Such shares
are also subject to certain restrictions on transferability imposed by
Common Stock Purchase Warrants expiring August 25, 2003, a copy of which is
on file at the offices of the Company."
8.2. NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL. Prior to
any transfer of any Restricted Securities which are not registered under an
effective registration statement under the
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Securities Act (other than a transfer pursuant to Rule 144 or any comparable
rule under such Act), the holder thereof will give written notice to the
Company of such holder's intention to effect such transfer and to comply in
all other respects with this section 8.2. Each such notice (a) shall
describe the manner and circumstances of the proposed transfer in sufficient
detail to enable counsel to render the opinions referred to below, and
(b) shall designate counsel for the holder giving such notice (who may be
in-house counsel for such holder). The holder giving such notice will submit
a copy thereof to the counsel designated in such notice. The following
provisions shall then apply:
(i) If in the opinion of counsel for the holder the proposed transfer
may be effected without registration, such holder shall thereupon be
entitled to transfer such Restricted Securities in accordance with the
terms of the notice delivered by such holder to the Company. Each Warrant
or certificate, if any, issued upon or in connection with such transfer
shall bear the appropriate restrictive legend set forth in section 8.1
unless, in the opinion of such counsel, such legend is no longer required
to insure compliance with the Securities Act.
(ii) If the opinion of such counsel for the holder is not to the
effect that the proposed transfer may legally be effected without
registration of such Restricted Securities under the Securities Act, such
holder shall not be entitled to transfer such Restricted Securities (other
than in a transfer pursuant to Rule 144 or any comparable rule under the
Securities Act) until the conditions specified in subdivision (i) above
shall be satisfied or until registration of such Restricted Securities
under the Securities Act has become effective.
Notwithstanding the foregoing provisions of this section 8.2, the holder of
any Restricted Securities shall be permitted to transfer any such Restricted
Securities pursuant to Rule 144A under the Securities Act, PROVIDED that each
transferee agrees in writing to be bound by all the restrictions on transfer
of such Restricted Securities contained in this section 8.2. The Company
will pay the reasonable fees and disbursements of counsel (other than
in-house counsel) for any holder of Restricted Securities and of counsel for
the Company in connection with all opinions rendered by them pursuant to this
section 8.2 and pursuant to section 8.3.
8.3. TERMINATION OF RESTRICTIONS. The restrictions imposed by
this section 8 upon the transferability of Restricted Securities shall cease
and terminate as to any particular Restricted Securities (a) when such
securities shall have been effectively registered under the Securities Act
and disposed of in accordance with the registration statement covering such
Restricted Securities, (b) when, in the opinions of both counsel for the
holder thereof and counsel for the Company, such restrictions are
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no longer required in order to insure compliance with the Securities Act, or
(c) when such securities have been beneficially owned, by a person who has
not been an affiliate of the Company for at least three months, for a period
of at least two years, all as determined under Rule 144 under the Securities
Act. Whenever such restrictions shall terminate as to any Restricted
Securities, as soon as practicable thereafter and in any event within five
days, the holder thereof shall be entitled to receive from the Company,
without expense (other than transfer taxes, if any), new securities of like
tenor not bearing the applicable legend set forth in section 8.1 hereof.
9. REGISTRATION UNDER SECURITIES ACT, ETC. 9.1. INCIDENTAL
REGISTRATION. (a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company
at any time on or after February 25, 2000 proposes to register any of its
securities under the Securities Act (other than by a registration on Form S-4
or S-8 or any successor or similar forms), whether or not for sale for its
own account, in a manner which would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will each such
time give prompt written notice to all holders of Registrable Securities of
its intention to do so and of such holders' rights under this section 9.1.
Upon the written request of any such holder made within 20 days after receipt
of any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders thereof, to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so to be
registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to register,
PROVIDED that if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (a) in
the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith) and (b) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities for the same period as the delay in registering such other
securities. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
section 9.1.
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(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration
pursuant to this section 9.1 involves an underwritten offering and the
managing underwriter advises the Company in writing that, in its opinion, the
number of securities requested to be included in such registration exceeds
the number which can be sold in such offering, the Company will include in
such registration to the extent of the number which the Company is so advised
can be sold in such offering securities determined as follows:
(i) if such registration as initially proposed by the Company was
solely a primary registration of its securities, (x) first, the securities
proposed by the Company to be sold for its own account, (y) second, any
Registrable Securities and any other securities of the Company requested to
be included in such registration, pro rata among the holders thereof
requesting such registration on the basis of the number of shares of such
securities requested to be included by such holders, and
(ii) if such registration as initially proposed by the Company was in
whole or in part requested by holders of securities of the Company, other
than holders of Registrable Securities, pursuant to demand registration
rights, (x) first, such securities held by the holders initiating such
registration, pro rata among the holders thereof, on the basis of the
number of shares of such securities requested to be included by such
holders, (y) second, any Registrable Securities and any other securities of
the Company requested to be included in such registration, pro rata among
the holders thereof requesting such registration on the basis of the number
of shares of such securities requested to be included by such holders.
9.2. REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in section 9.1,
the Company will as expeditiously as possible:
(a) prepare and file with the Commission the requisite registration
statement (including such audited financial statements as may be required
by the Securities Act or the rules and regulations promulgated thereunder)
to effect such registration and use its best efforts to cause such
registration statement to become effective, PROVIDED that before filing
such registration statement or any amendments thereto, the Company will
furnish to the counsel selected by the holders of Registrable Securities
whose Registrable Securities are to be included in such registration copies
of all such documents proposed to be filed, which documents will be subject
to the review of such counsel, and PROVIDED, FURTHER, that the Company may
discontinue any registration of
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its securities which are not Registrable Securities at any time prior to
the effective date of the registration statement relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to maintain the effectiveness of
such registration statement and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or 90 days after such registration statement becomes effective,
PROVIDED that if less than all the Registrable Securities are withdrawn
from registration after the relevant period, the shares to be so withdrawn
shall be allocated pro rata among the holders thereof on the basis of the
respective numbers of Registrable Securities held by them included in such
registration;
(c) furnish to each seller of Registrable Securities covered by such
registration statement (and each Requesting Holder) such number of
conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number
of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request;
(d) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions as each
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect, and take any other action which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subdivision (d) be obligated to be so
qualified or to consent to general service of process in any such
jurisdiction;
(e) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the
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seller or sellers thereof to consummate the disposition of such Registrable
Securities;
(f) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller (and the underwriters, if any), of
(i) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten Public Offering, dated the
date of any closing under the underwriting agreement), reasonably
satisfactory in form and substance to such seller, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten Public Offering, dated the date of any closing under
the underwriting agreement), signed by the independent public
accountants who have certified the Company's financial statements
included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten Public Offerings of securities and, in the case of the
accountants' letter, such other financial matters, as such seller (or the
underwriters, if any) may reasonably request;
(g) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any such
holder promptly prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
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(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and not file any
amendment or supplement to such registration statement or prospectus to
which any such seller shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material respects with
the requirements of the Securities Act or of the rules or regulations
thereunder, having been furnished with a copy thereof at least five
business days prior to the filing thereof;
(i) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement; and
(j) use its best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any of
the securities of the same class as the Registrable Securities are then
listed.
The Company may require each holder of Registrable Securities as to
which any registration is being effected to furnish the Company such
information regarding such holder and the distribution of such securities as
the Company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by the acquisition of
such Registrable Securities that upon receipt of any notice from the Company
of the happening of any event of the kind described in subdivision (g) of
this section 9.2, such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by subdivision
(g) of this section 9.2 and, if so directed by the Company, will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, then in such holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the periods referred to in
subdivision (b) of this section 9.2 shall be extended by a number of days
equal to the number of days during the period from and including the giving
of notice pursuant to subdivision (g) of this section 9.2 and including the
date when each seller of any Registrable Securities covered by such
registration statement shall receive the copies of
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the supplemented or amended prospectus contemplated by subdivision (g) of
this section 9.2.
9.3. UNDERWRITTEN OFFERINGS. (a) INCIDENTAL UNDERWRITTEN
OFFERINGS. If the Company at any time proposes to register any of its
securities under the Securities Act as contemplated by section 9.1 and such
securities are to be distributed by or through one or more underwriters, the
Company will, subject to the provisions of section 9.1(b), use its best
efforts, if requested by any holder of Registrable Securities, to arrange for
such underwriters to include the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by
such underwriters shall be parties to the underwriting agreement between the
Company and such underwriters. No holder of Registrable Securities shall be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or
agreements regarding such holder and such holder's intended method of
distribution and any other representation required by law.
(b) HOLDBACK AGREEMENTS. (i) Each holder of Registrable
Securities agrees by acquisition of such Registrable Securities, if so
required by the managing underwriter, not to effect any public sale or
distribution of such securities during the seven days prior to and the 90
days after the closing of any underwritten registration pursuant to section
9.1 has become effective, or, if the managing underwriter advises the Company
in writing that, in its opinion, no such public sale or distribution should
be effected for a specified period longer than 90 days after such
underwritten registration in order to complete the sale and distribution of
securities included in such registration and the Company gives notice to such
holder of Registrable Securities of such advice, during a reasonable longer
period after such underwritten registration, except as part of such
underwritten registration, whether or not such holder participates in such
registration.
(ii) The Company agrees not to effect any public sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the seven days
prior to and the 90 days after the closing of any underwritten registration
pursuant to section 9.1 has become effective, except as part of such
underwritten registration and except pursuant to registrations on Form S-4 or
S-8 or any successor or similar forms thereto, and if the managing
underwriter advises the Company in writing that, in its opinion, no such
public sale or distribution should be effected for a specified period longer
than 90 days after such underwritten registration in order to complete the
sale and distribution of securities included in such registration, during a
reasonable longer period after such
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underwritten registration, except as part of such underwritten registration.
9.4. PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the
Securities Act, the Company will give the holders of Registrable Securities
registered under such registration statement and their respective counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give
each of them such access to its books and records and such opportunities to
discuss the business of the Company with its officers and the independent
public accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
9.5. CERTAIN RIGHTS OF HOLDERS. The Company will not file any
registration statement under the Securities Act which refers to any holder of
any Notes or Registrable Securities by name or otherwise as the holder of any
securities of the Company, unless it shall first have given to such holder
the right to require (a) the insertion therein of language, in form and
substance satisfactory to such holder, to the effect that the holding by such
holder of such securities does not make such holder a "controlling person" of
the Company within the meaning of the Securities Act and is not to be
construed as a recommendation by such holder of the investment quality of the
Company's debt or equity securities covered thereby and that such holding
does not imply that such holder will assist in meeting any future financial
requirements of the Company, or (b) in the event that such reference to such
holder by name or otherwise is not required by the Securities Act or any
rules and regulations promulgated thereunder, the deletion of the reference
to such holder.
9.6. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. In the
event of any registration of any securities of the Company under the
Securities Act, the Company will, and hereby does, indemnify and hold
harmless the seller of Registrable Securities covered by any registration
statement filed pursuant to section 9.1, its directors and officers, each
other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls any such seller
or any such underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such
seller or any such director or officer or underwriter or controlling Person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any
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material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will reimburse such
seller and each such director, officer, underwriter and controlling person
for any legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, liability, action or
proceeding, PROVIDED that with respect to any seller the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such seller
specifically stating that it is for use in the preparation thereof, and,
PROVIDED, FURTHER, that the Company shall not be liable to any Person who
participates as an underwriter, in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a
copy of the final prospectus to the Person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, underwriter or controlling person and shall survive the transfer of
such securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to section 9.1, that the Company shall have received
an undertaking satisfactory to it from the prospective seller of such
securities, to indemnify and hold harmless (in the same manner and to the
same extent as set forth in subdivision (a) of this section 9.6) the Company,
each director of the Company, each officer of the Company and each other
Person, if any, who controls the Company within the meaning of the Securities
Act, and each Person who participates as an underwriter in the offering or
sale of securities by the Company, with respect to any statement or alleged
statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement
or alleged
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statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for
use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement,
PROVIDED that such seller's obligations hereunder shall be limited to an
amount equal to the proceeds to such holder of the Registrable Securities
sold pursuant to such registration statement.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this section
9.6, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, PROVIDED that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this section
9.6, except to the extent that the indemnifying party is actually prejudiced
by such failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment
upon advice of counsel a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the extent
that it may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party
shall not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof
other than reasonable costs of investigation. No indemnifying party shall
consent to entry of any judgment or enter into any settlement without the
consent of the indemnified party 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.
(d) OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding subdivisions of this section 9.6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any
governmental authority, other than the Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification required by
this section 9.6 shall be made by periodic payments of the amount thereof
during the course of the investigation or
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defense, as and when bills are received or expense, loss, damage or liability
is incurred.
9.7. COVENANTS RELATING TO RULE 144. The Company will file
reports in compliance with the Exchange Act and will, at its expense,
forthwith upon the request of any holder of Restricted Securities, deliver to
such holder a certificate, signed by the Company's principal financial
officer, stating (a) the Company's name, address and telephone number,
(b) the Company's Internal Revenue Service identification number, (c) the
Company's Commission file number, (d) the number of shares of Common Stock of
the Company outstanding as shown by the most recent report or statement
published by the Company, and (e) whether the Company has filed the reports
required to be filed under the Exchange Act for a period of at least 90 days
prior to the date of such certificate and in addition has filed the most
recent annual report required to be filed thereunder. If at any time the
Company is not required to file reports in compliance with either section 13
or section 15(d) of the Exchange Act, the Company at its expense will,
forthwith upon the written request of the holder of any Restricted
securities, make available adequate current public information with respect
to the Company within the meaning of paragraph (c)(2) of Rule 144 of the
General Rules and Regulations promulgated under the Securities Act.
10. AVAILABILITY OF INFORMATION. The Company will cooperate with
each holder of any Restricted Securities in supplying such information as may
be necessary for such holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to each holder of any
Warrants, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its stockholders, and copies of all regular and
periodic reports and all registration statements and prospectuses filed by
the Company with any securities exchange or with the commission.
11. RESERVATION OF STOCK, ETC. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time outstanding.
All shares of Common Stock (or Other Securities) shall be duly authorized
and, when issued upon such exercise, shall be validly issued and, in the case
of shares, fully paid and nonassessable with no liability on the part of the
holders thereof.
12. LISTING ON SECURITIES EXCHANGE. The Company will list on each
national securities exchange on which any Common Stock may at any time be
listed, subject to official notice of issuance upon exercise of the Warrants,
and will maintain such listing of,
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all shares of Common Stock from time to time issuable upon exercise of the
Warrants. The Company will also so list on each national securities
exchange, and will maintain such listing of, any other securities if at the
time any securities of the same class shall be listed on such national
securities exchange by the Company.
13. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
13.1. OWNERSHIP OF WARRANTS. The Company may treat the person in
whose name any Warrant is registered on the register kept at the principal
office of the Company as the owner and holder thereof for all purposes,
notwithstanding any notice to the contrary, except that, if and when any
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer thereof as the owner of such Warrant for all
purposes, notwithstanding any notice to the contrary. Subject to section 8,
a Warrant, if properly assigned, may be exercised by a new holder without
first having a new Warrant issued.
13.2. TRANSFER AND EXCHANGE OF WARRANTS. Upon the surrender of
any Warrant, properly endorsed, for registration of transfer or for exchange
at the principal office of the Company, the Company at its expense will
(subject to compliance with section 8, if applicable) execute and deliver to
or upon the order of the holder thereof a new Warrant or Warrants of like
tenor, in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock called
for on the face or faces of the Warrant or Warrants so surrendered.
13.3. REPLACEMENT OF WARRANTS. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant held by a Person other than any institutional
investor, upon delivery of indemnity reasonably satisfactory to the Company
in form and amount or, in the case of any such mutilation, upon surrender of
such Warrant for cancellation at the principal office of the Company, the
Company at its expense will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
14. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
ACQUIRING PERSON: the continuing or surviving corporation of a
consolidation or merger with the Company (if other than the Company), the
transferee of substantially all of the properties and assets of the Company,
the corporation consolidating with or merging into the Company in a
consolidation or merger in connection with which the Common Stock is changed
into or exchanged for stock or other securities of any other Person or cash
or any
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other property, or, in the case of a capital reorganization or
reclassification, the Company.
ACQUISITION PRICE: as applied to the Common Stock, with respect to
any transaction to which section 3 applies, (a) the price per share equal to
the greater of the following, determined in each case as of the date
immediately preceding the date of consummation of such transaction: (i) the
Market Price of the Common Stock and (ii) the highest amount of cash plus the
Fair Value of the highest amount of securities or other property which the
holder of this Warrant would have been entitled as a shareholder to receive
upon such consummation if such holder had exercised this Warrant immediately
prior thereto, or (b) if a purchase, tender or an exchange offer is made by
the Acquiring Person (or by any of its affiliates) to the holders of the
Common Stock and such offer is accepted by the holders of more than 50% of
the outstanding shares of Common Stock, the greater of (i) the price
determined in accordance with the foregoing, subdivision (a) and (ii) the
price per share equal to the greater of the following, determined in each
case as of the date immediately preceding the acceptance of such offer by the
holders of more than 50% of the outstanding shares of Common Stock: (x) the
Market Price of the Common Stock and (y) the highest amount of cash plus the
Fair Value of the highest amount of securities or other property which the
holder of this Warrant would be entitled as a shareholder to receive pursuant
to such offer if such holder had exercised this Warrant immediately prior to
the expiration of such offer and accepted the same.
ADDITIONAL SHARES OF COMMON STOCK: all shares (including treasury
shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4,
deemed to be issued) by the Company after the Initial Date hereof, whether or
not subsequently reacquired or retired by the Company, other than (a) shares
of Common Stock issued upon the exercise of Warrants and (b) the Options
listed on Schedule A hereto.
BASE PRICE: as of any date of determination, the lesser of
(a) $4.00 and (b) the Current Market Price as of such date.
BUSINESS DAY: any day other than a Saturday or a Sunday or a day
on which commercial banking institutions in the City of New York are
authorized by law to be closed, PROVIDED that, in determining the period
within which certificates or Warrants are to be issued and delivered pursuant
to section 1.3 at a time when shares of Common Stock (or Other Securities)
are listed or admitted to trading on any national securities exchange or in
the over-the-counter market and in determining the Market Price of any
securities listed or admitted to trading on any national securities exchange
or in the over-the-counter market, "Business Day" shall mean any day when the
principal exchange in which securities are then listed or admitted to trading
is open for trading or, if such securities are traded in the over-the-counter
market in the United
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States, such market is open for trading, and PROVIDED, FURTHER, that any
reference to "days" (unless Business Days are specified) shall mean calendar
days.
COMMISSION: the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act or the Exchange
Act, whichever is the relevant statute for the particular purpose.
COMMON STOCK: the Company's Common Stock, par value $.005 per
share, as constituted on the date hereof, any stock into which such Common
Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the
right, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
COMPANY: Eco Soil Systems, Inc., a Nebraska corporation.
CONVERTIBLE SECURITIES: any evidences of indebtedness, shares of
stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
CURRENT MARKET PRICE: on any date specified herein, (a) with
respect to Common Stock, (i) the lesser of (x) the average daily Market Price
during the period of the most recent 20 consecutive Business Days ending on
such date and (y) the Market Price on the Business Day immediately preceding
such date, or (ii) if shares of Common Stock are not then listed or admitted
to trading on any national securities exchange and if the closing bid and
asked prices thereof are not then quoted or published in the over-the-counter
market, the Market Price on such date; and (b) with respect to any other
securities, the Market Price on such date.
EXCHANGE ACT: the Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the commission thereunder,
all as the same shall be in effect at the time. Reference to a particular
section of the Securities Exchange Act of 1934 shall include a reference to
the comparable section, if any, of any such similar Federal statute.
FAIR VALUE: with respect to any securities or other property, the
Fair Value thereof as of a date which is within 15 days of the date as of
which the determination is to be made (a) determined by an agreement between
the Company and the Requisite Holders of Warrants or (b) if the Company and
the Requisite Holders of Warrants fail to agree, determined jointly by an
independent investment banking firm retained by the Company and by an
independent investment banking firm retained by the Requisite
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Holders of Warrants, either of which firms may be an independent investment
banking firm regularly retained by the Company or any such holder or (c) if
the Company or such holders shall fail so to retain an independent investment
banking firm within five Business Days of the retention of such firm by such
holders or the Company, as the case may be, determined solely by the firm so
retained or (d) if the firms so retained by the Company and by such holders
shall be unable to reach a joint determination within 15 Business Days of the
retention of the last firm so retained, determined by another independent
investment banking firm which is not a regular investment banking firm of the
Company or any such holder chosen by the first two such firms.
INITIAL DATE: the meaning specified in section 2.2.
MARKET PRICE: on any date specified herein, (a) with respect to
Common Stock, the amount per share equal to (i) the last sale price of shares
of such security, regular way, on such date or, if no such sale takes place
on such date, the average of the closing bid and asked prices thereof on such
date, in each case as officially reported on the principal national
securities exchange on which the same are then listed or admitted to trading,
or (ii) if no shares of such security are then listed or admitted to trading
on any national securities exchange but such security is designated as a
national market system security by the NASD, the last trading price of such
security on such date, or if such security is not so designated, the average
of the reported closing bid and asked prices thereof on such date as shown by
the NASD automated quotation system or, if no shares thereof are then quoted
in such system, as published by the National Quotation Bureau, Incorporated
or any successor organization, and in either case as reported by any member
firm of the New York Stock Exchange selected by the Company, or (iii) if no
shares of such security are then listed or admitted to trading on any
national exchange or designated as a national market system security and if
no closing bid and asked prices thereof are then so quoted or published in
the over-the-counter market, the higher of (x) the book value thereof as
determined by agreement between the Company and the Requisite Holders of
Warrants, or if the Company and the Requisite Holders of Warrants fail to
agree, by any firm of independent public accountants of recognized standing
selected by the Board of Directors of the Company, as of the last day of any
month ending within 60 days preceding the date as of which the determination
is to be made or (y) the fair value thereof determined in good faith by the
Board of Directors of the issuer thereof as of a date which is within 15 days
of the date as of which the determination is to be made; and (b) with respect
to any other securities, the fair value thereof determined in good faith by
the Board of Directors of the Company as of a date which is within 15 days of
the date as of which the determination is to be made.
NASD: the National Association of Securities Dealers.
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NOTES: the meaning specified in the opening paragraphs of this
Warrant.
OPTIONS: rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
securities.
OTHER SECURITIES: any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which
the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to section 3 or otherwise.
PARENT: as to any Acquiring Person, any corporation which
(a) controls the Acquiring Person directly or indirectly through one or more
intermediaries, (b) is required to include the Acquiring Person in its
consolidated financial statements under generally accepted accounting
principles and (c) is not itself included in the consolidated financial
statements of any other Person (other than its consolidated subsidiaries).
PERSON: an individual, a partnership, an association, a joint
venture, a corporation, a limited liability company, a business, a trust, an
unincorporated organization or a government or any department, agency or
subdivision thereof.
PUBLIC OFFERING: any offering of Common Stock to the public
pursuant to an effective registration statement under the Securities Act.
PURCHASE AGREEMENT: the meaning specified in the opening
paragraphs of this Warrant.
REGISTRABLE SECURITIES: (a) any shares of Common Stock or other
Securities issued or issuable upon exercise of the Warrants and (b) any
securities issued or issuable with respect to any Common Stock or Other
Securities referred to in subdivision (a) by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any
particular Registrable Securities, once issued such securities shall cease to
be Registrable Securities when (x) a registration statement with respect to
the sale of such securities shall have become effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (y) they shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act,
or (z) they shall have ceased to be outstanding.
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REGISTRATION EXPENSES: all expenses incident to the Company's
performance of or compliance with section 9, including, without limitation,
all registration, filing and NASD fees, all fees and expenses of complying
with securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, the
reasonable fees and disbursements of a single counsel and single firm of
accountants retained by the holders of the Registrable Securities being
registered, premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
being registered and any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any.
REQUISITE HOLDERS OF WARRANTS: the holders of at least 60% of all
the Warrants at the time outstanding determined on the basis of the number of
shares of Common Stock or Other Securities deliverable upon exercise thereof.
RESTRICTED SECURITIES: (a) any Warrants bearing the applicable
legend set forth in section 8.1, (b) any shares of Common Stock (or Other
Securities) which have been issued upon the exercise of Warrants and which
are evidenced by a certificate or certificates bearing the applicable legend
set forth in such section, and (c) unless the context otherwise requires, any
shares of Common Stock (or Other Securities) which are at the time issuable
upon the exercise of Warrants and which, when so issued, will be evidenced by
a certificate or certificates bearing the applicable legend set forth in such
section.
SECURITIES ACT: the Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time. Reference to a particular section
of the Securities Act of 1933 shall include a reference to the comparable
section, if any, of any such similar Federal statute.
SUBSIDIARY: any corporation, association or other business entity at
least 50% (by number of votes) of the Voting Common Stock of which is at the
time owned by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries.
TRANSFER: unless the context otherwise requires, any sale,
assignment, pledge or other disposition of any security, or of any interest
therein, which could constitute a "sale" as that term is defined in section 2(3)
of the Securities Act.
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VOTING COMMON STOCK: with respect to any corporation, association
or other business entity, stock of any class or classes (or equivalent
interest) , if the holders of the stock of such class or classes (or
equivalent interests) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or persons
performing similar functions) of such corporation, association or business
entity, even if the right so to vote has been suspended by the happening of
such a contingency.
WARRANT PRICE: the meaning specified in section 2.1.
WARRANTS: the meaning specified in the opening paragraphs of this
Warrant.
15. REMEDIES. The Company stipulates that the remedies at law of
the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of
this Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
16. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in
this Warrant shall be construed as conferring upon the holder hereof any
rights as a stockholder of the Company or as imposing any liabilities on such
holder to purchase any securities or as a stockholder of the Company, whether
such liabilities are asserted by the Company or by creditors or stockholders
of the Company or otherwise.
17. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be delivered by hand, facsimile
transmission or courier service, or mailed by registered or certified mail,
return receipt requested, addressed (a) if to any holder of any Warrant or
any holder of any Common Stock (or Other Securities), at the registered
address of such holder as set forth in the register kept at the principal
office of the Company, or (b) if to the Company, to the attention of its
Chief Financial Officer, at its principal office, PROVIDED that the exercise
of any Warrant shall be effected in the manner provided in section 1.
18. 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 agreements of the Company contained
in this Warrant, other than those applicable solely to the Warrants and the
holders thereof, shall inure to the benefit of and be enforceable by any
holder or holders at the time of any Common Stock (or Other Securities)
issued upon the exercise of Warrants, whether so expressed or not. This
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Warrant shall be construed and enforced in accordance with and governed by
the laws of the State of New York. The section headings in this Warrant are
for purposes of convenience only and shall not constitute a part hereof.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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19. EXPIRATION. The right to exercise this Warrant shall expire
at 3 P.M., New York City time, on August 25, 2003.
ECO SOIL SYSTEMS, INC.
By: /s/ William B. Adams
-----------------------------------
Title: Chief Executive Officer
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FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To _________________
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder,
_____________(1) shares of Common Stock of ECO SOIL SYSTEMS, INC., a Nebraska
corporation, and herewith makes payment of $________ therefor
[by application pursuant to section 1.5 of such Warrant of $________ aggregate
principal amount of Notes (as defined in such Warrant) plus $________ accrued
interest thereon], (2) and requests that the certificates for such shares be
issued in the name of, and delivered to ________ whose address is ________.
[The undersigned hereby instructs you to credit the principal amount
of each Note so applied against the installments of principal remaining unpaid
on such Note in the ________ order of their maturity dates.]
Dated: ______________
_____________________
(Signature must conform in all respects to name of
holder as specified on the face of this Warrant)
[insert address]
_____________________
(1) Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment for
additional Common Stock or any other stock or other securities or property or
cash which, pursuant to the adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of a partial exercise, a new warrant or
Warrants will be issued and delivered, representing the unexercised portion
of this Warrant, to the holder surrendering the same.
(2) Delete inapplicable language in brackets.
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FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto ________ the right
represented by such Warrant to purchase shares ________ of Common Stock of
ECO SOIL SYSTEMS, INC., a Nebraska corporation, to which such Warrant
relates, and appoints ________ Attorney to make such transfer on the books of
________ maintained for such purpose, with full power of substitution in the
premises.
Dated: _____________
_________________________
(Signature must conform in all respects to name of
holder as specified on the face of this Warrant)
[insert address]
Signed in the presence of:
_________________________
xxxvii
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SCHEDULE I
Eco Soil Systems, Inc. (the "Company") issued a substantially identical
Common Stock Purchase Warrant to Albion Alliance Mezzanine Fund, L.P.
("Albion"). In addition to the different holder, the warrant issued to
Albion (the "Albion Warrant") differs from that issued to Paribas Capital
Funding LLC in the following respects:
1. The Albion Warrant is numbered W-1.
2. The Albion Warrant grants Albion the right to purchase 140,000
shares of the Company's common stock.
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EXHIBIT 99.1
ECO SOIL ARRANGES $35 MILLION IN NEW LONG TERM FINANCINGS
RANCHO BERNARDO, Calif., Aug. 26 /PRNewswire/ -- Eco Soil Systems, Inc.
(Nasdaq: ESSI - NEWS) announced today that it has successfully completed two
transactions providing the Company with $15 million in gross proceeds and the
right to borrow up to an additional $20 million. The transactions consist of
the private placement of $15 million principal amount of the Company's senior
subordinated notes (together with warrants to purchase 262,500 shares of the
Company's common stock), and, separately, a $20 million secured revolving
line of credit arranged with The Provident Bank. The senior subordinated
notes are due in 2003 and bear interest at a rate of 12% per annum. The
secured revolving line of credit has a three-year term during which
borrowings will bear interest at floating rates of interest tied to prime or
LIBOR rates. Other terms of the financings were not disclosed.
Eco Soil also announced today that it has completed its previously announced
acquisition of Controlled Irrigation International, Inc., an irrigation
products supplier operating primarily in the states of California and Arizona
under the name of Yuma Sprinkler and Pipe Supply.
William B. Adams, chairman and chief executive officer, said, "The financings
will significantly strengthen our balance sheet and give ESSI the resources
it needs to continue penetration into the high value agricultural crops
market serviced by drip irrigation, as well as to continue to expand our
sales of products to golf markets."
ESSI distributes and supports a proprietary line of biotech products that are
used to treat chronic soil and water quality problems. The Company's
principal proprietary product is the BioJect-Registered Trademark-, which
cultures and dispenses biological products through irrigation systems. The
Company distributes a wide range of turf maintenance products principally
through Turf Partners, a wholly owned subsidiary with warehouses in Arizona,
Illinois, Indiana, Michigan, New Hampshire, Ohio, Pennsylvania, and Southern
California. The Company distributes irrigation supplies principally through
Agricultural Supply Inc., a wholly owned subsidiary with warehouses in
Arizona, New Mexico, Southern California and Mexico. Eco Soil's Internet site
address is http://www.ecosoil.com.
The statements contained in this release that are not historical facts are
forward-looking statements that involve risks and uncertainties. Management
wishes to caution the reader that these forward-looking statements are only
predictions; actual events or results may differ materially as a result of
risks facing the Company, including those listed under the caption "factors
that may affect future performance" in the Company's Annual Report on Form
10-K filed March 31, 1998 and in the Company's Quarterly Report on Form 10-Q
filed August 15, 1998.
SOURCE: ECO SOIL SYSTEMS, INC.
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