CONVERTIBLE NOTE AGREEMENT
Dated as of July 31, 2000
by and among
WPI GROUP, INC.,
WPI ELECTRONICS, INC.
WPI MAGNETEC, INC., WPI MICRO PALM, INC.,
WPI POWER SYSTEMS, INC., WPI TERMIFLEX, INC.
WPI MICRO PROCESSOR SYSTEMS, INC.,
WPI DECISIONKEY, INC., WPI UK HOLDING, INC.
WPI UK HOLDING, II, INC., WPI OYSTER TERMINALS, INC.,
WPI HUSKY TECHNOLOGY, INC., and WPI INSTRUMENTS, INC.
as Borrowers,
and
SUNRISE CAPITAL PARTNERS, L.P.
as Lender
TABLE OF CONTENTS
Page
1. AMOUNT AND TERMS OF CREDIT
1.1 Purchase and Sale of Securities.........................2
1.2 Scheduled Repayment of the Notes........................4
1.3 Use of Proceeds.........................................4
1.4 Interest on the Notes...................................4
1.5 Fees....................................................6
1.6 Prepayments.............................................6
1.7 Receipt of Payments.....................................8
1.8 Loan Account and Accounting.............................8
1.9 Indemnity...............................................8
1.10 Access..................................................9
1.11 Taxes..................................................10
1.12 Single Obligation......................................10
1.13 Appointment of Borrower Representative.................10
2. CONVERSION OF NOTES
2.1 Conversion Privilege...................................11
2.2 Mandatory Conversion...................................11
2.3 Adjustments to Conversion Price........................12
2.5 Fractional Shares.....................................14
2.6 Documentary and Transfer Taxes.........................14
2.7 Reservation of Common Stock............................14
2.8 Registration Rights....................................14
3. CONDITIONS TO THE PURCHASE OF SECURITIES
3.1 Conditions to the Purchase of the Term A Securities....15
3.2 Conditions to the Purchase of the Term B Securities....18
3.3 Conditions to the Purchase of the Term C Securities....19
4. REPRESENTATIONS AND WARRANTIES OF BORROWERS
4.1 Corporate Existence; Compliance with Law...............21
4.2 Executive Offices; FEIN................................21
4.3 Corporate Power, Authorization, Enforceable
Obligations............................................21
4.4 SEC Reports and Financial Statements...................22
4.5 Projections............................................23
4.6 Material Adverse Effect................................23
4.7 Ownership of Property: Liens..........................23
4.8 Labor Matters..........................................24
4.9 Ventures; Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness.................................25
4.10 Government Regulation..................................25
4.11 Margin Regulations.....................................26
4.12 Taxes..................................................26
4.13 ERISA..................................................27
4.14 No Litigation..........................................28
4.15 Brokers................................................28
4.16 Intellectual Property..................................28
4.17 Full Disclosure........................................28
4.18 Environmental Matters..................................29
4.19 Insurance..............................................30
4.20 Bank Accounts..........................................30
4.21 Government Contracts...................................30
4.22 Customer and Trade Relations...........................30
4.23 Agreements and Other Documents.........................31
4.24 Solvency...............................................31
4.25 Valid Issuance of Securities...........................31
4A. REPRESENTATIONS AND WARRANTIES OF THE LENDER
4A.1 Acquisition for Own Account............................31
4A.2 Adequate Information...................................32
4A.3 Acknowledgment of Risk.................................32
4A.4 Accredited Investor....................................32
4A.5 Restrictions on Distribution...........................32
5. COVENANTS: FINANCIAL STATEMENTS AND INFORMATION
5.1 Reports and Notices....................................33
5.2 Communication with Accountants.........................36
6. AFFIRMATIVE COVENANTS
6.1 Maintenance of Existence and Conduct of Business.......36
6.2 Payment of Obligations.................................36
6.3 Books and Records......................................37
6.4 Insurance: Damage to or Destruction of Collateral......37
6.5 Compliance with Laws...................................39
6.6 Supplemental Disclosure................................39
6.7 Intellectual Property..................................39
6.8 Environmental Matters..................................39
6.9 Landlords' Agreements, Mortgagee Agreements
and Bailee Letters.....................................40
6.11 Further Assurances.....................................41
7. NEGATIVE COVENANTS
7.1 Mergers, Subsidiaries, Etc.............................41
7.2 Investments; Notes and Advances........................42
7.3 Indebtedness...........................................42
7.4 Employee Notes and Affiliate Transactions..............43
7.5 Capital Structure and Business.........................44
7.6 Guaranteed Indebtedness................................45
7.7 Liens..................................................45
7.8 Sale of Stock and Assets...............................45
7.9 ERISA..................................................46
7.10 Financial Covenants....................................46
7.11 Hazardous Materials....................................46
7.12 Sale-Leasebacks........................................46
7.13 Cancellation of Indebtedness...........................46
7.14 Restricted Payments....................................47
7.15 Change of Corporate Name or Location; Change of
Fiscal Year............................................47
7.16 No Impairment of Intercompany Transfers................47
7.17 No Speculative Transactions............................48
7.18 Leases.................................................48
8. TERM
8.1 Termination............................................48
8.2 Survival of Obligations Upon Termination
of Financing Arrangements..............................48
9. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
9.1 Events of Default......................................49
9.2 Remedies...............................................51
9.3 Waivers by Borrowers...................................51
10. ASSIGNMENTS AND PARTICIPATIONS
10.1 Assignments............................................52
11. SUCCESSORS AND ASSIGNS
11.1 Successors and Assigns.................................54
12. MISCELLANEOUS
12.1 Complete Agreement; Modification of Agreement..........54
12.2 Amendments and Waivers.................................55
12.3 Fees and Expenses......................................55
12.4 No Waiver..............................................56
12.5 Remedies...............................................57
12.6 Severability...........................................57
12.7 Conflict of Terms......................................57
12.8 Confidentiality........................................57
12.9 GOVERNING LAW..........................................58
12.10 Notices................................................58
12.11 Section Titles.........................................60
12.12 Counterparts...........................................60
12.13 WAIVER OF JURY TRIAL...................................60
12.14 Reinstatement..........................................60
12.15 No Strict Construction.................................61
12.16 Joint and Several Obligations..........................61
EXHIBITS
EXHIBIT A: Form of Term A Note
EXHIBIT B: Form of Term B Note
EXHIBIT C: Form of Term C Note
EXHIBIT D: Form of PIK Note
EXHIBIT E: Form of Warrant
EXHIBIT F: Form of Officer's Certificate
EXHIBIT G: Form of Registration Rights Agreement
EXHIBIT H: Form of Stockholders Agreement
EXHIBIT I: Form of Participation Agreement
EXHIBIT J: Form of Bylaws Amendment
EXHIBIT K: Form of Opinion of Borrowers' Counsel
EXHIBIT L: Form of Security Agreement
EXHIBIT M: Form of Pledge Agreement
EXHIBIT N: Form of Security Agreement (Intellectual Property)
ANNEXES
ANNEX A: DEFINITIONS
ANNEX B: FINANCIAL COVENANTS
ANNEX C: ANG NOTES
ANNEX D: INITIAL PARTICIPANTS
ANNEX E: BOARD OF DIRECTOR RESIGNATIONS
THIS CONVERTIBLE NOTE AGREEMENT, dated as of July 31, 2000 (this
"Agreement"), is by and among WPI GROUP, INC., a New Hampshire corporation
(the "Parent"), and each of its wholly owned subsidiaries WPI ELEC TRONICS,
INC., WPI MAGNETEC, INC., WPI MICRO PALM, INC., WPI POWER SYSTEMS, INC.,
WPI TERMIFLEX, INC., WPI MICRO PROCESSOR SYSTEMS, INC., WPI DECISIONKEY,
INC., WPI UK HOLDING, INC., WPI UK HOLDING II, INC., WPI OYSTER TERMINALS,
INC., and WPI INSTRU MENTS, INC., each a New Hampshire corporation, and WPI
HUSKY TECHNOL OGY, INC., a Florida corporation (collectively, the
"Subsidiary Borrowers"), all such corporations having their chief executive
offices at 1155 Elm Street, Manches ter, New Hampshire 03101 (the Parent
and the Subsidiary Borrowers are hereinafter referred to individually as a
"Borrower" and collectively as the "Borrowers"), and Sunrise Capital
Partners, L.P., a Delaware limited partnership (the "Lender").
RECITALS:
WHEREAS, the Borrowers have requested that Lender enter into
certain financing arrangements with the Borrowers pursuant to which the
Lender may purchase from the Borrowers (i) certain promissory notes in the
principal amounts specified herein; (ii) certain shares of common stock of
Parent; and (iii) warrants representing the right to purchase shares of
Parent's common stock, each on the terms and subject to the conditions set
forth herein.
WHEREAS, the proceeds from such purchase by the Lenders will be
used to refinance, in part, (i) amounts owed by the Borrower under that
Credit Agreement, dated as of August 3, 1998, among the Parent and certain
of its subsid iaries, as Borrowers, the lenders party thereto and Fleet
Bank - NH, as Agent (as amended to date, the "Existing Senior Credit
Facility") and (ii) amounts owed by WPI Instruments to certain Persons
affiliated with Allard-Nazarian Group, Inc. under a series of
non-negotiable promissory notes dated August 3, 1998 and identified on
Annex C hereto (the "ANG Notes");
WHEREAS, the Lender is willing to make such purchases and
provide such financial accommodations on the terms and conditions set forth
herein; and
WHEREAS, all capitalized terms used in this Agreement shall
have the meanings ascribed to them in Annex A. All Annexes, Disclosure
Schedules, Exhibits and other attachments (collectively, "Appendices")
hereto, or expressly identified in this Agreement, are incorporated herein
by reference, and taken to gether, shall constitute a single agreement.
These Recitals shall be construed as part of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration,
the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Purchase and Sale of Securities.
(a) Subject to the terms and conditions hereof, on the Closing
Date, the Lender shall purchase from the Borrowers, and the Borrowers shall
sell to the Lenders, the Term A Securities for an aggregate purchase price
of $14,116,875.
As used in this Agreement, "Term A Securities" means,
collectively, (i) the convertible promissory notes of the Borrowers,
substantially in the form as attached hereto as Exhibit A, in aggregate
principal amount of $14,116,875 (each, a "Term A Note" and collectively,
the "Term A Notes"); (ii) 1,833,906 shares of Common Stock, representing in
the aggregate 19.99% of the outstanding shares of Parent on a fully-diluted
basis (the "Term A Shares"); and (iii) Common Stock Purchase Warrants, in
substantially the form as attached hereto as Exhibit E, repre senting the
right to purchase in the aggregate the number of shares of Common Stock
equal to (x) the number of shares of Common Stock that would be issuable
upon conversion of the Term A Notes in accordance with the provisions of
Article 2 hereof multiplied by (y) .20 (the "Term A Warrants").
(b) Subject to the terms and conditions hereof, at any time
during the Term B Commitment Period, the Lender shall purchase from the
Borrowers, and the Borrowers shall sell to the Lenders, the Term B
Securities for an aggregate purchase price of $5,000,000.
As used in this Agreement, "Term B Securities" means,
collectively, (i) the convertible promissory notes of the Borrowers,
substantially in the form as attached hereto as Exhibit B, in aggregate
principal amount of $5,000,000 (each, a "Term B Note" and collectively, the
"Term B Notes") and (ii) Common Stock Purchase Warrants, in substantially
the form as attached hereto as Exhibit E, repre senting the right to
purchase in the aggregate the number of shares of Common Stock
equal to (x) the number of shares of Common Stock that would be issuable
upon conversion of the Term B Notes in accordance with the provisions of
Article 2 hereof multiplied by (y) .20 (the "Term B Warrants").
(c) Subject to the terms and conditions hereof, at any time
during the Term C Commitment Period, the Lender may, in its discretion,
purchase from the Borrowers the Term C Securities. The Lender shall notify
the Borrowers of its desire to purchase the Term C Securities by delivery
to Parent of a written notice (the "Term C Notice") informing the Borrowers
that the Lender is exercising its ability to purchase such securities from
the Borrowers. The Term C Notice shall set forth (i) the aggregate
principal amount of Term C Notes (as defined below) that Lender wishes to
purchase and (ii) the date of the purchase (which date shall not be more
than five (5) days after the termination of the Term C Commitment Period).
On the date specified in the Term C Notice, the Lender shall purchase from
the Borrowers, and the Borrowers shall sell to the Lender, the Term C
Securities for an aggregate purchase price equal to the principal amount of
Term C Notes.
As used in this Agreement, "Term C Securities" means, collectively,
(i) the convertible promissory notes of the Borrowers, substantially in the
form as attached hereto as Exhibit C, in an aggregate principal amount
specified by the Lender in the Term C Notice (each, a "Term C Note" and
collectively, the "Term C Notes") and (ii) Common Stock Purchase Warrants,
in substantially the form as attached hereto as Exhibit E, representing the
right to purchase in the aggregate the number of shares of Common Stock
equal to (x) the number of shares of Common Stock that would be issuable
upon conversion of the Term C Notes in accordance with the provisions of
Article 2 hereof multiplied by (y) .20 (the "Term C Warrants").
(d) The purchase price for each purchase described above shall
be allocated among the Securities in accordance with Annex F. The Borrowers
and the Lender shall notify one another and provide one another reasonable
assistance in the event of an examination or audit or other proceeding
regarding the allocation agreed to pursuant to this Section 1.1(d).
1.2 Scheduled Repayment of the Notes. Unless otherwise converted
pursuant to the terms of Article 2 of this Agreement, the Borrowers shall
repay the entire principal amount of the Notes, together with any accrued
but unpaid interest and Fees thereon, on the Maturity Date, if not sooner
repaid in full. The Borrowers shall not be entitled to re-borrow all or any
portion of the indebtedness represented by the Notes which shall be
converted, paid or repaid at any time.
1.3 Use of Proceeds.
Borrowers shall utilize the proceeds of the sale of securities
to refinance in part the Existing Senior Credit Facility and for the
financing of Borrow ers' ordinary working capital needs (but excluding in
any event the making of any Restricted Payment not specifically permitted
by Section 7.14). Section 1.3 of the Disclosure Schedule contains a
description of Borrowers' sources and uses of funds on the Closing Date.
1.4 Interest on the Notes.
(a) The outstanding principal balance of the Notes shall accrue
and bear interest at a rate per annum of 10.75% (the "Interest Rate").
(b) Interest on the Notes shall be payable in cash by Borrowers
to Lender quarterly in arrears (on March 31, June 30, September 30 and
December 31 of each year), except that no interest payment shall be
required to be paid by the Borrowers until the first anniversary of the
date of issuance of the Term A Notes; provided, however, if no Event of
Default has occurred and is continuing, the Borrowers may defer any
scheduled interest payment until the Maturity Date. Upon each such
deferral, Borrowers shall deliver to Lender a convertible promissory note
substantially in the form of Exhibit D hereto (each, a "PIK Note"). The
outstanding principal balance of the PIK Notes shall accrue and bear
interest at the Interest Rate, subject to adjustment in accordance with
Section 1.4(e). The PIK Notes shall be eligible for conversion in
accordance with Article 2 of this Agreement.
(c) If any payment on the Notes (including payment of interest
and Fees) becomes due and payable on a day other than a Business Day, the
maturity thereof will be extended to the next succeeding Business Day and,
with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(d) All computations of interest and Fees calculated on a per
annum basis shall be made by the Lender on the basis of a three hundred and
sixty- five (365) day year, in each case for the actual number of days
occurring in the period for which such interest and Fees are payable.
(e) So long as any Event of Default shall have occurred and be
continuing, the interest rates applicable to the Notes shall be increased
by two percentage points (2%) per annum above the rates of interest or the
rate of such Fees otherwise applicable hereunder ("Default Rate"), and all
outstanding Obligations shall bear interest at the Default Rate applicable
to such Obligations. Interest at the Default Rate shall accrue from the
initial date of such Event of Default until that Event of Default is cured
or waived and shall be payable upon demand.
(f) Notwithstanding anything to the contrary set forth in this
Section 1.4, if a court of competent jurisdiction determines in a final
order that the rate of interest payable on the Notes exceeds the highest
rate of interest permissible under law (the "Maximum Lawful Rate"), then so
long as the Maximum Lawful Rate would be so exceeded, the rate of interest
payable on the Notes shall be equal to the Maximum Lawful Rate; provided,
however, that if at any time thereafter the rate of interest payable
hereunder is less than the Maximum Lawful Rate, Borrowers shall continue to
pay interest hereunder at the Maximum Lawful Rate until such time as the
total interest received by the Lender is equal to the total interest which
would have been received had the interest rate payable on the Notes been
(but for the operation of this paragraph) the interest rate payable since
the Closing Date as otherwise provided in this Agreement. Thereafter,
interest on the Notes shall be paid at the rate(s) of interest and in the
manner provided in Sections 1.4(a) through (e) above, unless and until the
rate of interest again exceeds the Maximum Lawful Rate, and at that time
this paragraph shall again apply. In no event shall the total interest
received by the Lender pursuant to the terms hereof exceed the amount which
the Lender could lawfully have received had the interest due on the Notes
been calcu lated for the full term hereof at the Maximum Lawful Rate. If
the Maximum Lawful Rate is calculated pursuant to this paragraph, such
interest shall be calculated at a daily rate equal to the Maximum Lawful
Rate divided by the number of days in the year in which such calculation is
made. If, notwithstanding the provisions of this Section 1.4(f), a court of
competent jurisdiction shall finally determine that the Lender has received
interest on the Notes in excess of the Maximum Lawful Rate, the Lender
shall, to the extent permitted by applicable law, promptly apply such
excess to repay the principal amount of the Notes and thereafter shall
refund any excess to Borrowers or as a court of competent jurisdiction may
otherwise order.
1.5 Fees.
(a) Borrowers shall pay to Lender (or to such party or parties
as Lender may designate) in cash on the date of purchase of each series of
Notes the Closing Fee specified in the Sunrise Commitment Letter; provided,
however, at the option of the Parent, payment of the Closing Fee may be
deferred until the Maturity Date. If the Borrower elects to defer payment
of the Closing Fee, Borrower shall deliver to Lender a PIK Note for the
amount of such Fee. The PIK Note evidencing the unpaid amount of such
Closing Fee shall accrue and bear interest at the Interest Rate, subject to
adjustment in accordance with Section 1.4(e).
(b) Borrower shall pay to Sunrise Advisors, LLC in cash on the
Closing Date the Transaction Fee specified in the Sunrise Commitment
Letter.
(c) Borrowers shall pay to the Sunrise Advisors, LLC the annual
Administration Fee specified in the Sunrise Commitment Letter. The
administration fee shall be paid in equal quarterly installments on March
31, June 30, September 30 and December 31 of each year while the Notes
remain outstanding.
1.6 Prepayments.
(a) Voluntary Prepayments. Borrowers may not prepay any
principal amount of the Notes before the Maturity Date without prior written
consent of the Lender.
(b) Mandatory Repayments.
(i) Change of Control. Upon the occurrence of a Change of
Control (other than a Change of Control resulting from conversion of
the Notes) or the sale of all or substantially all of the assets of
the Parent (includ ing Stock in any Borrowers), the Borrowers shall
be obligated to offer to repurchase the Notes from the Lender at a
price equal to 110% of the unpaid principal amount of the Notes, plus
any accrued but unpaid interest thereon.
(ii) Asset Dispositions. Upon receipt by any Borrower of
Net Cash Proceeds from any asset disposition (including condemnation
and insurance proceeds, but excluding proceeds of asset dispositions
permitted by Section 7.8 (a), (b), and (c)), Borrowers shall, within
three (3) Business Days of receipt of such proceeds, apply such
Net Cash Proceeds (A) first, to the extent the Borrowers are
required, to prepay or repay any amounts outstand ing under the
Existing Senior Credit Facility (as amended or superseded through
the date of such asset disposition); (B) second, if the Net Cash
Proceeds from any asset disposition does not exceed $500,000, to
reinvest such proceeds in tangible assets to be used by the
Borrowers in their line of business; and (C) third, to the extent
of the balance of such Net Cash Pro ceeds remaining after
application in accordance with clauses (A) and (B), to offer to
repurchase the Notes from the Lender in accordance with the provi
sions of paragraph (c) of this Section 1.6.
(iii) Issuance of Capital Stock. If Parent issues Stock,
no later than the Business Day following the date of receipt of
proceeds thereof, Parent shall apply the proceeds from the sale of
such Stock, net of underwrit ing discounts and commissions and other
reasonable costs, fees and expenses paid to Non-Affiliates in
connection therewith (A) first, to the extent the Borrowers are
required, to prepay or repay any amounts outstanding under the
Existing Senior Credit Facility (as amended or superseded through the
date of such stock issuance); and (B) second, to the extent of the
balance of such Net Cash Proceeds remaining after application in
accordance with clause (A), to offer to repurchase the Notes from the
Lender in accordance with the provisions of paragraph (c) of this
Section 1.6.; provided, that repayments or offers to repurchase
pursuant to this clause (iii) shall only be made to the extent such
proceeds from the sale or issuance of Stock exceed $1,000,000.
(c) Offers to Repurchase. Any offer by the Borrowers to repur
chase Notes from the Lender pursuant to clause (b) above shall be made in
writing to the Lender, who shall have thirty (30) days to tender its Notes
to the Borrower for repurchase. In the event that the Borrowers make an
offer to repurchase the Notes pursuant to this Section 1.6, the Borrowers
shall comply with any applicable securi ties laws and regulations.
(d) Nothing in this Section 1.6 shall be construed to
constitute the Lender's consent to any transaction referred to in clause
(b) above which is not permitted by other provisions of this Agreement or
the other Note Documents.
1.7 Receipt of Payments.
Borrowers shall make each payment under this Agreement not
later than 2:00 p.m. (New York, New York time) on the day when due in
immediately available funds in Dollars to the Lender (or to such other
party or parties as Lender may designate in writing). For purposes of
computing interest and Fees, all pay ments shall be deemed received on the
day of receipt of immediately available funds therefor in the account or
accounts designated by the Lender for payments prior to 2:00 p.m. New York,
New York time. Payments received after 2:00 p.m. New York, New York time on
any Business Day shall be deemed to have been received on the following
Business Day.
1.8 Loan Account and Accounting.
The Lender shall maintain a loan account (the "Loan Account")
on its books to record the outstanding principal amount of all Notes, all
payments made by Borrowers, and all other debits and credits as provided in
this Agreement with respect to the Notes or any other Obligations. All
entries in the Loan Account shall be made in accordance with the Lender's
customary accounting practices as in effect from time to time. The balance
in the Loan Account, as recorded on the Lender's most recent printout or
other written statement, shall, absent manifest error, be presumptive
evidence of the amounts due and owing to the Lender by each Borrower under
the Notes; provided, that any failure to so record or any error in so
recording shall not limit or otherwise affect any Borrower's duty to pay
the Obligations. Borrower shall receive, upon request to Lender, a summary
of the Loan Account maintained by Lender; provided that Borrower shall not
request such summary more than once each fiscal quarter.
1.9 Indemnity.
Each Borrower shall jointly and severally indemnify and hold
harmless the Lender and its Affiliates, and each such Person's respective
officers, directors, employees, attorneys, agents and representatives
(each, an "Indemnified Person"), from and against any and all suits,
actions, proceedings, claims, damages, losses, liabilities and expenses
(including reasonable attorneys' fees and disburse ments and other costs of
investigation or defense, including those incurred upon any appeal) which
may be instituted or asserted against or incurred by any such Indemni fied
Person as the result of the purchase of the Securities (including the
Notes), any credit having been extended, suspended or terminated under this
Agreement and the other Note Documents and the administration of the Notes
or such credit, and in connection with or arising out of the transactions
contemplated hereunder and thereunder and any actions or failures to act in
connection therewith, including any and all Environmental Liabilities and
legal costs and expenses arising out of or incurred in connection with
disputes between or among any parties to any of the Note Documents
(collectively, "Indemnified Liabilities"); provided, that no such Borrower
shall be liable for any indemnification to an Indemnified Person to the
extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from that Indemnified Person's gross
negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE
RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY Note Document, ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF THE SALE OF THE SECURI TIES, ANY CREDIT HAVING BEEN EXTENDED,
SUSPENDED OR TERMI NATED UNDER ANY Note Document OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
1.10 Access.
Each Borrower shall, during normal business hours, from time to
time upon three (3) Business Days' prior notice as frequently as the Lender
determines to be appropriate: (a) provide the Lender and any of its
officers, employees and agents access to its properties, facilities,
advisors and employees (including officers) of each Borrower and to the
Collateral, (b) permit the Lender, and any of its officers, employees and
agents, to inspect, audit and make extracts from any Borrower's books and
records, and (c) permit the Lender, and its officers, employees and agents,
to inspect, review, evaluate and make test verifications and counts of the
Accounts, Inventory and other Collateral of any Borrower. If a Default or
Event of Default shall have occurred and be continuing, each such Borrower
shall provide such access to the Lender at all times and without advance
notice. Furthermore, so long as any Event of Default shall have occurred
and be continuing, Borrowers shall provide the Lender with access to their
suppliers and customers. Each Borrower shall make available to the Lender
and its counsel, as quickly as is possible under the circum stances,
originals or copies of all books and records which the Lender may request.
Each Borrower shall deliver any document or instrument necessary for the
Lender, as it may from time to time request, to obtain records from any
service bureau or other Person which maintains records for such Borrower,
and shall maintain duplicate records or supporting documentation on media,
including computer tapes and discs owned by such Borrower consistent with
past practices.
1.11 Taxes.
(a) Any and all payments by each Borrower hereunder or under
the Notes shall be made, in accordance with this Section 1.11, free and
clear of and without deduction for any and all present or future Taxes. If
any Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under the Notes, (i) the sum
payable shall be increased as much as shall be necessary so that after
making all required deductions (including deductions applica ble to
additional sums payable under this Section 1.11) the Lender receives an
amount equal to the sum they would have received had no such deductions
been made, (ii) such Borrower shall make such deductions, and (iii) such
Borrower shall pay the full amount deducted to the relevant taxing or other
authority in accordance with applicable law. Within thirty (30) days after
the date of any payment of Taxes, Parent shall furnish to the Lender the
original or a certified copy of a receipt evidenc ing payment thereof.
(b) Each Borrower shall jointly and severally indemnify and,
within ten (10) days of demand therefor, pay the Lender for the full amount
of Taxes (including any Taxes imposed by any jurisdiction on amounts
payable under this Section 1.11) paid by Lender, as appropriate, and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes were correctly or legally
asserted.
1.12 Single Obligation.
The Notes purchased by the Lender and all of the other
Obligations of Borrowers arising under this Agreement and the other Note
Documents shall constitute one general joint and several obligation of the
Borrowers secured, until the Termination Date, by all of the Collateral.
1.13 Appointment of Borrower Representative. Each Borrower hereby
designates Parent as its representative and agent on its behalf for the
purposes of giving and receiving all other notices and consents hereunder
or under any of the other Note Documents and taking all other actions
(including in respect of compli ance with covenants) on behalf of any
Borrower or Borrowers under the Note Documents. Parent hereby accepts such
appointment. The Lender may regard any notice or other communication
pursuant to any Note Document from Parent as a notice or communication from
all Borrowers, and may give any notice or communi cation required or
permitted to be given to any Borrower or Borrowers hereunder to Parent on
behalf of such Borrower or Borrowers. Each Borrower agrees that each
notice, election, representation and warranty, covenant, agreement and
undertaking made on its behalf by Parent shall be deemed for all purposes
to have been made by such Borrower and shall be binding upon and
enforceable against such Borrower to the same extent as if the same had
been made directly by such Borrower.
2. CONVERSION OF NOTES
2.1 Conversion Privilege.
(a) At any time or from time to time before the Maturity Date,
the Lender may convert any or all of the outstanding principal amount of
the Notes, and any accrued but unpaid interest and Fees thereon, into
Common Stock. The number of shares of Common Stock issuable upon conversion
shall be determined by dividing the amount of unpaid principal, interest
and Fees designated by the Lender for conversion (the "Optional Conversion
Amount") by the Conversion Price in effect at the time of such conversion.
(b) To convert any amounts pursuant to this Section 2.1, the
Lender must give notice to the Borrowers setting forth the Optional
Conversion Amount. The date on which the Lender gives such notice is the
effective date of the conversion (the "Optional Conversion Date"). As soon
as practicable, but in no event later than five (5) business days following
the Optional Conversion Date, Parent shall deliver to Lender or a party
designated by the Lender a certificate for the number of full shares of
Common Stock issuable upon the conversion with any fractional share being
rounded up to a full share. The person in whose name the certificate is
registered shall be treated as a shareholder of record on and after the
Optional Conversion Date.
2.2 Mandatory Conversion.
(a) Upon the occurrence of Trading Price Conversion Event (as
defined below), Parent may require the Lender to convert the entire unpaid
principal amount of the Notes, together with any accrued but unpaid
interest and Fees thereon (the "Mandatory Conversion Amount"), into Common
Stock. The number of shares of Common Stock issuable upon such conversion
shall be determined by dividing the Mandatory Conversion Amount by the
Conversion Price in effect at the time of the Trading Price Conversion
Event.
For purposes of this Agreement, a "Trading Price Conversion
Event" shall be deemed to occur if (a) the Borrowers are in full compliance
with all the terms of the Existing Senior Credit Facility (as in effect at
such time), and no event of default has occurred or is continuing
thereunder; (b) no Default or Event of Default has occurred and is
continuing hereunder; (c) the Parent has maintained and at the time is
maintaining the listing of its Common Stock on the NASDAQ National Market
or the New York Stock Exchange; (d) Parent's Common Stock maintains a
trading price at or above $4.50 per share for a period of forty-five (45)
consecutive trading days; and (e) the trading volume of the Parent's Common
Stock on such exchange on any day in such forty-five (45) day period is not
less than 40,000 shares.
(b) If, upon the occurrence of a Trading Price Conversion
Event, Parent elects to effect a mandatory conversion in accordance with
the terms of this Section 2.2, Parent shall deliver written notice to the
Lender to such effect. The date on which the Lender receives such notice
from Parent is the effective date of the conversion (the "Mandatory
Conversion Date"). As soon as practicable, but in no event later than five
(5) business days after the Mandatory Conversion Date, Parent shall deliver
to the Lender (or such party or parties as Lender shall designate) a
certificate for the number of full shares of Common Stock issuable upon the
conver sion of the Notes with any fractional share being rounded up to a
full share. The person in whose name the certificate is registered shall be
treated as a shareholder of record on and after the Mandatory Conversion
Date.
2.3 Adjustments to Conversion Price.
(a) If, on or after the Closing Date, Parent:
(i) pays a dividend or makes a distribution on its Common
Stock in shares of Common Stock;
(ii) splits or subdivides its outstanding shares of Common
Stock into a greater number of shares;
(iii) combines its outstanding shares of Common Stock into
a smaller number of shares;
(iv) makes a distribution on its Common Stock in shares of
its Stock other than Common Stock; or
(v) issues by reclassification of its Common Stock any
shares of its Stock;
then the conversion privilege and the Conversion Price in effect
immediately prior to such action shall be adjusted so that the Lender may
receive the number of shares of Common Stock which would be owned
immediately following such action if Lender had converted the Notes (or any
portion thereof) immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(b) If, upon receipt of a Term C Notice, the Borrowers shall
fail to sell to the Lenders the Term C Securities or shall otherwise fail
to comply with the terms of Section 1.1(c), then the Conversion Price in
effect immediately prior to the delivery of the Term C Notice shall be
adjusted to a price equal to: (A) the total principal amount of all loans
outstanding divided by (B) the sum of (x) the number of shares of Common
Stock issuable upon conversion of all outstanding Notes at the then-current
Conversion Price, plus (y) the number of shares of Common Stock that would
be issuable upon conversion of the Term C Notes at the then-current Conver
sion Price, had such Term C Notes been sold to the Lender.
(c) No adjustment in the Conversion Price need be made unless
the adjustment would require an increase or decrease of at least 1% in the
Conversion Price. Any adjustments that are not made shall be carried
forward and taken into account in any subsequent adjustment
2.4 Reorganization, Reclassifications. Without limiting the
requirements of Section 1.6(b) of this Agreement, if Parent is a party to a
Change of Control, consolidation or merger which reclassifies or changes
its outstanding Common Stock, upon consummation of such transaction the
Notes shall automatically become convertible into the kind and amount of
securities, cash or other assets which the Lender would have owned
immediately after such transaction if the Lender had converted the Notes
immediately before the effective date of the transaction. The Borrowers
shall not effect any such transaction unless, prior to the consummation
thereof, the entity whose Stock is to be issued upon conversion of the
Notes thereaf ter, shall expressly assume by written instrument delivered
to the Lender, the obligation to deliver to the Lender such shares of Stock
or property the Lender would be entitled to receive upon conversion of the
Notes. Nothing in this Section 2.4 shall be construed to permit a Change of
Control, consolidation, merger or other transac tion which is otherwise
prohibited by this Agreement.
2.5 Fractional Shares. Parent will not issue any fractional shares
of Common Stock upon any conversion pursuant to this Article 2. Each
fractional share will be rounded up to a full share.
2.6 Documentary and Transfer Taxes. All documentary, stamp or similar
issue or transfer tax due upon the issuance of Common Stock upon any
conversion pursuant to this Article 2 shall be paid by Parent. Neither
Parent nor Borrowers shall be required to pay any transfer taxes incurred
by reason of the issuance of any shares of Common Stock in the name of any
person other than the Lender or an Affiliate thereof.
2.7 Reservation of Common Stock. Parent agrees that at all times
while any amounts are outstanding under this Agreement there shall be
reserved for issuance and delivery upon any conversion of the Notes
pursuant to this Article 2 shares of Common Stock issuable upon such
conversion. All such shares shall be fully authorized, fully paid and
non-assessable, free and clear of all liens, security interests, charges
and other encumbrances or restrictions on sale and free and clear of all
preemptive rights.
2.8 Registration Rights. The shares of Common Stock issuable upon
conversion pursuant to this Article 2 shall constitute Registrable
Securities (as such term is defined in the Registration Rights Agreement).
2.9 Cancellation of Notes. Upon conversion of any Notes pursuant to
this Article 2, such Notes will be marked by the Lender "paid" to the
extent of the amount converted. If any Note shall have been fully converted
pursuant to this Article 2, such Note shall be marked by the Lender "Paid
In Full."
3. CONDITIONS TO THE PURCHASE OF SECURITIES
3.1 Conditions to the Purchase of the Term A Securities.
The obligation of the Lender to purchase the Term A Securities
and to perform any obligations hereunder on the Closing Date shall be
subject to the satisfaction of, or waiver by the Lender of, the following
conditions on or before the Closing Date:
(a) Credit Agreement; Note Documents. This Agreement and the
other Note Documents shall have been duly executed by, and delivered to,
the Borrowers and the Lender, and the Lender shall have received such
documents, instruments, agreements and legal opinions as Lender shall
reasonably request in connection with the transactions contemplated by this
Agreement and the other Note Documents, each in form and substance
satisfactory to the Lender.
(b) Delivery of Convertible Notes. The Borrowers shall have
issued to Lender the Term A Notes.
(c) Issuance of Warrants. Parent shall have delivered to Lender
(or such party or parties as Lender shall designate) certificates
representing the Term A Warrants.
(d) Payment of Fees. Borrowers shall have paid the Fees payable
pursuant to Section 1.5 hereof (including the Fees specified in the Sunrise
Commit ment Letter), and shall have reimbursed the Lender for all fees,
costs and expenses of closing presented as of the Closing Date. All such
amounts may be paid with proceeds of the sale of Securities as made on the
Closing Date and, in such case, will be reflected in the funding notice and
wiring instructions given by the Borrowers to the Lenders before the
Closing Date.
(e) Issuance of Common Stock Parent shall have issued to Lender
(or such party or parties as Lender shall designate) certificates
representing the Term A Shares.
(f) Amendments to Existing Senior Credit Facility. The Lender
shall have received fully executed copies of the Senior Credit Amendments,
in form and substance satisfactory to the Lender, as duly authorized,
executed and delivered by the Borrowers and the Agent and Lenders named
under the Existing Senior Credit Facility.
(g) [Intentionally Omitted]
(h) Approvals. The Lender shall have received satisfactory
evidence that the Borrowers have obtained all required consents and
approvals of all Persons (including all requisite Governmental Authorities)
to the execution, delivery and performance of this Agreement and the other
Note Documents and the consum mation of the transactions contemplated
hereby and thereby, and all waiting periods shall have been terminated or
lapsed without extension or the imposition of any conditions or
restrictions.
(i) No Material Adverse Effect. There shall not have occurred a
Material Adverse Effect on any of the Borrowers, or any event reasonably
likely to result in a Material Adverse Effect on any of the Borrowers,
since December 31, 1999.
(j) Registration Rights Agreement. Parent and Borrower shall
have executed the Registration Rights Agreement in substantially the form as
attached hereto as Exhibit G.
(k) Stockholders Agreement. The Stockholders Agreement, in
substantially the form attached hereto as Exhibit H, shall have been executed
by the parties thereto and delivered to Lender.
(l) Participation Agreements. The ANG Notes shall have been
repaid in full. Participation Agreements, in substantially the form as
attached hereto as Exhibit I, shall have been executed and delivered by the
parties identified on Annex D hereof with respect to the amounts set forth
thereon.
(m) Employee Confidentiality and Non-Disclosure Agreements. The
Lender shall have received evidence satisfactory to it that employees of
the Borrowers have executed or are otherwise bound by confidentiality and
proprietary information agreements.
(n) Bylaws Amendment. The Board of Directors of Parent shall
have adopted the Bylaws Amendment.
(o) Director Resignations. The members of the Board of Direc
tors of Parent identified on Annex E shall have resigned from their
positions on the Board of Directors of Parent, and the Sunrise Directors
shall have been elected to fill the vacancies created by such resignations.
(p) Officer's CertificThe Borrowers shall have delivered to the
Purchaser a certificate executed by (a) the Chairman of the Board or the
President or one of the Vice Presidents of the Parent and (b) the Treasurer
or one of the Assistant Treasurers of the Parent, in substantially the form
as annexed hereto as Exhibit F, certifying on behalf of each of the
Borrowers that the conditions specified in this Section 3.1 have been
fulfilled.
(q) Secretary's Certificates. Lender shall have received a
certifi cate from each of the Borrowers, dated as of the Closing Date and
signed by the Secretary or an Assistant Secretary of each such Borrower,
certifying that the attached copies of the Articles of Incorporation,
bylaws, and resolutions of the Board of Directors of such Borrower
approving the Note Documents and the transactions contemplated thereby, are
all true, complete and correct and remain unamended and in full force and
effect.
(r) Opinion of Counsel. The Lender shall have received an
opinion of counsel to the Borrowers, dated as of the Closing Date
substantially in the form of Exhibit K hereto.
(s) Security. The Lender shall have received evidence, in form
and substance reasonably satisfactory to the Lender, that it has a valid
and perfected security interests in, and liens upon, the Collateral and
other property which is intended to be security for the Obligations or the
liability of any Obligor in respect thereof, subject only to the security
interests and liens permitted herein or in the Existing Senior Credit
Facility, as amended by the Senior Credit Amendments.
(t) Insurance. The Lender shall have received evidence of
insurance and loss payee endorsements required hereunder and under the
other Note Documents, and certificates of insurance policies and/or
endorsements naming the Lender as loss payee with respect thereto, in each
case in form and substance reasonably satisfactory to the Lender.
3.2 Conditions to the Purchase of the Term B Securities.
The obligation of the Lender to purchase the Term B Securities
shall be subject to the satisfaction of, or waiver by the Lender of, the
following conditions:
(a) Representations and Warranties. Each of the representations
and warranties of the Borrowers contained in this Agreement that is
qualified as to Material Adverse Effect shall be true and correct, and each
of the representations and warranties of the Borrowers contained in this
Agreement that is not so qualified shall be true and correct in all
material respects, at and as of such date except to the extent that such
representations and warranties relate solely to an earlier date, in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date as if made at and as of such
date.
(b) Compliance with the Terms and Conditions of this Agree
ment; No Default. Each of the Borrowers shall have duly and properly
performed and complied with all of the agreements, covenants and
obligations set forth herein that are required to be performed or complied
with by such Borrower on or before such date, and no Default or Event of
Default shall have occurred and be continuing on such date or would result
after giving effect to the sale of the Term B Securities.
(c) No Material Adverse Effect. There shall not have occurred a
Material Adverse Effect on any of the Borrowers, or any event reasonably
likely to result in a Material Adverse Effect on any of the Borrowers,
since December 31, 1999.
(d) Delivery of Convertible Notes. The Borrowers shall have
delivered to the Purchaser the Term B Notes.
(e) Issuance of Additional Warrants. Parent shall have
delivered to Lender (or such party or parties as Lender shall designate)
certificates representing the Term B Warrants.
(f) Payment of Fees. Borrowers shall have paid the Fees payable
pursuant to Section 1.5 hereof (including the Fees specified in the Sunrise
Commit ment Letter).
(g) Participation Agreements. Participation Agreements, in
substantially the form as attached hereto as Exhibit I, shall have been
executed and delivered by the parties identified on Annex D hereof with
respect to the amounts set forth thereon.
(h) Stockholder Approval. Parent shall have obtained
Stockholder Approval at its annual meeting or a special meeting duly called
therefor and the Charter Amendment shall have been adopted.
The request and acceptance by the Borrower Representative of
the proceeds from the sale of the Term B Securities shall be deemed to
constitute, as of the date of such request or acceptance, (i) a
representation and warranty by Borrow ers that the conditions in this
Section 3.2 have been satisfied and (ii) a reaffirmation by the Borrowers
of the granting and continuance of the Lender's Liens pursuant to the
Collateral Documents.
3.3 Conditions to the Purchase of the Term C Securities.
The obligation of the Lender to purchase the Term C Securities
and to perform any obligations hereunder on the Closing Date shall be
subject to the satisfaction of, or waiver by the Lender of, the following
conditions:
(a) Representations and Warranties. Each of the representations
and warranties of the Borrowers contained in this Agreement that is
qualified as to Material Adverse Effect shall be true and correct, and each
of the representations and warranties of the Borrowers contained in this
Agreement that is not so qualified shall be true and correct in all
material respects, at and as of such date except to the extent that such
representations and warranties relate solely to an earlier date, in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date as if made at and as of such
date.
(b) Compliance with the Terms and Conditions of this Agree
ment; No Default. Each of the Borrowers shall have duly and properly
performed and complied with all of the agreements, covenants and
obligations set forth herein that are required to be performed or complied
with by such Borrower on or before such date, and no Default or Event of
Default shall have occurred and be continuing on such date or would result
after giving effect to the sale of the Term C Securities.
(c) No Material Adverse Effect. There shall not have occurred a
Material Adverse Effect on any of the Borrowers, or any event reasonably
likely to result in a Material Adverse Effect on any of the Borrowers,
since December 31, 1999.
(d) Sale of Term B Securities. The Term B Securities shall have
been purchased by the Lender.
(e) Delivery of Convertible Notes. The Borrowers shall have
delivered to the Purchaser the Term C Notes.
(f) Issuance of Additional Warrants. Parent shall have delivered
to Lender (or such party or parties as Lender shall designate) certificates
representing the Term B Warrants.
(g) Payment of Fees. Borrowers shall have paid the Fees payable
pursuant to Section 1.5 hereof (including the Fees specified in the Sunrise
Commit ment Letter).
(h) Participation Agreements. Participation Agreements, in
substantially the form as attached hereto as Exhibit I, shall have been
executed and delivered by the parties identified on Annex D hereof with
respect to the amounts set forth thereon.
The acceptance by the Borrower Representative of the proceeds
of the sale of the Term C Securities shall be deemed to constitute, as of
the date of such request or acceptance, (i) a representation and warranty
by Borrowers that the conditions in this Section 3.3 have been satisfied
and (ii) a reaffirmation by the Borrowers of the granting and continuance
of the Lender's Liens pursuant to the Collateral Documents.
4. REPRESENTATIONS AND WARRANTIES OF BORROWERS
To induce the Lender to purchase the Securities, the Borrowers
executing this Agreement, jointly and severally, make the following
representations and warranties to the Lender with respect to all Borrowers,
each and all of which shall survive the execution and delivery of this
Agreement.
4.1 Corporate Existence; Compliance with Law.
Each Borrower (a) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation; (b) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not have a Material Adverse
Effect; (c) has the requisite corporate power and authority and the legal
right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease and to conduct
its business as now, heretofore and proposed to be conducted; (d) subject
to specific representations set forth herein regarding Environmental Laws,
has all licenses, permits, consents or approvals from or by, and has made
all filings with, and has given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (e) is in compliance with its charter and by-laws;
and (f) subject to specific representations set forth herein regarding
ERISA, Environmental Laws, tax and other laws, is in compliance with all
applicable provisions of law, except where the failure to comply,
individually or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect.
4.2 Executive Offices; FEIN.
As of the Closing Date, the current location of each Borrower's
chief executive office and principal place of business is set forth on
Section 4.2 of the Disclosure Schedule, and none of such locations have
changed within the twelve (12) months preceding the Closing Date. In
addition, Section 4.2 of the Disclosure Schedule lists the federal employer
identification number of each Borrower.
4.3 Corporate Power, Authorization, Enforceable Obligations.
The execution, delivery and performance by each Borrower of
each of the Note Documents to which it is a party, the issuance of the
Securities contem plated thereby and the creation of all Liens provided for
therein: (a) are within such Person's corporate or partnership power; (b)
have been duly authorized by all necessary or proper corporate, shareholder
and other action (other than receipt of Stockholder Approval of the Charter
Amendment necessary for issuance of the Term B Notes); (c) do not
contravene any provision of such Person's charter, bylaws or partnership
agreement; (d) do not violate any law or regulation, or any order or decree
of any court or Governmental Authority; (e) do not conflict with or result
in the breach or termination of, constitute a default under or accelerate or
permit the acceleration of any performance required by, any indenture,
instrument, mortgage, deed of trust, or any material lease or other
agreement to which such Person is a party or by which such Person or any of
its property is bound; (f) do not result in the creation or imposition of
any Lien upon any of the property of such Person, other than those in favor
of the Lender pursuant to the Note Documents; and (g) do not require the
consent or approval of any Governmental Authority or any other Person. On
or prior to the Closing Date, each of the Note Documents shall have been
duly executed and delivered by each Borrower and each such Note Document
shall then constitute a legal, valid and binding obligation enforceable in
accordance with its terms.
4.4 SEC Reports and Financial Statements. Parent has filed all
required registration statements, prospectuses, reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
since January 1, 1998 (the "SEC Reports"). No Subsidiary of Parent is
required to file any registration statement, prospectus, report, schedule,
form, statement or other document with the SEC. None of the SEC Reports, as
of their respective dates (and, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing), contained
or will contain any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein necessary to
make the statements therein, in light of the circumstances under which they
are made, not misleading. Each of the financial statements (including the
related notes) included in the SEC Reports presents fairly, in all material
respects, the consolidated financial position and results of operations and
cash flows of Parent and its Subsidiaries on a consolidated basis as of the
respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied during the periods involved
except as otherwise noted therein and subject, in the case of the unaudited
interim financial statements, to the absence of notes and normal year-end
adjustments that have not been made and are not expected to be material in
amount. All of such SEC Reports, as of their respective dates (and as of
the date of any amendment to the respective SEC Report) complied as to form
in all material respects with the applicable requirements of the Securities
Act and the Exchange Act and the rules and regulations promulgated
thereunder.
4.5 Projections.
The Projections delivered on the date hereof and attached as
Section 4.5 of the Disclosure Schedule have been prepared by Borrowers in
light of the past operations of their businesses, but including future
payments of known contingent liabilities, and reflect projections for the
fiscal year ending September 30, 2000 beginning on the first day of the
month immediately following the Closing Date on a month by month basis for
the first year and on a year by year basis thereafter. The Projections are
based upon estimates and assumptions stated therein, all of which Borrowers
believe to be reasonable and fair in light of current conditions and
current facts known to Borrowers and, as of the Closing Date, reflect
Borrowers' good faith and reasonable estimates of the future financial
performance of Borrowers and of the other information projected therein for
the period set forth therein.
4.6 Material Adverse Effect.
Except as set forth on Section 4.6 of the Disclosure Schedule,
between the September 30, 1999 and the Closing Date, (a) no Borrower has
incurred any obligations, contingent or non-contingent liabilities,
liabilities for Charges, long-term leases or unusual forward or long-term
commitments which are not reflected in the audited financial statements
contained in the SEC Reports and which, alone or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, (b) no contract,
lease or other agreement or instrument has been entered into by any
Borrower or has become binding upon any Borrower's assets and no law or
regula tion applicable to any Borrower has been adopted which has had or
could reasonably be expected to have a Material Adverse Effect, and (c) no
Borrower is in default and to the best of Existing Borrowers' knowledge no
third party is in default under any material contract, lease or other
agreement or instrument, which alone or in the aggregate could reasonably
be expected to have a Material Adverse Effect. Between September 30, 1999
and the Closing Date no event has occurred, which alone or together with
other events, could reasonably be expected to have a Material Adverse
Effect.
4.7 Ownership of Property: Liens.
As of the Closing Date, the real estate listed on Section 4.7
of the Disclosure Schedule (the "Real Estate") constitutes all of the real
property owned, leased, subleased, or used by any Borrower. Each Borrower
owns good and market able fee simple title to all of its owned real estate,
and valid and marketable leasehold interests in all of its leased Real
Estate, all as described on Section 4.7 of the Disclo sure Schedule, and
copies of all such leases or a summary of terms thereof satisfac tory to
Lender have been delivered to Lender. Section 4.7 of the Disclosure Sched
ule further describes any Real Estate with respect to which any Borrower is
a lessor, sublessor or assignor as of the Closing Date. Each Borrower also
has good and marketable title to, or valid leasehold interests in, all of
its personal properties and assets. As of the Closing Date, none of the
properties and assets of any Borrower are subject to any Liens other than
Permitted Encumbrances, and there are no facts, circumstances or conditions
known to any Borrower that may result in any Liens (including Liens arising
under Environmental Laws) other than Permitted Encum brances. Each Borrower
has received all deeds, assignments, waivers, consents, non- disturbance
and recognition or similar agreements, bills of sale and other documents,
and has duly effected all recordings, filings and other actions necessary
to establish, protect and perfect such Borrower's right, title and interest
in and to all such Real Estate and other properties and assets. Section
4.17 of the Disclosure Schedule also describes any purchase options, rights
of first refusal or other similar contractual rights pertaining to any Real
Estate. As of the Closing Date, no portion of any Borrower's Real Estate
has suffered any material damage by fire or other casualty loss which has
not heretofore been repaired and restored in all material respects to its
original condition or otherwise remedied. As of the Closing Date, all
material permits required to have been issued to enable the Real Estate to
be lawfully occu pied and used for all of the purposes for which they are
currently occupied and used have been lawfully issued and are in full force
and effect.
4.8 Labor Matters.
As of the Closing Date (a) no strikes or other material labor
disputes against any Borrower are pending or, to any Borrower's knowledge,
threatened; (b) hours worked by and payment made to employees of each
Borrower comply with the Fair Labor Standards Act and each other federal,
state, local or foreign law applica ble to such matter; (c) all payments
due from any Borrower for employee health and welfare insurance have been
paid or accrued as a liability on the books of such Borrower; (d) except as
set forth in Section 4.8 of the Disclosure Schedule, no Borrower is a party
to or bound by any collective bargaining agreement, management agreement,
consulting agreement or any employment agreement (and true and complete
copies of any agreements described on Section 4.8 of the Disclosure
Schedule have been delivered to the Lender); (e) there is no organizing
activity involving any Borrower pending or, to any Borrower's knowledge,
threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any Borrower's knowledge,
threatened with the National Labor Relations Board, and no labor
organization or group of employees of any Borrower has made a pending
demand for recognition; and (g) except as set forth in Section 4.8 of the
Disclosure Schedule, there are no complaints or charges against any
Borrower pending or, to the knowledge of any Borrower, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out
of, in connection with, or otherwise relating to the employment or
termination of employment by any Bor rower of any individual.
4.9 Ventures; Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness.
Except as set forth on Section 4.9 of the Disclosure Schedule,
no Borrower has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any Person other
than the other Borrowers. All of the issued and outstanding Stock of each
Borrower that is a corporation is owned by each of the stockholders and in
the amounts set forth on Section 4.9 of the Disclosure Schedule. Except as
set forth on Section 4.9 of Disclosure Schedule, there are no outstanding
rights to purchase, options, warrants or similar rights or agreements
pursuant to which any Borrower may be required to issue, sell, repur chase
or redeem any of its Stock or other equity securities, or interests or any
Stock or other equity securities of its Subsidiaries. As of the Closing
Date, the Borrowers have no Indebtedness or Guaranteed Indebtedness except
as set forth on Section 7.3 of the Disclosure Schedule.
4.10 Government Regulation.
No Borrower is an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended. No Bor rower is subject to regulation under the Public Utility
Holding Company Act of 1935, as amended, the Federal Power Act, as amended,
or any other federal or state statute that restricts or limits its ability
to incur Indebtedness or to perform its obligations hereunder. The issuance
of the Securities by the Borrowers to the Lenders, the application of the
proceeds from the sale thereof and repayment thereof, and the issuance of
the Common Stock upon conversion of the Notes or exercise of the Warrants
will not violate any provision of any such statute or any rule, regulation
or order issued by the Securities and Exchange Commission.
4.11 Margin Regulations.
No Borrower is engaged, nor will it engage, principally or as
one of its important activities, in the business of extending credit for
the purpose of "pur chasing" or "carrying" any "margin security" as such
terms are defined in Regulation U or G of the Federal Reserve Board as now
and from time to time hereafter in effect (such securities being referred
to herein as "Margin Stock"). No Borrower owns any Margin Stock, and none
of the proceeds of the Notes or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchas
ing or carrying any Margin Stock, for the purpose of reducing or retiring
any Indebtedness which was originally incurred to purchase or carry any
Margin Stock or for any other purpose which might cause any of the Notes or
other extensions of credit under this Agreement to be considered a "purpose
credit" within the meaning of Regulation G, U or X of the Federal Reserve
Board. No Borrower will take or permit to be taken any action which might
cause any Note Document to violate any regulation of the Federal Reserve
Board.
4.12 Taxes.
All tax returns, reports and statements, including information
returns, required by any Governmental Authority to be filed by any Borrower
have been filed with the appropriate Governmental Authority and all Charges
have been paid prior to the date on which any fine, penalty, interest or
late charge may be added thereto for nonpayment thereof (or any such fine,
penalty, interest, late charge or loss has been paid), excluding Charges or
other amounts being contested in accordance with Section 6.2(b). Proper and
accurate amounts have been withheld by each Borrower from its respective
employees for all periods in full and complete compliance with all
applicable federal, state, local and foreign law and such withholdings have
been timely paid to the respective Governmental Authorities. Section 4.12
of the Disclo sure Schedule sets forth as of the Closing Date those taxable
years for which any Borrower's tax returns are currently being audited by
the IRS or any other applicable Governmental Authority and any assessments
or threatened assessments in connec tion with such audit, or otherwise
currently outstanding. Except as described on Section 4.12 of the
Disclosure Schedule, no Borrower has executed or filed with the IRS or any
other Governmental Authority any agreement or other document extend ing, or
having the effect of extending, the period for assessment or collection of
any Charges. None of the Borrowers and their respective predecessors are
liable for any Charges: (a) under any agreement (including any tax sharing
agreements) or (b) to each Borrower's knowledge, as a transferee. As of the
Closing Date, no Borrower has agreed or been requested to make any
adjustment under IRC Section 481(a), by reason of a change in accounting
method or otherwise, which would have a Material Adverse Effect.
4.13 ERISA.
(a) Section 4.13 of the Disclosure Schedule lists and
separately identifies all Title IV Plans, Multiemployer Plans, ESOPs and
Retiree Welfare Plans. Copies of all such listed Plans, together with a
copy of the latest form 5500 for each such Plan, have been delivered to the
Lender. Each Qualified Plan has been deter mined by the IRS to qualify
under Section 401 of the IRC, and the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section 501 of the
IRC, and nothing has occurred which would cause the loss of such
qualification or tax-exempt status. Each Plan is in compliance with the
applicable provisions of ERISA and the IRC, including the filing of reports
required under the IRC or ERISA. No Borrower or ERISA Affiliate has failed
to make any contribution or pay any amount due as required by either
Section 412 of the IRC or Section 302 of ERISA or the terms of any such
Plan. No Borrower or ERISA Affiliate has engaged in a prohibited
transaction, as defined in Section 4975 of the IRC, in connection with any
Plan, which would subject any Borrower to a material tax on prohibited
transac tions imposed by Section 4975 of the IRC.
(b) Except as set forth in Section 4.13 of the Disclosure
Schedule: (i) no Title IV Plan has any Unfunded Pension Liability; (ii) no
ERISA Event or event described in Section 4062(e) of ERISA with respect to
any Title IV Plan has occurred or is reasonably expected to occur; (iii)
there are no pending, or to the knowledge of any Borrower, threatened
claims (other than claims for benefits in the normal course), sanctions,
actions or lawsuits, asserted or instituted against any Plan or any Person
as fiduciary or sponsor of any Plan; (iv) no Borrower or ERISA Affiliate
has incurred or reasonably expects to incur any liability as a result of a
complete or partial withdrawal from a Multiemployer Plan; (v) within the
last five years no Title IV Plan with Unfunded Pension Liabilities has been
transferred outside of the "controlled group" (within the meaning of
Section 4001 (a)(14) of ERISA) of any Borrower or ERISA Affiliate; and (vi)
no liability under any Title IV Plan has been satisfied with the purchase
of a contract from an insurance company that is not rated AAA by the
Standard & Poor's Corporation or the equivalent by another nationally
recognized rating agency.
4.14 No Litigation.
No action, claim, lawsuit, demand, investigation or proceeding
is now pending or, to the knowledge of any Borrower, threatened against any
Borrower, before any Governmental Authority or before any arbitrator or
panel of arbitrators (collectively, "Litigation"), (a) which challenges any
Borrower's right or power to enter into or perform any of its obligations
under the Note Documents to which it is a party, or the validity or
enforceability of any Note Document or any action taken thereunder, or (b)
which has a reasonable risk of being determined adversely to any Borrower
and which, if so determined, could reasonably be expected to have a
Material Adverse Effect. Except as set forth on Section 4.14 of the
Disclosure Schedule, as of the Closing Date there is no Litigation pending
or threatened which seeks damages in excess of $100,000 or injunctive
relief or alleges criminal miscon duct of any Borrower.
4.15 Brokers.
Except as set forth on Section 4.15 of the Disclosure Schedule,
no broker or finder acting on behalf of any Borrower brought about the
issuance or sale of the Securities or the transactions contemplated by this
Agreement, and no Bor rower has any obligation to any Person in respect of
any finder's or brokerage fees in connection therewith.
4.16 Intellectual Property.
As of the Closing Date, each Borrower owns or has rights to use
all Intellectual Property necessary to continue to conduct its business as
now or hereto fore conducted by it or proposed to be conducted by it, and
each Patent, Trademark, registered Copyright and License is listed,
together with application or registration numbers, as applicable, on
Section 4.16 of the Disclosure Schedule. Each Borrower conducts its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person.
4.17 Full Disclosure.
No information contained in this Agreement, any of the other
Note Documents, any Projections, Financial Statements or Collateral Reports
or other reports from time to time delivered hereunder or any written
statement furnished by or on behalf of any Borrower to the Lender pursuant
to the terms of this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which they were made. The Liens granted
to the Lender pursuant to the Collateral Documents will at all times be
fully perfected first priority Liens in and to the Collateral described
therein, subject, as to priority, only to Permitted Encumbrances with
respect to the Collateral.
4.18 Environmental Matters.
(a) Except as set forth on Section 4.18 of the Disclosure
Schedule, as of the Closing Date: (i) the Real Estate is free of
contamination from any Hazard ous Material except for such contamination
that would not result in Environmental Liabilities which could reasonably
be expected to have a Material Adverse Effect; (ii) no Borrower has caused
or suffered to occur any Release of Hazardous Materials on, at, in, under,
above, to, from or about any of its Real Estate, except for such Releases
as would not result in Environmental Liabilities which could reasonably be
expected to have a Material Adverse Effect; (iii) the Borrowers are and
have been in compliance with all Environmental Laws, except for such
noncompliance which would not result in Environmental Liabilities which
could reasonably be expected to have a Material Adverse Effect; (iv) the
Borrowers have obtained, and are in compli ance with, all Environmental
Permits required by Environmental Laws for the operations of their
respective businesses as presently conducted or as proposed to be
conducted, except where the failure to so obtain or comply with such
Environmental Permits would not result in Environmental Liabilities which
could reasonably be expected to have a Material Adverse Effect, and all
such Environmental Permits are valid, uncontested and in good standing; (v)
no Borrower is involved in operations or knows of any facts, circumstances
or conditions, including any Releases of Hazard ous Materials, that are
likely to result in any Environmental Liabilities of such Borrower which
could reasonably be expected to have a Material Adverse Effect, and no
Borrower has permitted any current or former tenant or occupant of the Real
Estate to engage in any such operations; (vi) there is no Litigation
arising under or related to any Environmental Laws, Environmental Permits
or Hazardous Material which seeks damages, penalties, fines, costs or
expenses in excess of $25,000 or injunctive relief, or which alleges
criminal misconduct by any Borrower; (vii) no notice has been received by
any Borrower identifying it as a "potentially responsible party" or
requesting information under CERCLA or analogous state statutes, and to the
knowledge of the Borrowers, there are no facts, circumstances or conditions
that may result in any Borrower being identified as a "potentially
responsible party" under CERCLA or analogous state statutes; and (viii) the
Borrowers have provided to the Lender copies of all existing environmental
reports and audits in their posses sion pertaining to actual or potential
Environmental Liabilities, in each case relating to any Real Estate.
(b) Each Borrower hereby acknowledges and agrees that the
Lender (i) is not now, and has not ever been, in control of any of the Real
Estate or any Borrower's affairs, and (ii) does not have the capacity
through the provisions of the Note Documents or otherwise to influence any
Borrower's conduct with respect to the ownership, operation or management
of any of its Real Estate or compliance with Environmental Laws or
Environmental Permits.
4.19 Insurance.
Section 4.19 of the Disclosure Schedule lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Borrower, as well as a summary of the terms of each
such policy.
4.20 Bank Accounts.
Section 4.20 of the Disclosure Schedule lists all banks and
other financial institutions at which any Borrower maintains deposits
and/or other accounts as of the Closing Date, and such Schedule correctly
identifies the name, address and telephone number of each depository, the
name in which the account is held, a description of the purpose of the
account, and the complete account number.
4.21 Government Contracts.
Except as set forth on Section 4.21 of the Disclosure Schedule,
as of the Closing Date, no Borrower is a party to any contract or agreement
with any Governmental Authority and no Borrower's Accounts are subject to
the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. Section
3727), or any similar state or local law.
4.22 Customer and Trade Relations.
Except as set forth on Section 4.22 of the Disclosure Schedule,
as of the Closing Date, there exists no actual or, to the knowledge of any
Borrower, threatened termination or cancellation of, or any material
adverse modification or change in: the business relationship of any
Borrower with any customer or group of customers whose purchases during the
preceding twelve (12) months caused them to be ranked among the ten largest
customers of such Borrower; or the business relationship of any Borrower
with any supplier material to its operations.
4.23 Agreements and Other Documents.
As of the Closing Date, each Borrower has provided to the
Lender or its counsel, on behalf of Lenders, accurate and complete copies
(or summaries) of all of the following agreements or documents to which any
it is subject and each of which are listed on Section 4.23 of the
Disclosure Schedule: (a) supply agreements and purchase agreements not
terminable by such Borrower within sixty (60) days following written notice
issued by such Borrower and involving transactions in excess of $1,000,000
per annum; (b) any lease of Equipment having a remaining term of one year
or longer and requiring aggregate rental and other payments in excess of
$500,000 per annum; (c) licenses and permits held by the Borrowers, the
absence of which could be reasonably likely to have a Material Adverse
Effect; (d) instruments or documents evidencing Indebtedness of such
Borrower and any security interest granted by such Borrower with respect
thereto; and (e) instruments and agreements evidencing the issuance of any
equity securities, warrants, rights or options to purchase equity
securities of such Borrower.
4.24 Solvency. Immediately after giving effect to (a) the sale of
Securities by the Borrower on the Closing Date or such other date as Notes
requested hereunder are issued, (b) the disbursement of the proceeds of the
sale of the Securities pursuant to the instructions of Parent, and (c) the
payment and accrual of all transaction costs in connection with the
foregoing, each Borrower is Solvent.
4.25 Valid Issuance of Securities. Upon issuance and delivery of (a)
certificates representing the Term A Shares and (b) the shares of Common
Stock issuable upon conversion of any Notes or exercise of any Warrants,
such shares of Common Stock will be validly issued, fully paid,
non-assessable and free of preemp tive rights or similar rights of
stockholders of Parent, and free and clear of all Liens or other
encumbrances.
4A. REPRESENTATIONS AND WARRANTIES OF THE LENDER
4A.1 Acquisition for Own Account. The Securities to be purchased by
the Lender hereunder shall be acquired for investment for the Lender's own
account, not as a nominee or agent, and not with a view to the public
resale or distribution thereof, and, except with respect to the sale of
participations in the Securities discussed herein, the Lender has no
present intention of selling or otherwise distributing the same. The Lender
has not been formed for the specific purpose of acquiring the Securities.
4A.2 Adequate Information. The Lender has received or has had full
access to all the information it considers necessary or appropriate to make
an informed investment decision with respect to the Securities to be
purchased under this Agree ment. The Lender further has had an opportunity
to ask questions and receive answers from the Borrowers regarding the terms
and conditions of the offering of the Securities and to obtain additional
information (to the extent the Borrowers pos sessed such information or
could acquire it without unreasonable effort or expense) necessary to
verify any information furnished to the Lender or to which the Lender had
access.
4A.3 Acknowledgment of Risk. The Lender understands that the purchase
of the Securities involves substantial risk. The Lender acknowledges that
the Lender is able to fend for itself, can bear the economic risk of the
Lender's investment in the Securities and has such knowledge and experience
in financial or business matters that the Lender is capable of evaluating
the merits and risks of this investment in the Securities and protecting
its own interests in connection with this investment.
4A.4 Accredited Investor. The Lender is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act.
4A.5 Restrictions on Distribution. The Lender understands that the
Securities are characterized as "restricted securities" under the
Securities Act inasmuch as they are being acquired from the Borrowers in a
transaction not involv ing a public offering and that under the Securities
Act and applicable regulations thereunder such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. Further, the Lender represents that the Lender is familiar
with Rule 144 of the Commission, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act. The
Lender understands that Parent is under no obligation to register any of
the securities sold hereunder except as provided in the Registration Rights
Agreement.
5. COVENANTS: FINANCIAL STATEMENTS AND INFORMATION
5.1 Reports and Notices. Borrowers shall deliver or cause to be
delivered to the Lender the following:
(a) Quarterly Financials. Within forty-five (45) days after the
end of each Fiscal Quarter, consolidated financial information regarding
Borrowers, certified by the Chief Financial Officer of Parent, including
(i) unaudited balance sheets as of the close of such Fiscal Quarter and the
related statements of income and cash flow for that portion of the Fiscal
Year ending as of the close of such Fiscal Quarter and (ii) unaudited
statements of income and cash flows for such Fiscal Quarter, in each case
setting forth in comparative form the figures for the corre sponding period
in the prior year and the figures contained in the Projections for such
Fiscal Year, all prepared in accordance with GAAP (subject to normal
year-end adjustments). Such financial information shall be accompanied by
(A) a compliance Certificate in respect of each of the financial covenants
set forth on Annex B which is tested on a quarterly basis and (B) the
certification of the Chief Financial Officer of Parent that (i) such
financial information presents fairly in accordance with GAAP (subject to
normal year-end adjustments) the financial position, results of operations
and statements of cash flows of Borrowers and their Subsidiaries, on a
consolidated basis, as at the end of such Fiscal Quarter and for the period
then ended, (ii) any other information presented is true, correct and
complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default
shall have occurred and be continuing, describing the nature thereof and
all efforts undertaken to cure such Default or Event of Default. In
addition, Borrowers shall deliver to the Lender, within forty-five (45)
days after the end of each Fiscal Quarter, a management discussion and
analysis which includes a comparison to budget for that Fiscal Quarter and
a comparison of performance for that Fiscal Quarter to the corresponding
period in the prior year;
(b) Operating Plan. As soon as available, but not later than
thirty (30) days after the end of each Fiscal Year, an annual operating
plan for the Borrow ers, approved by the Board of Directors of Parent, for
the following year, which will include a statement of all of the material
assumptions on which such plan is based, will include quarterly balance
sheets and a quarterly budget for the following year and will integrate
sales, gross profits, operating expenses, operating profit and cash flow
projections all prepared on the same basis and in similar detail as that on
which operating results are reported (and in the case of cash flow
projections, representing management's good faith estimates of future
financial performance based on histori cal performance), and including
plans for personnel, Capital Expenditures and facilities;
(c) Annual Audited Financials. Within ninety (90) days after
the end of each Fiscal Year, audited Financial Statements for Borrowers and
their Subsidiaries on a consolidated basis, consisting of balance sheets
and statements of income and retained earnings and cash flows, setting
forth in comparative form in each case the figures for the previous Fiscal
Year which Financial Statements shall be prepared in accordance with GAAP,
certified without qualification, by an inde pendent certified public
accounting firm of national standing or otherwise acceptable to the Lender.
Such Financial Statements shall be accompanied by (i) a statement prepared
in reasonable detail showing the calculations used in determining compli
ance with each of the financial covenants set forth on Annex B, (ii) a
report from such accounting firm to the effect that, in connection with
their audit examination, nothing has come to their attention to cause them
to believe that a Default or Event of Default has occurred (or specifying
those Defaults and Events of Default that they became aware of), it being
understood that such audit examination extended only to accounting matters
that no special investigation was made with respect to the existence of
Defaults or Events of Default, (iii) the annual letters to such accountants
in connection with their audit examination detailing contingent liabilities
and material litigation matters, and (iv) the certification of the Chief
Executive Officer or Chief Financial Officer of Borrowers that all such
Financial Statements present fairly in accordance with GAAP the financial
position, results of operations and statements of cash flows of Borrowers
and their Subsidiaries on a consolidated basis, as at the end of such year
and for the period then ended, and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default
shall have occurred and be continuing, describing the nature thereof and
all efforts undertaken to cure such Default or Event of Default; and (vi) a
letter from the Chief Financial Officer of Borrower addressed to the
Lender, in form and substance reasonably satisfactory to the Lender,
setting forth a comparison of the figures for the previous Fiscal Year
against the figures contained in the Projections for such Fiscal Year;
(d) Management Letters. Within five (5) Business Days after
receipt thereof by any Borrower, copies of all management letters,
exception reports or similar letters or reports received by such Borrower
from its independent certified public accountants;
(e) Default Notices. As soon as practicable, and in any event
within five (5) Business Days after an executive officer of any Borrower
has actual knowledge of the existence of any Default, Event of Default or
other event which has had a Material Adverse Effect, telephonic or
telecopies notice specifying the nature of such Default or Event of Default
or other event, including the anticipated effect thereof, which notice, if
given telephonically, shall be promptly confirmed in writing on the next
Business Day;
(f) SEC Filing and Press Releases. Promptly upon their becoming
available, copies of: (i) all SEC Reports made publicly available by Parent
to its security holders; and (ii) all press releases and other statements
made available by any Parent to the public concerning material adverse
changes or developments in the business of any such Person;
(g) Supplemental Schedules. To the Lender, supplemental
disclosures, if any, required by Section 6.6 of the Agreement;
(h) Litigation. Promptly upon learning thereof, notice of any
Litigation commenced or threatened against any Borrower that (i) seeks
damages in excess of $100,000, (ii) seeks injunctive relief, (iii) is
asserted or instituted against any Plan, its fiduciaries or its assets or
against any Borrower or ERISA Affiliate in connection with any Plan, (iv)
alleges criminal misconduct by any Borrower, or (v) alleges the violation
of any law regarding, or seeks remedies in connection with, any
Environmental Liabilities;
(i) Insurance Notices. Disclosure of losses or casualties
required by Section 6.4 of the Agreement;
(j) Lease/Warehouse Notices. To Agent, copies of (i) any and
all default notices received under or with respect to any leased location
or public warehouse where Collateral is located, and (ii) such other
notices or documents as Agent may request respecting such leased locations
or public warehouses; and
(k) Other Documents. Such other financial and other information
respecting any Borrower's business or financial condition as the Lender
shall, from time to time, request in its reasonable discretion.
5.2 Communication with Accountants.
Each Borrower executing this Agreement authorizes the Lender to
communicate directly with its independent certified public accountants, and
autho rizes and shall instruct those accountants and advisors to disclose
and make available to the Lender any and all Financial Statements and other
supporting financial documents, schedules and information relating to any
Borrower (including copies of any issued management letters) with respect
to the business, financial condition and other affairs of any Borrower in a
manner consistent with the policies of such accountants and advisors.
6. AFFIRMATIVE COVENANTS
Each Borrower jointly and severally agrees as to all Borrowers that
from and after the date hereof and until the Termination Date:
6.1 Maintenance of Existence and Conduct of Business.
Each Borrower shall do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence and
its rights and franchises; continue to conduct its business substantially
as now conducted or as otherwise permitted hereunder; at all times
maintain, preserve and protect all of its assets and properties used or
useful in the conduct of its business, and keep the same in good repair,
working order and condition in all material respects (taking into
consideration ordinary wear and tear) and from time to time make, or cause
to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices; and transact
business only in such corporate and trade names as are set forth on Section
6.1 of the Disclosure Schedule.
6.2 Payment of Obligations.
(a) Subject to Section 6.2(b), each Borrower shall pay and
discharge or cause to be paid and discharged promptly all Charges payable
by it, including (A) Charges imposed upon it, its income and profits, or
any of its property (real, personal or mixed) and all Charges with respect
to tax, social security and unemployment withholding with respect to its
employees, and (B) lawful claims for labor, materials, supplies and
services or otherwise, before any thereof shall become past due.
(b) Each Borrower may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims described in
Section 6.2(a); provided, that (i) at the time of commencement of any such
contest no Default or Event of Default shall have occurred and be
continuing, (ii) adequate reserves with respect to such contest are
maintained on the books of such Borrower, in accordance with GAAP, (iii)
such contest is maintained and prosecuted continuously and with diligence
and operates to suspend collection or enforcement of such Charges or claims
or any Lien in respect thereof, (iv) none of the Collateral becomes subject
to forfeiture or loss as a result of such contest, (v) no Lien shall be
imposed to secure payment of such Charges or claims other than Permitted
Encumbrances, (vi) such Borrower shall promptly pay or discharge such
contested Charges or claims and all additional charges, interest, penalties
and expenses, if any, and shall deliver to the Lender evidence acceptable
to the Lender of such compliance, payment or discharge, if such contest is
terminated or discontinued adversely to such Borrower or the conditions set
forth in this Section 6.2(b) are no longer met, and (vii) the Lender has
not advised Borrowers in writing that Lender reasonably believes that
nonpayment or nondischarge thereof could have or result in a Material
Adverse Effect.
6.3 Books and Records.
Each Borrower shall keep adequate books and records with
respect to its business activities in which proper entries, reflecting all
financial transactions, are made in accordance with GAAP and on a basis
consistent with the Financial State ments contained in the SEC Reports.
6.4 Insurance: Damage to or Destruction of Collateral.
(a) The Borrowers shall, at their sole cost and expense,
maintain the policies of insurance described on Section 4.19 of the
Disclosure Schedule as in effect on the date hereof in form and with
insurers acceptable to the Lender. If any Borrower at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above or to pay all premiums relating thereto, the Lender may at
any time or times thereafter obtain and maintain such policies of insurance
and pay such premiums and take any other action with respect thereto which
the Lender deems advisable. The Lender shall have no obligation to obtain
insurance for any Borrower or pay any premiums therefor. By doing so, the
Lender shall not be deemed to have waived any Default or Event of Default
arising from any Borrower's failure to maintain such insurance or pay any
premiums therefor. All sums so disbursed, including attorneys' fees, court
costs and other charges related thereto, shall be payable on demand by
Borrowers to the Lender and shall be additional Obligations hereunder
secured by the Collateral.
(b) The Lender reserves the right at any time upon any change
in any Borrower's risk profile (including any change in the product mix
maintained by any Borrower or any laws affecting the potential liability of
such Borrower) to require additional forms and limits of insurance to, in
the Lender's opinion, ade quately protect Lender's interests in all or any
portion of the Collateral and to ensure that each Borrower is protected by
insurance in amounts and with coverage custom ary for its industry. If
requested by the Lender, each Borrower shall deliver to the Lender from
time to time a report of a reputable insurance broker, satisfactory to the
Lender, with respect to its insurance policies.
(c) Each Borrower shall deliver to the Lender, in form and
substance satisfactory to the Lender, endorsements to (i) all "All Risk"
and business interruption insurance naming the Lender as a loss payee, and
(ii) all general liability and other liability policies naming the Lender
as additional insured. Each Borrower irrevocably makes, constitutes and
appoints the Lender (and all officers, employees or agents designated by
the Lender), so long as any Default or Event of Default shall have occurred
and be continuing, as such Borrower's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims
under such "All Risk" policies of insurance, endorsing the name of such
Borrower on any check or other item of payment for the proceeds of such
"All Risk" policies of insurance and for making all determinations and
decisions with respect to such "All Risk" policies of insurance. The Lender
shall have no duty to exercise any rights or powers granted to it pursuant
to the foregoing power-of-attorney. Parent shall promptly notify the Lender
of any loss, damage, or destruction to the Collateral in the amount of
$500,000 or more, whether or not covered by insurance. After deducting from
such proceeds the expenses, if any, incurred by the Lender in the
collection or handling thereof, the Lender may, at its option, apply such
proceeds to the reduction of the Obligations in accordance with Section
1.6(b), or permit or require the applicable Borrower to use such money, or
any part thereof, to replace, repair, restore or rebuild the Collateral in
a diligent and expeditious manner with materials and workmanship of
substantially the same quality as existed before the loss, damage or
destruction.
6.5 Compliance with Laws.
Each Borrower shall comply with all federal, state, local and
foreign laws and regulations applicable to it, including without limitation
those relating to licensing, ERISA and labor matters, except to the extent
that the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
6.6 Supplemental Disclosure.
From time to time as may be requested by the Lender (which
request will not be made more frequently than twice each year absent the
occurrence and continuance of a Default or an Event of Default), the
Borrowers shall supplement each Disclosure Schedule hereto, or any
representation herein or in any other Note Document, with respect to any
matter hereafter arising which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in
such Disclosure Schedule or as an exception to such representation or which
is necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case
of any supplements to any Disclosure Schedule, such Disclosure Schedule
shall be appropriately marked to show the changes made therein);provided
that (a) no such supplement to any such Disclosure Schedule or
representation shall be or be deemed a waiver of any Default or Event of
Default resulting from the matters disclosed therein, except as consented
to by the Lender in writing; and (b) no supplement shall be required as to
representa tions and warranties that relate solely to the Closing Date.
6.7 Intellectual Property.
Each Borrower will conduct its business and affairs without
infringe ment of or interference with any Intellectual Property of any
other Person which could reasonably be expected to have a Material Adverse
Effect.
6.8 Environmental Matters.
Each Borrower shall and shall cause each Person within its
control to: (a) conduct its operations and keep and maintain its Real
Estate in compliance with all Environmental Laws and Environmental Permits
other than noncompliance which could not reasonably be expected to have a
Material Adverse Effect; (b) implement any and all investigation,
remediation, removal and response actions which are necessary to comply
with Environmental Laws and Environmental Permits pertain ing to the
presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or
about any of its Real Estate; (c) notify the Lender promptly after such
Borrower becomes aware of any violation of Environmental Laws or
Environmental Permits or any Release on, at, in, under, above, to, from or
about any Real Estate which is reasonably likely to result in Environmental
Liabilities in excess of $500,000; and (d) promptly forward to the Lender a
copy of any order, notice, request for information or any communica tion or
report received by such Borrower in connection with any such violation or
Release or any other matter relating to any Environmental Laws or
Environmental Permits that could reasonably be expected to result in
Environmental Liabilities in excess of $1,000,000 in each case whether or
not the Environmental Protection Agency or any Governmental Authority has
taken or threatened any action in connection with any such violation or
Release. If the Lender at any time has a reasonable basis to believe that
there may be a violation of any Environmental Laws or Environmental Permits
by any Borrower or any Environmental Liability arising thereunder, or a
Release of Hazardous Materials on, at, in, under, above, to, from or about
any of its Real Estate, which, in each case, could reasonably be expected
to have a Material Adverse Effect, then each Borrower shall, upon the
Lender's written request (i) cause the performance of such environmental
audits including subsurface sampling of soil and groundwater, and
preparation of such environmental reports, at Borrowers' expense, as the
Lender may from time to time reasonably request, which shall be conducted
by reputable environmental consulting firms reasonably accept able to the
Lender and shall be in form and substance acceptable to the Lender, and
(ii) permit the Lender or its representatives to have access to all Real
Estate for the purpose of conducting such environmental audits and testing
as the Lender deems reasonably appropriate, including subsurface sampling
of soil and groundwater. Borrowers shall reimburse the Lender for the costs
of such audits and tests and the same will constitute a part of the
Obligations secured hereunder.
6.9 Landlords' Agreements, Mortgagee Agreements and Bailee Letters.
Each Borrower shall use its best efforts to obtain a landlord's
agree ment, mortgagee agreement or bailee letter, as applicable, from the
lessor of each leased property or mortgagee of owned property or with
respect to any warehouse, processor or converter facility or other location
where Collateral is located, which agreement or letter shall contain a
waiver or subordination of all Liens or claims that the landlord, mortgagee
or bailee may assert against the Inventory or Collateral at that location,
and shall otherwise be satisfactory in form and substance to the Lender.
After the Closing Date, no real property or warehouse space shall be leased
or acquired by any Borrower and no Inventory shall be shipped to a
processor or converter under arrangements established after the Closing
Date without the prior written consent of the Lender, unless and until a
satisfactory landlord or mortgagee agreement or bailee letter, as
appropriate, shall first have been obtained with respect to such location.
Each Borrower shall timely and fully pay and perform its obliga tions under
all leases and other agreements with respect to each leased location or
public warehouse where any Collateral is or may be located. If any Borrower
obtains an ownership interest in any real property following the Closing
Date, such Borrower shall execute and deliver all documents and instruments
necessary to grant the Lender a fully perfected security interest in such
real property.
6.10 Election of Directors. As long as any Notes remain outstanding,
Parent shall use its reasonable best efforts to cause the Sunrise Directors
to be elected to the Board of Directors of Parent at each annual meeting of
Parent's stockholders.
6.11 Further Assurances.
Each Borrower agrees that it shall and shall cause each other
Bor rower to, at such Borrower's expense and upon request of the Lender,
duly execute and deliver, or cause to be duly executed and delivered, to
the Lender such further instruments and do and cause to be done such
further acts as may be necessary or proper in the reasonable opinion of the
Lender to carry out more effectively the provisions and purposes of this
Agreement or any other Note Document.
7. NEGATIVE COVENANTS
Each Borrower jointly and severally agrees as to all Borrowers that,
without the prior written consent of the Lender, from and after the date
hereof until the Termination Date:
7.1 Mergers, Subsidiaries, Etc.
No Borrower shall directly or indirectly, by operation of law
or otherwise, (a) form or acquire any Subsidiary, or (b) merge with,
consolidate with, acquire all or substantially all of the assets or capital
stock of, or otherwise combine with or acquire, any Person.
7.2 Investments; Notes and Advances.
Except as otherwise expressly permitted by this Section 7, no
Bor rower shall make or permit to exist any investment in, or make, accrue
or permit to exist loans or advances of money to, any Person, through the
direct or indirect lending of money, holding of securities or otherwise,
except that (a) Borrowers may hold investments comprised of notes payable,
or stock or other securities issued by Account Debtors to any Borrower
pursuant to negotiated agreements with respect to settlement of such
Account Debtor's Accounts in the ordinary course of business, so long as
the aggregate amount of such Accounts so settled by Borrowers does not
exceed $250,000; and (b) provided that no Event of Default shall have
occurred and be continuing and that the Lender has a first priority
perfected security interest therein pursuant to a Control Letter, Borrowers
may make and own investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof maturing within one year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one year from the date of creation
thereof and currently having the highest rating obtainable from either
Standard & Poor's Ratings Group or Moody's Investors Service, Inc., (iii)
certificates of deposit maturing no more than one year from the date of
creation thereof or overnight repurchase obligations issued by commercial
banks incorporated under the laws of the United States of America, each
having combined capital, surplus and undivided profits of not less than
$200,000,000 and having a senior unsecured rating of "A" or better by a
nationally recognized rating agency, provided that the aggregate amount
invested in such certificates of deposit shall not at any time exceed
$500,000 for any one such certificate of deposit and $1,000,000 for any one
such bank, (iv) time deposits, maturing no more than thirty (30) days from
the date of creation thereof with commercial banks or savings and loan
associations each having mem bership either in the Federal Deposit
Insurance Corporation or in the Federal Savings and Loan Insurance
Corporation and in amounts not exceeding the maximum amounts of insurance
thereunder, and (v) any other type of investment not exceeding $1,000,000
in the aggregate at any time outstanding.
7.3 Indebtedness.
(a) No Borrower shall create, incur, assume or permit to exist
any Indebtedness, except (without duplication) (i) Indebtedness secured by
purchase money security interests permitted in clause (c) of Section 7.7,
(ii) Indebtedness under the Existing Senior Credit Facility in an aggregate
principal amount not to exceed $23.0 million at any time outstanding;
provided, that Indebtedness permitted by this clause (ii) shall be $25.0
million if the Term B Notes have not been sold to the Lender; (iii) the
Notes and the other Obligations, (iii) deferred taxes, (iv) un funded
pension fund and other employee benefit plan obligations and liabilities to
the extent they are permitted to remain unfunded under applicable law, (v)
existing Indebtedness described on Section 7.3 of the Disclosure Schedule
and refinancings thereof or amendments or modifications thereto which do
not have the effect of increasing the principal amount thereof or changing
the amortization thereof (other than to extend the same) and which are
otherwise on terms and conditions no less favorable to any Borrower or the
Lender, as reasonably determined by the Lender, than the terms of the
Indebtedness being refinanced, amended or modified, (vi) Indebtedness
consisting of intercompany loans and advances made by any Borrower to any
other Borrower or Foreign Subsidiary, provided that (A) each obligor of
such loans or advances shall have executed and delivered to the Borrower
making such loan or advances, on the Closing Date, a demand note
(collectively, the "Intercompany Notes") to evidence any such intercompany
Indebtedness owing at any time by such obligor to such Borrower, which
Intercompany Notes shall be in form and substance satisfactory to the
Lender and shall be pledged and delivered to the Lender pursuant to the
applicable Pledge Agreement or Security Agreement as additional collateral
security for the Obligations; (B) each Borrower shall record all
intercompany transactions on its books and records in a manner satisfactory
to the Lender; (C) at the time any such intercompany loan or advance is
made by any Borrower to any other Borrower and after giving effect thereto,
each such Borrower shall be Solvent; and (D) no Default or Event of Default
would occur and be continu ing after giving effect to any such proposed
intercompany loan.
(b) No Borrower shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any,
interest or other amount payable in respect of any Indebtedness, other than
(i) the Obligations, (ii) Indebted ness secured by a Permitted Encumbrance
if the asset securing such Indebtedness has been sold or otherwise disposed
of in accordance with Sections 7.8(b), or (iii) other Indebtedness not in
excess of $500,000.
7.4 Employee Notes and Affiliate Transactions.
(a) Except as otherwise expressly permitted in this Section 7
with respect to Affiliates, no Borrower shall enter into or be a party to
any transaction with any other Borrower or any Affiliate thereof except (i)
transfers of equipment and sales of inventory between Borrowers in the
ordinary course of business; provided that such assets are physically moved
to the premises of the transferee and each Borrower continues to be Solvent
after giving effect to any such transfer; and (ii) other transactions in
the ordinary course of and pursuant to the reasonable requirements of such
Borrower's business (but expressly excluding any Restricted Payments except
as expressly permitted in Section 7.14) and, in each case, upon fair and
reasonable terms that are no less favorable to such Borrower than would be
obtained in a comparable arm's length transaction with a Person not an
Affiliate of such Borrower. In addition, if any such transaction or series
of related transactions involves payments in excess of $1,000,000 in the
aggregate, the terms of these transactions must be disclosed in advance to
the Lender. All such transactions existing as of the date hereof are
described on Section 7.4(a) of the Disclosure Schedule.
(b) No Borrower shall enter into any lending or borrowing
transaction with any employees of any Borrower, except loans to their
respective employees on an arms-length basis in the ordinary course of
business consistent with past practices for travel expenses, relocation
costs and similar purposes up to a maximum of $100,000 to any employee and
up to a maximum of $500,000 in the aggregate at any one time outstanding.
7.5 Capital Structure and Business.
No Borrower shall (a) make any changes in any of its business
objectives, purposes or operations which could in any way adversely affect
the repayment of the Notes or any of the other Obligations or could
reasonably be expected to result in a Material Adverse Effect, (b) except
as contemplated by this Agreement, make any change in its capital structure
as described on Section 4.9 of the Disclosure Schedule, including the
issuance of any shares of Stock, warrants or other securities convertible
into Stock or any revision of the terms of its outstanding Stock, except
that Parent may issue shares to Borrowers' employees upon exercise of
options or pursuant to Parent's employee stock option plan, or (c) amend
its charter or bylaws in a manner which would adversely affect the Lender
or such Borrower's duty or ability to repay the Obligations. No Borrower
shall engage in any business other than the businesses currently engaged in
by it or businesses reasonably related thereto.
7.6 Guaranteed Indebtedness.
No Borrower shall create, incur, assume or permit to exist any
Guaranteed Indebtedness except (a) by endorsement of instruments or items
of payment for deposit to the general account of any Borrower, and (b) for
Guaranteed Indebtedness incurred for the benefit of any other Borrower if
the primary obligation is expressly permitted by this Agreement.
7.7 Liens.
No Borrower shall create, incur, assume or permit to exist any
Lien on or with respect to its Accounts or any of its other properties or
assets (whether now owned or hereafter acquired) except for (a) Permitted
Encumbrances; (b) Liens in existence on the date hereof and summarized on
Section 7.7 of the Disclosure Schedule; (c) Liens created after the date
hereof by conditional sale or other title retention agreements (including
Capital Leases) or in connection with purchase money Indebtedness with
respect to Equipment and Fixtures acquired by any Borrower in the ordinary
course of business, involving the incurrence of an aggregate amount of
purchase money Indebtedness and Capital Lease Obligations of not more than
$500,000 outstanding at any one time for all such Liens (provided that such
Liens attach only to the assets subject to such purchase money debt and
such Indebtedness is incurred within twenty (20) days following such
purchase and does not exceed 100% of the purchase price of the subject
assets). In addition, no Bor rower shall become a party to any agreement,
note, indenture or instrument, or take any other action, which would
prohibit the creation of a Lien on any of its properties or other assets in
favor of the Lender, on behalf of itself and Lenders, as additional
collateral for the Obligations, except operating leases, Capital Leases or
Licenses which prohibit Liens upon the assets that are subject thereto.
7.8 Sale of Stock and Assets.
No Borrower shall sell, transfer, convey, assign or otherwise
dispose of any of its properties or other assets, including the capital
Stock of any of its Subsidiaries and any of their Accounts, other than (a)
the sale of Inventory in the ordinary course of business, (b) the sale,
transfer, conveyance or other disposition by a Borrower of Equipment or
Fixtures that are obsolete or no longer used or useful in such Borrower's
business and having a value not exceeding $100,000 in an, single
transaction or $500,000 in the aggregate in any Fiscal Year, and (c) those
disposi tions set forth in Section 7.8 of the Disclosure Schedule. With
respect to any disposition of assets or other properties permitted pursuant
to clause (b) and clause (c) above, the Lender agrees on reasonable prior
written notice to release its Lien on such assets or other properties in
order to permit the applicable Borrower to effect such disposition and
shall execute and deliver to Borrowers, at Borrowers' expense, appropriate
UCC-3 termination statements and other releases as reasonably requested by
Borrowers.
7.9 ERISA.
No Borrower shall, or shall cause or permit any ERISA Affiliate
to, cause or permit to occur an event which could result in the imposition
of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA.
7.10 Financial Covenants.
Borrowers shall not breach or fail to comply with any of the
Financial Covenants (the "Financial Covenants") set forth on Annex B.
7.11 Hazardous Materials.
No Borrower shall cause or permit a Release of any Hazardous
Material on, at, in, under, above, to, from or about any of the Real Estate
where such Release would violate, or form the basis for Environmental
Liabilities under, any Environmental Laws or Environmental Permits, other
than such violations or Environmental Liabilities which could not
reasonably be expected to have a Material Adverse Effect.
7.12 Sale-Leasebacks.
No Borrower shall engage in any sale-leaseback, synthetic lease
or similar transaction involving any of its assets.
7.13 Cancellation of Indebtedness.
No Borrower shall cancel any claim or debt owing to it, except
for reasonable consideration negotiated on an arms-length basis and in the
ordinary course of its business consistent with past practices.
7.14 Restricted Payments.
No Borrower shall make any Restricted Payment, except (a)
intercompany loans and advances between Borrowers to the extent permitted
by Section 7.3 above; (b) dividends and distributions by a Borrower to such
Borrower as owns all of its capital stock; and (c) employee loans permitted
under Section 7.4(b) above.
7.15 Change of Corporate Name or Location; Change of Fiscal Year.
No Borrower shall not (a) change its corporate name, or (b)
change its chief executive office, principal place of business, corporate
offices or warehouses or locations at which Collateral is held or stored,
or the location of its records concern ing the Collateral, in any case
without at least thirty (30) days prior written notice to the Lender and
after the Lender's written acknowledgment that any reasonable action
requested by the Lender in connection therewith, including to continue the
perfection of any Liens in favor of the Lender in any Collateral, has been
completed or taken, and provided that any such new location shall be in the
continental United States. Without limiting the foregoing, no Borrower
shall change its name, identity or corporate structure in any manner which
might make any financing or continuation statement filed in connection
herewith seriously misleading within the meaning of Section 9-402(7) of the
Code or any other then applicable provision of the Code except upon prior
written notice to the Lender and after the Lender's written ac knowledgment
that any reasonable action requested by the Lender in connection therewith,
including to continue the perfection of any Liens in favor of the Lender in
any Collateral, has been completed or taken. No Borrower shall change its
Fiscal Year.
7.16 No Impairment of Intercompany Transfers.
No Borrower shall directly or indirectly enter into or become
bound by any agreement, instrument, indenture or other obligation (other
than this Agree ment and the other Note Documents) which could directly or
indirectly restrict, prohibit or require the consent of any Person with
respect to the payment of divi dends or distributions or the making or
repayment of intercompany loans by a Subsidiary of any Borrower to any
Borrower or between Borrowers.
7.17 No Speculative Transactions.
No Borrower shall engage in any transaction involving commodity
options, futures contracts or similar transactions, except solely to hedge
against fluctuations in the prices of commodities owned or purchased by it
and the values of foreign currencies receivable or payable by it and
interest swaps, caps or collars.
7.18 Leases.
No Borrower shall enter into any operating lease for Equipment
or Real Estate, if the aggregate of all such operating lease payments
payable in any year for Borrowers on a consolidated basis would exceed
$500,000.
8. TERM
8.1 Termination.
The financing arrangements contemplated hereby shall be in
effect until the Maturity Date and the Notes and all other Obligations
shall be automatically due and payable in full on such date.
8.2 Survival of Obligations Upon Termination of Financing Arrange
ments.
Except as otherwise expressly provided for in the Note
Documents, no termination or cancellation (regardless of cause or
procedure) of any Note or any financing arrangement under this Agreement
shall in any way affect or impair the obligations, duties and liabilities
of the Borrowers or the rights of the Lender relating to any unpaid portion
of the Notes or any other Obligations, due or not due, liqui dated,
contingent or unliquidated or any transaction or event occurring prior to
such termination, or any transaction or event, the performance of which is
required after the Commitment Termination Date. Except as otherwise
expressly provided herein or in any other Note Document, all undertakings,
agreements, covenants, warranties and representations of or binding upon
the Borrowers, and all rights of the Lender, all as contained in the Note
Documents, shall not terminate or expire, but rather shall survive any such
termination or cancellation and shall continue in full force and effect
until the Termination Date; provided however, that in all events the
provisions of Section 12, the payment obligations under Sections 1.2, 1.4
and 1.5, and the indemnities contained in the Note Documents shall survive
the Termination Date.
9. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
9.1 Events of Default.
The occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute an "Event of Default"
hereunder:
(a) Any Borrower (i) fails to make any payment of principal of,
or interest on, or Fees owing in respect of, the Notes or any of the other
Obligations when due and payable, whether by acceleration or otherwise, or
(ii) fails to pay or reimburse the Lender for any expense reimbursable
hereunder or under any other Note Document within ten (10) days following
the Lender demand for such reim bursement or payment of expenses.
(b) Any Borrower shall fail or neglect to perform, keep or
observe any of the provisions of Sections 1.4, 1.5, 6.4 or 7, or any of the
provisions set forth on Annex B.
(c) Any Borrower shall fail or neglect to perform, keep or
observe any of the provisions of Section 5 and the same shall remain
unremedied for three (3) Business Days or more.
(d) Any Borrower shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the other Note
Documents (other than any provision embodied in or covered by any other
clause of this Section 9.1) and the some shall remain unremedied for thirty
(30) days or more.
(e) A default or breach shall occur under any other agreement,
document or instrument to which any Borrower is a party which is not cured
within any applicable grace period, and such default or breach (i) involves
the failure to make any payment when due in respect of any Indebtedness
(other than the Obliga tions) of any Borrower in excess of $100,000 in the
aggregate, or (ii) causes, or permits any holder of such Indebtedness or a
trustee to cause, Indebtedness or a portion thereof in excess of $200,000
in the aggregate to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment, regardless of whether such default is
waived, or such right is exercised, by such holder or trustee.
(f) Assets of any Borrower with a fair market value of $200,000
or more shall be attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of any Borrower and such
condition continues for thirty (30) days or more.
(g) A case or proceeding shall have been commenced against any
Borrower seeking a decree or order in respect of any Borrower (i) under
Title 11 of the United States Code, as now constituted or hereafter amended
or any other applicable federal, state or foreign bankruptcy or other
similar law, (ii) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) for any Borrower or of any
substantial part of any such Person's assets, or (iii) ordering the winding
up or liquidation of the affairs of any Borrower, and such case or
proceeding shall remain undismissed or unstayed for sixty (60) days or more
or such court shall enter a decree or order granting the relief sought in
such case or proceeding.
(h) Any Borrower (i) shall file a petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) shall fail to contest in a timely and appropriate
manner or shall consent to the institution of proceedings thereunder or to
the filing of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of any Borrower or of any substantial
part of any such Person's assets, (iii) shall make an assignment for the
benefit of creditors, (iv) shall take any corporate action in furtherance
of any of the foregoing; or (v) shall admit in writing its inability to, or
shall be generally unable to, pay its debts as such debts become due.
(i) A final judgment or judgments for the payment of money in
excess of $100,000 in the aggregate at any time outstanding shall be
rendered against any Borrower and the same shall not, within thirty (30)
days after the entry thereof, have been discharged or execution thereof
stayed or bonded pending appeal, or shall not have been discharged prior to
the expiration of any such stay.
(j) Any material provision of any Note Document shall for any
reason cease to be valid, binding and enforceable in accordance with its
terms (or any Borrower shall challenge the enforceability of any Note
Document or shall assert in writing, or engage in any action or inaction
based on any such assertion, that any provision of any of the Note
Documents has ceased to be or otherwise is not valid, binding and
enforceable in accordance with its terms), or any security interest created
under any Note Document shall cease to be a valid and perfected first
priority security interest or Lien (except as otherwise permitted herein or
therein) in any of the Collateral purported to be covered thereby.
(k) Any Change of Control shall occur.
(l) Any event shall occur, whether or not insured or insurable,
as a result of which revenue-producing activities cease or are
substantially curtailed at any facility of Borrowers generating more than
25% of Borrowers' consolidated revenues for the Fiscal Year preceding such
event and such cessation or curtailment continues for more than thirty (30)
days.
9.2 Remedies.
(a) If any Default or Event of Default shall have occurred and
be continuing, the Lender may, without notice except as otherwise expressly
provided herein, increase the rate of interest applicable to the Notes to
the Default Rate as provided in Section 1.4(e).
(b) If any Event of Default shall have occurred and be
continuing, the Lender may, without notice, (i) declare all or any portion
of the Obligations, including all or any portion of any Note to be
forthwith due and payable, all without presentment, demand, protest or
further notice of any kind, all of which are expressly waived by Borrowers
and each other Borrower; and (ii) exercise any rights and remedies provided
to the Lender under the Note Documents and/or at law or equity, including
all remedies provided under the Code; provided, however, that upon the
occurrence of an Event of Default specified in Sections 9.1(g), (h) or (i),
all of the Obligations, shall become immediately due and payable without
declaration, notice or demand by any Person.
9.3 Waivers by Borrowers.
Except as otherwise provided for in this Agreement or by
applicable law, each Borrower waives: (a) presentment, demand and protest
and notice of presentment, dishonor, notice of intent to accelerate, notice
of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by the Lender on which any Borrower may in any
way be liable, and hereby ratifies and confirms whatever the Lender may do
in this regard, (b) all rights to notice and a hearing prior to the
Lender's taking possession or control of, or to the Lender's replevy,
attachment or levy upon, the Collateral or any bond or security which might
be required by any court prior to allowing the Lender to exercise any of
its remedies, and (c) the benefit of all valuation, appraisal, marshaling
and exemption laws.
10. ASSIGNMENTS AND PARTICIPATIONS
10.1 Assignments.
(a) The Borrowers signatory hereto consent to the Lender's
assignment of, and/or sale of participations in, at any time or times, the
Note Docu ments, Notes, or of any portion thereof or interest therein,
including the Lender's rights, title, interests, remedies, powers or duties
thereunder, whether evidenced by a writing or not. Any assignment by the
Lender shall require the consent of Borrowers (which shall not be
unreasonably withheld or delayed), except that the consent of Borrowers
shall not be required for an assignment by the Lender to an affiliate
(i.e., an entity controlling, controlled by or under common control with
the assigning Lender) or during the existence and continuance of a Default
or an Event of Default, and the execution of an assignment agreement; (ii)
be conditioned on the assignee lender representing to the assigning Lender
that it is purchasing the applicable Notes to be assigned to it for its own
account, for investment purposes and not with a view to the distribution
thereof; and (iii) if a partial assignment, be in an amount at least equal
to $1,000,000. In the case of an assignment by the Lender under this
Section 10.1, the assignee shall have, to the extent of such assignment,
the same rights, benefits and obligations as it would if it were a Lender
hereunder. The assigning Lender shall be relieved of its obligations
hereunder with respect to its Commitments or assigned portion thereof from
and after the date of such assignment. Each Borrower hereby acknowledges
and agrees that any assignment will give rise to a direct obligation of
Borrowers to the assignee and that the assignee shall have all the rights
and remedies of the Lender. In the event the Lender assigns or otherwise
transfers all or any part of a Note, the Lender shall so notify Borrowers
and Borrow ers shall, upon the request of the Lender, execute new Notes in
exchange for the Notes being assigned. Notwithstanding the foregoing
provisions of this Section 10.1(a), the Lender may at any time pledge or
assign all or any portion of its rights under this Agreement and the other
Note Documents to a Federal Reserve Bank; provided, however, that no such
pledge or assignment shall release the Lender from its obligations
hereunder or under any other Note Document.
(b) Any participation by a Lender of all or any part of any
Note shall be made with the understanding that all amounts payable by
Borrowers hereun der shall be determined as if that Lender had not sold
such participation, and that the holder of any such participation shall not
be entitled to require such Lender to take or omit to take any action
hereunder except actions directly affecting (i) any reduction in the
principal amount of, or interest rate or Fees payable with respect to, any
Note in which such holder participates, (ii) any extension of the scheduled
amortization of the principal amount of any Note in which such holder
participates or the final maturity date thereof, and (iii) any release of
all or substantially all of the Collateral (other than in accordance with
the terms of this Agreement, the Collateral Docu ments or the other Note
Documents). Solely for purposes of Sections 1.9, 1.11, and 1.12, each
Borrower acknowledges and agrees that a participation shall give rise to a
direct obligation of Borrowers to the participant and the participant shall
be consid ered to be a "Lender". Except as set forth in the preceding
sentence no Borrower shall have any obligation or duty to any participant.
(c) Except as expressly provided in this Section 10.1, no
Lender shall be relieved of any of its obligations hereunder as a result of
any sale, assign ment, transfer or negotiation of, or granting of
participation in, all or any part of the Notes or other Obligations owed to
such Lender.
(d) Each Borrower shall assist any Lender permitted to sell
assignments or participations under this Section 10.1 as reasonably
required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any
and all agreements, notes and other documents and instruments as shall be
requested and, if requested by the Lender, the preparation of informational
materials for, and the participation of management in meetings with,
potential assignees or participants. Each Borrower shall certify the
correctness, completeness and accuracy of all descriptions of the Borrowers
and their affairs contained in any selling materials provided by them and
all other information provided by them and included in such materials,
except that any Projections delivered by Borrowers shall only be certified
by Borrowers as having been prepared by Borrowers in compliance with the
representations contained in Section 4.5.
(e) A Lender may furnish any information concerning Borrowers
in the possession of such Lender from time to time to assignees (including
prospec tive assignees). Each Lender shall obtain from assignees or
participants confidential ity covenants substantially equivalent to those
contained in Section 12.8.
(f) So long as no Event of Default shall have occurred and be
continuing, the Lender shall not assign or sell participations in any
portion of its Notes, if, as of the date of the proposed assignment or
sale, the assignee or partici pant would be subject to capital adequacy or
similar requirements under Section 1.12(a) or increased costs under Section
1.12(b).
11. SUCCESSORS AND ASSIGNS
11.1 Successors and Assigns.
This Agreement and the other Note Documents shall be binding on
and shall inure to the benefit of each Borrower, the Lender and their
respective successors and assigns (including, in the case of any Borrower,
a debtor-in-posses sion on behalf of such Borrower), except as otherwise
provided herein or therein. No Borrower may assign, transfer, hypothecate
or otherwise convey its rights, benefits, obligations or duties hereunder
or under any of the other Note Documents without the prior express written
consent of the Lender. Any such purported assignment, transfer,
hypothecation or other conveyance by any Borrower without the prior express
written consent of the Lender shall be void. The terms and provisions of
this Agreement are for the purpose of defining the relative rights and
obligations of each Borrower and the Lenders with respect to the
transactions contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement or any of
the other Note Documents.
12. MISCELLANEOUS
12.1 Complete Agreement; Modification of Agreement.
The Note Documents constitute the complete agreement between
the parties with respect to the subject matter thereof and may not be
modified, altered or amended except as set forth in Section 12.2 below. Any
letter of interest, commit ment letter, and/or fee letter (other than the
Sunrise Commitment Letter) between any Borrower and the Lender or any of
their respective affiliates, predating this Agree ment and relating to a
financing of substantially similar form, purpose or effect shall be
superseded by this Agreement.
12.2 Amendments and Waivers.
No amendment, modification, termination or waiver of any provision of
this Agreement or any of the Notes, or any consent to any departure by any
Borrower therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Lender and Borrowers.
12.3 Fees and Expenses.
Borrowers shall reimburse the Lender for all out-of-pocket
expenses incurred in connection with the preparation of the Note Documents
(including the reasonable fees and expenses of all of its counsel,
advisors, consultants and auditors retained in connection with the Note
Documents and the transactions contemplated thereby and advice in
connection therewith). Borrowers shall reimburse the Lenders for all fees,
costs and expenses, including the reasonable fees, costs and expenses of
counsel or other advisors (including environmental and management
consultants and appraisers) for advice, assistance, or other representation
in connection with:
(a) the forwarding to Borrowers or any other Person on behalf of
Borrowers of the proceeds of the sale of the Notes or the other Securities;
(b) any amendment, modification or waiver of, or consent with
respect to, any of the Note Documents or advice in connection with the
administra tion of the loans evidenced by the Notes made pursuant hereto or
its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by the Lender, any Borrower or any other Person)
in any way relating to the Collateral, any of the Note Documents or any
other agreement to be executed or delivered in connection therewith or
herewith, whether as party, witness, or otherwise, including any
litigation, contest, dispute, suit, case, proceeding or action, and any
appeal or review thereof, in connection with a case commenced by or against
any or all of the Borrowers or any other Person that may be obligated to
the Lender by virtue of the Note Documents; including any such litigation,
contest, dispute, suit, proceeding or action arising in connection with any
work-out or restructuring of the Notes during the pendency of one or more
Events of Default;
(d) any attempt to enforce any remedies of the Lender against
any or all of the Borrowers or any other Person that may be obligated to
Lender by virtue of any of the Note Documents; including any such attempt
to enforce any such remedies in the course of any work-out or restructuring
of the Notes during the pendency of one or more Events of Default;
(e) any work-out or restructuring of the Notes during the pen
dency of one or more Events of Default;
(f) efforts to (i) monitor the Notes or any of the other
Obligations, (ii) evaluate, observe or assess any of the Borrowers or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral,
provided that with respect to field audits or other access reviews pursuant
to Section 1.10 conducted while there are no outstanding Events of Default,
Borrowers shall only be obligated to reimburse the Lender for expenses
incurred with respect to one such field audit per Fiscal Year; including
all attorneys' and other professional and service providers' fees arising
from such services, including those in connection with any appellate
proceedings; and all expenses, costs, charges and other fees incurred by
such counsel and others in any way or respect arising in connection with or
relating to any of the events or actions described in this Section 12.3
shall be payable, on demand, by Borrowers to the Lender. Without limiting
the generality of the foregoing, such expenses, costs, charges and fees may
include: fees, costs and expenses of accountants, environmen tal advisors,
appraisers, field auditors, management and other consultants and
paralegals; court costs and expenses; photocopying and duplication
expenses; court reporter fees, costs and expenses; long distance telephone
charges; air express charges; telegram or telecopy charges; secretarial
overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services.
12.4 No Waiver.
The Lender's failure, at any time or times, to require strict
perfor mance by the Borrowers of any provision of this Agreement and any of
the other Note Documents shall not waive, affect or diminish any right of
the Lender thereafter to demand strict compliance and performance
therewith. Any suspension or waiver of an Event of Default shall not
suspend, waive or affect any other Event of Default whether the same is
prior or subsequent thereto and whether the same or of a different type.
Subject to the provisions of Section 12.2, none of the undertakings,
agreements, warranties, covenants and representations of any Borrower
contained in this Agreement or any of the other Note Documents and no
Default or Event of Default by any Borrower shall be deemed to have been
suspended or waived by the Lender, unless such waiver or suspension is by
an instrument in writing signed by an officer of or other authorized
employee of the Lender, and directed to Borrowers specifying such
suspension or waiver.
12.5 Remedies.
The Lenders' rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies which the
Lender may have under any other agreement, including the other Note
Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.
12.6 Severability.
Wherever possible, each provision of this Agreement and the
other Note Documents shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
12.7 Conflict of Terms.
Except as otherwise provided in this Agreement or any of the
other Note Documents by specific reference to the applicable provisions of
this Agree ment, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Note
Documents, the provision contained in this Agreement shall govern and
control.
12.8 Confidentiality.
The Lender agrees to use commercially reasonable efforts
(equivalent to the efforts the Lender applies to maintaining the
confidentiality of its own confi dential information) to maintain as
confidential all confidential information provided to them by the Borrowers
and designated as confidential for a period of two (2) years following
receipt thereof, except that the Lender may disclose such information (a)
to Persons employed or engaged by the Lender in evaluating, approving,
structuring or administering the Notes; (b) to any bona fide assignee or
potential assignee that has agreed to comply with the covenant contained in
this Section 12.8 (and any such bona fide assignee or participant or
potential assignee or participant may disclose such information to Persons
employed or engaged by them as described in clause (a) above); (c) as
required or requested by any Governmental Authority or reasonably believed
by the Lender to be compelled by any court decree, subpoena or legal or
administrative order or process; (d) as, in the opinion of the Lender's
counsel, required by law; (e) in connection with the exercise of any right
or remedy under the Note Documents or in connection with any Litigation to
which the Lender is a party; or (f) which ceases to be confidential through
no fault of the Lender.
12.9 GOVERNING LAW.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE NOTE
DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THE NOTE DOCU MENTS AND THE OBLIGATIONS SHALL BE GOVERNED
BY, AND CON STRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PER FORMED IN THAT STATE. EACH
BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE BORROWER AND THE LENDER PERTAINING TO THIS AGREEMENT OR ANY OF THE
OTHER NOTE DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER NOTE DOCUMENTS. EACH BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH BOR ROWER HEREBY WAIVES ANY OBJECTION
WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IM
PROPER VENUE OR FORUM NON CONVENIENS.
12.10 Notices.
Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or
other communica tion shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to
give or serve upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall
be deemed to have been validly served, given or delivered (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the
United States Mail, registered or certified mail, return receipt requested,
with proper postage prepaid, (b) upon transmission, when sent by telecopy
or other similar facsimile transmission (with such telecopy or facsimile
promptly confirmed by delivery of a copy by personal delivery or United
States Mail as otherwise provided in this Section 12.10), (c) one (1)
Business Day after deposit with a reputable overnight courier with all
charges prepaid or (d) when delivered, if hand-delivered by messenger, all
of which shall be addressed to the party to be notified and sent to the
address or facsimile number indicated below or to such other address (or
facsimile number) as may be substituted by notice given as herein provided.
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice.
Any notices required under this Agreement shall be delivered
if to the Lender:
Sunrise Capital Partners, L.P.
685 Third Avenue, 15th Floor
New York, NY 10017
Attention: Joseph Julian
Fax: (212) 582-3016
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036
Attention: Eileen T. Nugent
Fax: (212) 735-2000
if to any Borrower:
WPI Group, Inc.
1155 Elm Street
Manchester, NH 03101
Attention: John Allard
Fax: 603-627-3150
with a copy to:
Nixon Peabody LLP
889 Elm Street
Manchester, NH 03101
Attention: Daniel W. Sklar
Fax: 603-628-4040
12.11 Section Titles.
The Section titles and Table of Contents contained in this
Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties
hereto.
12.12 Counterparts.
This Agreement may be executed in any number of separate
counter parts, each of which shall collectively and separately constitute
one agreement.
12.13 WAIVER OF JURY TRIAL.
THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHER WISE, AMONG THE LENDER AND ANY BORROWER
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATION
SHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREE MENT, THE NOTES
OR ANY OF THE OTHER NOTE DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
12.14 Reinstatement.
This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against any
Borrower for liquidation or reorganization, should any Borrower become
insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Borrower's assets, and shall continue to be
effective or to be reinstated, as the case may be, if at any time payment
and performance of the Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Obliga tions, whether as a
"voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned,
the Obliga tions shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
12.15 No Strict Construction.
The parties hereto have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agree ment.
12.16 Joint and Several Obligations.
The Notes and the other Obligations shall constitute the joint
and several obligations of the Borrowers.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first written above.
BORROWERS:
WPI GROUP, INC.,
WPI POWER SYSTEMS, INC.,
WPI MAGNETEC, INC.,
WPI ELECTRONICS, INC.,
WPI TERMIFLEX, INC.,
WPI MICRO PALM, INC.,
WPI MICRO PROCESSOR SYSTEMS, INC.,
WPI DECISIONKEY, INC.,
WPI UK HOLDING, INC.,
WPI UK HOLDING II, INC.,
WPI OYSTER TERMINALS, INC.,
WPI HUSKY TECHNOLOGY, INC., and
WPI INSTRUMENTS, INC.
By:
-----------------------------------------
Name:
Title:
THE LENDER:
SUNRISE CAPITAL PARTNERS, L.P.
By: Sunrise Advisors, LLC,
its General Partner
By:
-----------------------------------------
Name:
Title:
ANNEX A
TO
CONVERTIBLE NOTE AGREEMENT
DEFINITIONS
Capitalized terms used in the Note Documents shall have (unless
otherwise provided elsewhere in the Note Documents) the following
respective meanings and all section references in the following definitions
shall refer to Sections of the Agreement:
"Account Debtor" shall mean any Person who may become obligated to
any Borrower under, with respect to, or on account of, an Account.
"Accounts" shall mean all "accounts," as such term is defined in the
Code, now owned or hereafter acquired by any Borrower (for purposes of this
definition, the term "Borrower" shall include Foreign Subsidiaries) and, in
any event, including (a) all accounts receivable, other receivables, book
debts and other forms of obliga tions (other than forms of obligations
evidenced by Chattel Paper, Documents or Instruments) now owned or
hereafter received or acquired by or belonging or owing to any Borrower,
whether arising out of goods sold or services rendered by it or from any
other transaction (including any such obligations which may be
characterized as an account or contract right under the Code), (b) all of
each Borrower's rights in, to and under all purchase orders or receipts now
owned or hereafter acquired by it for goods or services, (c) all of each
Borrowers rights to any goods represented by any of the foregoing
(including unpaid sellers' rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed
goods), (d) all monies due or to become due to any Borrower, under all
purchase orders and contracts for the sale of goods or the performance of
services or both by such Borrower or in connection with any other
transaction (whether or not yet earned by performance on the part of such
Borrower) now or hereafter in existence, including the right to receive the
proceeds of said purchase orders and contracts, and (e) all collateral
security and guarantees of any kind, now or hereafter in existence, given
by any Person with respect to any of the foregoing.
"Affiliate" shall mean, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as
a trustee, guardian or other fiduciary, five percent (5%) or more of the
Stock having ordinary voting power in the election of directors of such
Persons, (b) each Person that controls, is controlled by or is under common
control with such Person, (c) each of such Person's officers, directors,
joint venturers and partners and (d) in the case of Borrowers, the
immediate family members, spouses and lineal descendants of individuals who
are Affiliates of any Borrower.
"Agreement" shall mean the Convertible Note Agreement, dated as of
the Closing Date, by and among Borrowers and the Lender.
"ANG Notes" shall have the meaning assigned to it in the recitals to
the Agreement.
"Appendices" shall have the meaning assigned to it in the recitals to
the Agreement.
"Borrowers" and "Borrower" shall have the respective meanings
assigned thereto in the recitals to the Agreement.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the State of
New York.
"Bylaws Amendment" shall mean the amendment to the bylaws of Parent,
substantially in the form of Exhibit J attached to the Agreement.
"Capital Expenditures" shall mean, with respect to any Person, all
expendi tures (by the expenditure of cash or the incurrence of
Indebtedness) by such Person during any measuring period for any fixed
assets or improvements or for replace ments, substitutions or additions
thereto, that have a useful life of more than one year and that are
required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee
that, in accor dance with GAAP, would be required to be classified and
accounted for as a capital lease on a balance sheet of such Person.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease of any Person, the amount of the obligation of the lessee thereunder
that, in accordance with GAAP, would appear on a balance sheet of such
lessee in respect of such Capital Lease.
"Change of Control" shall mean any event, transaction or occurrence
as a result of which (a) Parent shall cease to own and control all of the
economic and voting rights associated with all of the outstanding Stock of
the other Borrowers, or (b) if any person or group of persons (within the
meaning of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended) of 20% or more of the issued and outstanding capital
Stock of Parent having the right to vote for the election of directors of
Parent under ordinary circumstances.
"Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including taxes owed to the
PBGC at the time due and payable), levies, assessments, charges, liens,
claims or encumbrances upon or relating to (a) the Collateral, (b) the
Obligations, (c) the employees, payroll, income or gross receipts of any
Borrower, (b) any Borrower's ownership or use of any properties or other
assets, or (e) any other aspect of any Borrower's business.
"Charter Amendment" shall mean the amendment to Parent's Articles of
Incorporation increasing the number of authorized shares of Common Stock of
Parent from 20,000,000 to 75,000,000.
"Chattel Paper" shall mean any "chattel paper," as such term is
defined in the Code, now owned or hereafter acquired by any Borrower,
wherever located.
"Closing Date" shall mean the date on which all of the conditions
precedent to the purchase of the Term A Securities shall have been
satisfied by the Borrowers or waived by Sunrise, or such other date as may
be agreed upon between the parties.
"Code" shall mean the Uniform Commercial Code as the same may, from
time to time, be enacted and in effect in the State of New York; provided,
however, in the event that, by reason of mandatory provisions of law, any
or all of the attach ment, perfection or priority of the Lender's security
interest in any Collateral is governed by the Uniform Commercial Code as
enacted and in effect in a jurisdiction other than the State of New York,
the term "Code" shall mean the Uniform Commer cial Code as enacted and in
effect in such other jurisdiction solely for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes
of definitions related to such provisions.
"Collateral" shall mean the property covered by the Security
Agreement, the Mortgages and the other Collateral Documents and any other
property, real or personal, tangible or intangible, now existing or
hereafter acquired, that may at any time be or become subject to a security
interest or Lien in favor of the Lender to secure the Obligations.
"Collateral Documents" shall mean the Security Agreement, the Pledge
Agreements, the Security Agreements (Intellectual Property) and all similar
agree ments entered into guaranteeing payment of, or granting a Lien upon
property as security for payment of, the Obligations.
"Common Stock" shall mean the common stock, par value $.01 per share,
of Parent.
"Contracts" shall mean all "contracts," as such term is defined in
the Code, now owned or hereafter acquired by any Borrower, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Borrower may now or hereafter have any right, title or interest, including
any agreement relating to the terms of payment or the terms of performance
of any Account.
"Control Letter" means a letter agreement between the Lender and (i)
the issuer of uncertificated securities with respect to uncertificated
securities in the name of any Borrower, (ii) a securities intermediary with
respect to securities, whether certificated or uncertificated, securities
entitlements and other financial assets held in a securities account in the
name of any Borrower, (iii) a futures commission mer chant or clearing
house with respect to commodity accounts and commodity con tracts held by
any Borrower, whereby, among other things, the issuer, securities
intermediary or futures commission merchant disclaims any security interest
in the applicable financial assets, acknowledges the Lien of the Lender on
such financial assets, and agrees to follow the instructions or entitlement
orders of the Lender without further consent by the affected Borrower.
"Conversion Price" shall mean the Initial Conversion Price as
adjusted from time to time in accordance with Section 2.3 of the Agreement.
"Copyright License" shall mean any and all rights now owned or
hereafter acquired by any Borrower under any written agreement granting any
right to use any Copyright or Copyright registration.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Borrower: (a) all copyrights and general intangibles of
like nature (whether registered or unregistered), now owned or existing or
hereafter adopted or acquired, all registrations and recordings thereof,
and all applications in connection therewith, including all registrations,
recordings and applications in the United States Copyright Office or in any
similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b)
all reissues, extensions or renewals thereof.
"Current Assets" shall mean, with respect to any Person, all current
assets of such Person as of any date of determination calculated in
accordance with GAAP, but excluding cash, cash equivalents and debts due
from Affiliates.
"Current Credit Facilities" shall have the meaning assigned thereto
in the recitals to the Agreement.
"Current Liabilities" shall mean, with respect to any Person, all
liabilities which should, in accordance with GAAP, be classified as current
liabilities, and in any event shall include all Indebtedness payable on
demand or within one year from any date of determination without any option
on the part of the obligor to extend or renew beyond such year, all
accruals for federal or other taxes based on or measured by income and
payable within such year, and the current portion of long-term debt
required to be paid within one year.
"Current Ratio" shall mean, with respect to any Person as of any date
of determination, the ratio of (a) Current Assets, to (b) Current
Liabilities.
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall have the meaning assigned to it in Section
1.4(e) of the Agreement.
"Disclosure Schedules" shall mean the Schedules prepared by Borrowers
attached to the Agreement.
"Documents" shall mean any "documents," as such term is defined in
the Code, now owned or hereafter acquired by any Borrower, wherever
located.
"Dollars" or "$" shall mean lawful currency of the United States of
America.
"EBITDA" shall mean, with respect to Borrowers for any fiscal period,
an amount equal to (a) consolidated net income of Borrowers for such
period, minus (b) the sum of (i) income tax credits, (ii) interest income,
(iii) gain from extraordinary items for such period, (iv) any aggregate net
gain during such period arising from the sale, exchange or other
disposition of capital assets by Borrowers (including any fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), and (v) any other non-cash
gains which have been added in determining consolidated net income, in each
case to the extent included in the calculation of consolidated net income
of Borrowers for such period in accordance with GAAP, but without
duplication, plus (c) the sum of (i) any provision for income taxes, (ii)
Interest Expense, (iii) loss from extraordinary items for such period, (iv)
the amount of non-cash charges (including depreciation and amortization)
for such period, and (v) an aggregate net loss during such period arising
from the sale, exchange or other disposition of capital assets by Borrowers
(including any fixed assets, whether tangible or intangible, all inventory
sold in conjunction with the disposition of fixed assets and all
securities), in each case to the extent included in the calculation of
consolidated net income of Borrowers for such period in accordance with
GAAP, but without duplication. For purposes of this definition, the
following items shall be excluded in determining consolidated net income of
Borrowers: (1) the income (or deficit) of any other Person accrued prior to
the date it became a Subsidiary of, or was merged or consolidated into, a
Borrower or any Borrower's Subsidiaries; (2) the income (or deficit) of any
other Person (other than a Subsidiary) in which any Borrower has an
ownership interest, except to the extent any such income has actually been
received by a Borrower in the form of cash dividends or distributions; (3)
the undistributed earnings of any Subsidiary of a Borrower to the extent
that the declaration or payment of dividends or similar distributions by
such Subsidiary is not at the time permitted by the terms of any
contractual obligation or requirement of law applicable to such Subsidiary;
(4) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of income accrued
during such period; (5) any write- up of any asset; (6) any net gain from
the collection of the proceeds of life insurance policies; (7) any net gain
arising from the acquisition of any securities, or the extinguishment,
under GAAP, of any Indebtedness, of a Borrower, (8) in the case of a
successor to a Borrower by consolidation or merger or as a transferee of
its assets, any earnings of such successor prior to such consolidation,
merger or transfer of assets, and (9) any deferred credit representing the
excess of equity in any Subsidiary of a Borrower at the date of acquisition
of such Subsidiary over the cost to a Bor rower of the investment in such
Subsidiary.
"Environmental Laws" shall mean all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, standards and
regulations, now or hereafter in effect, and in each case as amended or
supplemented from time to time, and any applicable judicial or
administrative interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing liability
or standards of conduct for or relating to the regulation and protection of
human health, safety, the environment and natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental
Laws include the Compre hensive Environmental Response, Compensation, and
Liability Act of 1980 (42 U.S.C.ss.ss. 9601 et seq.) ("CERCLA"); the
Hazardous Materials Transportation Authorization Act of 1994 (49
U.S.C.ss.ss. 5101 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C.ss.ss. 136 et seq); the Solid Waste Disposal Act
(42 U.S.C.ss.ss. 6901 et seq.); the Toxic Substance Control Act (15 U.S.C.
ss.ss. 2601 et seq.); the Clean Air Act (42 U.S.C.ss.ss. 7401 et seq.); the
Federal Water Pollution Control Act (33 U.S.C.ss.ss. 1251 et seq.); the
Occupational Safety and Health Act (29 U.S.C.ss.ss. 651 et seq.); and the
Safe Drinking Water Act (42 U.S.C. ss.ss. 300(f) et seq.), each as from
time to time amended, and any and all regulations promulgated thereunder,
and all analogous state, local and foreign counterparts or equivalents and
any transfer of ownership notification or approval statutes.
"Environmental Liabilities" shall mean, with respect to any Person,
all liabilities, obligations, responsibilities, response, remedial and
removal costs, investigation and feasibility study costs, capital costs,
operation and maintenance costs, losses, damages, punitive damages,
property damages, natural resource damages, consequential damages, treble
damages, costs and expenses (including all fees, disbursements and expenses
of counsel, experts and consultants), fines, penal ties, sanctions and
interest incurred as a result of or related to any claim, suit, action,
investigation, proceeding or demand by any Person, whether based in
contract, tort, implied or express warranty, strict liability, criminal or
civil statute or common law, including any arising under or related to any
Environmental Laws, Environmental Permits, or in connection with any
Release or threatened Release or presence of a Hazardous Material whether
on, at, in, under, from or about or in the vicinity of any real or personal
property.
"Environmental Permits" shall mean all permits, licenses,
authorizations, certificates, approvals, registrations required by any
Governmental Authority under any Environmental Laws.
"Equipment" shall mean all "equipment," as such term is defined in
the Code, now owned or hereafter acquired by any Borrower, wherever located
and, in any event, including all such Borrower's machinery and equipment,
including processing equipment, conveyors, machine tools, data processing
and computer equipment with software and peripheral equipment (other than
software constituting part of the Accounts), and all engineering,
processing and manufacturing equipment, office machinery, furniture,
materials handling equipment, tools, attachments, accessories, automotive
equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, all whether now
owned or hereafter acquired, and wherever situated, together with all
additions and accessions thereto, replacements therefor, all parts
therefor, all substitutes for any of the foregoing, fuel therefor, and all
manuals, drawings, instructions, warranties and rights with respect
thereto, and all products and proceeds thereof and condemnation awards and
insur ance proceeds with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time,
and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Borrower, any trade
or business (whether or not incorporated) which, together with such
Borrower, are treated as a single employer within the meaning of Sections
414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to any Borrower or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with respect
to a Title IV Plan; (b) the withdrawal of any Borrower or ERISA Affiliate
from a Title IV Plan subject to Section 4063 of ERISA during a plan year in
which it was a substantial employer, as defined in Section 4001 (a)(2) of
ERISA; (c) the complete or partial withdrawal of any Borrower or any ERISA
Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent
to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings
to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the
failure by any Borrower or ERISA Affiliate to make when due required
contributions to a Multiemployer Plan or Title IV Plan unless such failure
is cured within 30 days; (g) any other event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Title IV Plan or Multiemployer Plan or for the imposition of liability
under Section 4069 or 4212(c) of ERISA; (h) the termination of a
Multiemployer Plan under Section 4041A of ERISA or the reorganization or
insolvency of a Multiemployer Plan under Section 4241 of ERISA; or (i) the
loss of a Qualified Plan's qualification or tax exempt status.
"ESOP" shall mean a Plan which is intended to satisfy the
requirements of Section 4975(e)(7) of the IRC.
"Event of Default" shall have the meaning assigned to it in Section
9.1.
"Excess Cash Flow" shall mean, without duplication, with respect to
any Fiscal Year of Borrowers, consolidated net income plus (a)
depreciation, amortiza tion and Interest Expense to the extent deducted in
determining consolidated net income, plus decreases or minus increases (as
the case may be) in (b) Working Capital minus (c) Capital Expenditures
during such Fiscal Year (excluding the financed portion thereof), minus (d)
Interest Expense paid (excluding any original issue discount, interest paid
in kind or amortized debt discount, to the extent included in determining
Interest Expense) and scheduled principal payments paid or payable in
respect of Funded Debt, or minus (as the case may be), (e) extraordinary
gains or losses which are cash items not included in the calculation of net
income, minus (f) mandatory prepayments paid in cash pursuant to Section
1.6 plus (g) taxes deducted in determining consolidated net income to the
extent not paid for in cash. For purposes of this definition, "Working
Capital" means Current Assets less Current Liabilities.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Existing Senior Credit Facility" shall have the meaning assigned
thereto in the Recitals of the Agreement.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"Fees" shall mean any and all fees payable to the Lender pursuant to
the Agreement or any of the other Note Documents, including without
limitation all fees specified in the Sunrise Commitment Letter.
"Financial Covenants" shall mean those covenants set forth in Annex
C.
"Financial Statements" shall mean the consolidated and consolidating
income statements, statements of cash flows and balance sheets of Borrowers
contained in the SEC Reports.
"Fiscal Quarter" shall mean any of the quarterly accounting periods
of Borrowers, ending on each December 31, March 31, June 30 and September
30.
"Fiscal Year" shall mean any of the annual accounting periods of
Borrowers ending on each September 30.
"Fixed Charge Coverage Ratio" shall mean, with respect to the
Borrowers for any period on a combined basis, the ratio of (a) EBITDA less
income taxes paid in cash and Capital Expenditures to (b) the sum of (i)
Interest Expense paid in cash and (ii) scheduled principal payments on
Funded Debt.
"Fixtures" shall mean any "fixtures" as such term is defined in the
Code, now owned or hereafter acquired by any Borrower.
"Funded Debt" shall mean, with respect to any Person, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness and which by its terms matures more than
one year from, or is directly or indirectly renewable or extendible at such
Person's option under a revolving credit or similar agreement obligating
the lender or lenders to extend credit over a period of more than one year
from the date of creation thereof, and specifically including Capital Lease
Obligations, current maturities of long-term debt, revolving credit and
short-term debt extendible beyond one year at the option of the debtor, and
also including, in the case of Borrowers, the Obligations.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect on the Closing Date, consistently
applied.
"General Intangibles" shall mean any "general intangibles," as such
term is defined in the Code, now owned or hereafter acquired by any
Borrower, and, in any event, including all right, title and interest which
such Borrower may now or hereafter have in or under any Contract, all
customer lists, Licenses, Copyrights, Trademarks, Patents, and all
applications therefor and reissues, extensions or renewals thereof, rights
in Intellectual Property, interests in partnerships, joint ventures and
other business associations, licenses, permits, copyrights, trade secrets,
proprietary or confidential information, inventions (whether or not
patented or patentable), technical information, procedures, designs,
knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill
(including the goodwill associated with any Trade mark or Trademark
License), all rights and claims in or under insurance policies (including
insurance for fire, damage, loss and casualty, whether covering personal
property, real property, intangible rights, all liability, life, key man
and business interruption insurance, and all unearned premiums),
uncertificated securities, choses in action, deposit, checking and other
bank accounts, rights to receive tax refunds and other payments, rights of
indemnification, all books and records, correspon dence, credit files,
invoices and other papers, including without limitation all tapes, cards,
computer runs and other papers and documents in the possession or under the
control of such Borrower or any computer bureau or service company from
time to time acting for such Borrower.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend,
or other obligation ("primary obligations") of any other Person (the
"primary obligor") in any manner, including any obligation or arrangement
of such Person (a) to purchase or repurchase any such primary obligation,
(b) to advance or supply funds (i) for the purchase or payment of any such
primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency or
any balance sheet condition of the primary obligor, (c) to purchase
property, securi ties or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (d) to indemnify the owner
of such primary obligation against loss in respect thereof. The amount of
any Guaranteed Indebtedness at any time shall be deemed to be an amount
equal to the lesser at such time of (x) the stated or determi nable amount
of the primary obligation in respect of which such Guaranteed Indebt edness
is made and (y) the maximum amount for which such Person may be liable
pursuant to the terms of the instrument embodying such Guaranteed
Indebtedness; or, if not stated or determinable, the maximum reasonably
anticipated liability (assuming full performance) in respect thereof.
"Hazardous Material" shall mean any substance, material or waste
which is regulated by or forms the basis of liability now or hereafter
under, any Environmen tal Laws, including any material or substance which
is (a) defined as a "solid waste," "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste," "restricted hazardous
waste," "pollutant," "contaminant," "hazard ous constituent," "special
waste," "toxic substance" under any Environmental Laws, (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls
(PCB's), or any radioactive substance.
"Indebtedness" of any Person shall mean without duplication (a) all
indebted ness of such Person for borrowed money or for the deferred
purchase price of property payment for which is deferred six (6) months or
more, but excluding obligations to trade creditors incurred in the ordinary
course of business that are not overdue by more than six (6) months unless
being contested in good faith, (b) all reimbursement and other obligations
with respect to letters of credit, bankers' acceptances and surety bonds,
whether or not matured, (c) all obligations evidenced by notes, bonds,
debentures or similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect
to property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Capital Lease
Obligations, (f) all obligations of such Person under commodity purchase or
option agreements or other commodity price hedging arrangements, in each
case whether contingent or matured, (g) all obliga tions of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement
designed to alter the risks of that Person arising from fluctuations in
currency values or interest rates, in each case whether contingent or
matured, (h) all Indebtedness referred to above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness, and (k) the Obligations.
"Indemnified Liabilities" shall have the meaning assigned to it in
Section 1.12 of the Agreement.
"Indemnified Persons" shall have the meaning assigned to it in
Section 1.12 of the Agreement.
"Initial Conversion Price" shall mean $1.75.
"Instruments" shall mean any "instrument," as such term is defined in
the Code, now owned or hereafter acquired by any Borrower, wherever
located, and, in any event, including all certificated securities, all
certificates of deposit, and all notes and other, without limitation,
evidences of indebtedness, other than instruments that constitute, or are a
part of a group of writings that constitute, Chattel Paper.
"Intellectual Property" shall mean any and all Licenses, Patents,
Copyrights, Trademarks, trade secrets and customer lists.
"Intercompany Notes" shall have the meaning assigned to it in Section
6.3 of the Agreement.
"Interest Expense" shall mean, with respect to any Person for any
fiscal period, interest expense (whether cash or non-cash and including
financing commit ment fees) of such Person determined in accordance with
GAAP for the relevant period ended on such date, including, in any event,
interest expense with respect to any Funded Debt of such Person.
"Inventory" shall mean any "inventory," as such term is defined in
the Code, now or hereafter owned or acquired by any Borrower (for purposes
of this definition, the term "Borrower" shall include Foreign
Subsidiaries), wherever located, and in any event including inventory,
merchandise, goods and other personal property which are held by or on
behalf of any Borrower for sale or lease or are furnished or are to be
furnished under a contract of service, or which constitute raw materials,
work in process or materials used or consumed or to be used or consumed in
such Borrower's business or in the processing, production, packaging,
promotion, delivery or shipping of the same, including other supplies.
"Investment Property" shall have the meaning ascribed thereto in
Section 9- 115 of the Code in those jurisdictions in which such definition
has been adopted and shall include (i) all securities, whether certificated
or uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Borrower,
including the rights of any Borrower to any securities account and the
financial assets held by a securities intermediary in such securities
account and any free credit balance or other money owing by any securities
intermediary with respect to that account; (iii) all securities accounts
held by any Borrower; (iv) all commodity contracts held by any Borrower;
and (v) all commodity accounts held by any Borrower.
"IRC" shall mean the Internal Revenue Code of 1986, as amended.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"Lender" shall mean Sunrise Capital Partners, L.P.
"License" shall mean any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter
acquired by any Borrower.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the Code or comparable law of any
jurisdiction).
"Litigation" shall have the meaning assigned to it in Section 4.14 of
the Agreement..
"Loan Account" shall have the meaning assigned to it in Section 1.8
of the Agreement.
"Mandatory Conversion Amount" shall have the meaning ascribed thereto
in Section 2.2.
"Mandatory Conversion Date" shall have the meaning ascribed thereto
in Section 2.2 of the Agreement.
"Margin Stock" shall have the meaning ascribed thereto in Section
4.11 of the Agreement.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, assets, operations, prospects, or financial or other
condition of any Bor rower, (b) any Borrower's ability to pay any of the
Notes or any of the other Obliga tions in accordance with the terms of the
Agreement, (c) the Collateral or the Lender's Liens on the Collateral or
the priority of such Liens, or (d) the Lender's rights and remedies under
the Agreement and the other Note Documents. Without limiting the foregoing,
any event or occurrence which results or could reasonably be expected to
result in costs or liabilities in excess of $1,000,000 as of any date of
determination shall be deemed to have had Material Adverse Effect.
"Maturity Date" shall mean the third anniversary of the date of the
Agree ment.
"Maximum Lawful Rate" shall have the meaning ascribed thereto in
Section 1.4(f) of the Agreement.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 400l(a)(3) of ERISA, and to which any Borrower or ERISA Affiliate
is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of
them.
"Net Cash Proceeds" shall mean cash proceeds received from an asset
disposition, net of (A) commissions and other reasonable and customary
transaction costs, fees and expenses properly attributable to such
transaction and payable by Borrowers in connection therewith (in each case,
paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders
of senior Liens (to the extent such Liens constitute Permitted Encumbrances
hereunder), if any, and (D) an appropriate reserve for income taxes in
accordance with GAAP in connection therewith.
"Net Worth" shall mean, with respect to any Person as of any date of
determi nation, the book value of the assets of such Person, minus (a)
reserves applicable thereto, and minus (b) all of such Person's liabilities
on a consolidated basis (includ ing accrued and deferred income taxes), all
as determined in accordance with GAAP.
"Note Documents" shall mean the Agreement, the Notes, the Collateral
Documents and all other agreements, instruments, documents and certificates
executed and delivered to, or in favor of the Lender and including all
other pledges, powers of attorney, consents, assignments, contracts,
notices, and all other written matter whether heretofore, now or hereafter
executed by or on behalf of any Bor rower, or any employee of any Borrower,
and delivered to the Lender in connection with the Agreement or the
transactions contemplated hereby. Any reference in the Agreement or any
other Note Document to a Note Document shall include all appendices,
exhibits or schedules thereto, and all amendments, restatements, supple
ments or other modifications thereto, and shall refer to such Agreement as
the same may be in effect at any and all times such reference becomes
operative.
"Notes" shall mean the Term A Notes, the Term B Notes, the Term C
Notes and the PIK Notes, collectively.
"Obligations" shall mean all loans, advances, debts, liabilities and
obliga tions, for the performance of covenants, tasks or duties or for
payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or determinable)
owing by any Borrower to the Lender, and all covenants and duties regarding
such amounts, of any kind or nature, present or future, whether or not
evidenced by any note, agreement or other instrument, arising under the
Agreement or any of the other Note Documents. This term includes all
principal, interest (including all interest which accrues after the
commencement of any case or proceeding in bankruptcy after the insolvency
of, or for the reorganiza tion of any Borrower, whether or not allowed in
such proceeding), Fees, Charges, expenses, attorneys' fees and any other
sum chargeable to any Borrower under the Agreement, the Notes or any of the
other Note Documents.
"Optional Conversion Amount" shall have the meaning ascribed thereto
in Section 2.1 of the Agreement.
"Optional Conversion Date" shall have the meaning ascribed thereto in
Section 2.1 of the Agreement.
"Parent" shall have the meaning ascribed thereto in the recitals to
the Agree ment.
"Participation Agreement" shall mean the Participation Agreement,
dated as of the date hereof, between the Lender and Allard-Nazarian Group,
Inc., in substan tially the form as attached to the Agreement as Exhibit I.
"Patent Security Agreements" shall mean the Patent Security
Agreements made in favor of the Lender by each applicable Borrower.
"Patent License" shall mean rights under any written agreement now
owned or hereafter acquired by any Borrower granting any right with respect
to any inven tion on which a Patent is in existence.
"Patents" shall mean all of the following in which any Borrower now
holds or hereafter acquires any interest: (a) all letters patent of the
United States or any other 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 of lice or
agency of the United States, any State or Territory thereof, or any other
country, and (b) all reissues, continuations, continuations-in-part or
extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Encumbrances" shall mean the following encumbrances: (a)
Liens securing the obligations of the Borrowers under the Existing Senior
Credit Facility; (b) Liens for taxes or assessments or other governmental
Charges not yet due and payable or being contested in accordance with
Section 5.2(b) of the Agreement; (c) pledges or deposits of money securing
obligations under workmen's compensation, unemployment insurance, social
security or public liability laws or similar legisla tion; (d) pledges or
deposits of money securing bids, tenders, contracts (other than contracts
for the payment of money) or leases to which any Borrower is a party as
lessee made in the ordinary course of business; (e) deposits of money
securing statutory obligations of any Borrower for workers compensation and
similar charges; (f) inchoate and unperfected workers', mechanics' or
similar liens arising in the ordinary course of business, so long as such
Liens attach only to Equipment, Fixtures and or Real Estate; (g) carriers',
warehousemen's, suppliers' or other similar possessory liens arising in the
ordinary course of business and securing liabilities in an outstanding
aggregate amount not in excess of $25,000 at any time, so long as such
Liens attach only to Inventory; (h) deposits securing, or in lieu of,
surety, appeal or customs bonds in proceedings to which any Borrower is a
party; (h) any attach ment or judgment lien not constituting an Event of
Default under Section 8.1(j), so long as such Lien only attaches to Real
Estate; (j) zoning restrictions, easements, licenses, or other restrictions
on the use of any Real Estate or other minor irregulari ties in title
(including leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such Real Estate; (k) presently
existing or hereinafter created Liens in favor of the Lender; and (l) Liens
expressly permitted under clauses (b) and (c) of Section 6.7 of the
Agreement.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit
corporation, other entity or government (whether federal, state, county,
city, municipal, local, foreign, or otherwise, including any
instrumentality, division, agency, body or department thereof).
"PIK Note" shall have the meaning ascribed thereto in Section 1.4(b).
"Plan" shall mean, at any time, an employee benefit plan, as defined
in Section 3(3) of ERISA, which any Borrower maintains, contributes to or
has an obligation to contribute to on behalf of participants who are or
were employed by any Borrower.
"Pledge Agreement" shall mean the Stock Pledge and Security Agreement
dated as of the Closing Date between Borrowers and the Lender pledging to
the Lenders the stock of all Borrowers other than Parent and 65% of the
stock of each Foreign Subsidiary (as required by the Agreement), in
substantially the form as attached to the Agreement as Exhibit M.
"Proceeds" shall mean "proceeds," as such term is defined in the Code
and, in any event, shall include (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any Borrower from time to time
with respect to any of the Collateral, (b) any and all payments (in any
form whatsoever) made or due and payable to any Borrower 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
Authority (or any Person acting under color of governmental authority), (c)
any claim of any Borrower against third parties (i) for past, present or
future infringement of any Patent or Patent License, or (ii) for past,
present or future infringement or dilution of any Copyright, Copyright
License, Trademark or Trade mark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (d) any recoveries by
any Borrower against third parties with respect to any litigation or
dispute concerning any of the Collateral, and (e) any and all other amounts
from time to time paid or payable under or in connection with any of the
Collateral, upon disposition or otherwise.
"Projections" means Borrowers' forecasted consolidated: (a) balance
sheets; (b) profit and loss statements; (c) cash flow statements; and (d)
capitalization statements, all prepared on a Subsidiary by Subsidiary or
division by division basis, if applicable, and otherwise consistent with
the historical Financial Statements of the Borrowers, together with
appropriate supporting details and a statement of underly ing assumptions,
and such additional detail as requested by the Lender.
"Qualified Plan" shall mean a Plan which is intended to be
tax-qualified under Section 401(a) of the IRC.
"Real Estate" shall have the meaning assigned to it in Section 3.6 of
the Agreement.
"Registration Rights Agreement" shall mean the Registration Rights
Agree ment, substantially in the form attached as Exhibit F to the
Agreement.
"Release" shall mean any spill, emission, leaking, pumping. pouring,
emit ting, emptying, escape, injection, deposit, disposal, discharge,
dispersal, dumping, leaching or migration of Hazardous Material in the
indoor or outdoor environment, including the movement of Hazardous Material
through or in the air, soil, surface water, ground water or property.
"Restricted Payment" shall mean (a) the declaration or payment of any
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of a Person's
Stock, (b) any payment on account of the purchase, redemption, defiance,
sinking fund or other retirement of a Person's Stock or any other payment
or distribution made in respect thereof, either directly or indirectly, (c)
any payment or prepayment of principal of, premium, if any, or interest,
fees or other charges on or with respect to, and any redemption, purchase,
retirement, defiance, sinking fund or similar payment and any claim for
rescission with respect to, any Subordinated Debt; (d) any payment made to
redeem, purchase, repurchase or retire, or to obtain the surrender of, any
outstanding war rants, options or other rights to acquire Stock of such
Person now or hereafter outstanding; (e) any payment of a claim for the
rescission of the purchase or sale of, or for material damages arising from
the purchase or sale of, any shares of such Person's Stock or of a claim
for reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission; (f) any pay ment,
loan, contribution, or other transfer of funds or other property to any
Stock holder of such Person; and (g) any payment of management fees (or
other fees of a similar nature) by such Person to any Stockholder of such
Person or their Affiliates.
"Retiree Welfare Plan" shall mean, at any time, a Plan that is a
"welfare plan" as defined in Section 3(2) of ERISA, that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at
the sole expense of the participant or the beneficiary of the participant.
"SEC" shall mean the Securities and Exchange Commission, or any
successor entity or agency thereto.
"SEC Reports" shall have the meaning ascribed thereto in Section 4.4
of the Agreement.
"Securities" shall mean the Term A Securities, the Term B Securities,
the Term C Securities and any other Notes issued pursuant to the Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Agreement" shall mean the Master Security Agreement,
entered into among the Lender and each Borrower on the Closing Date, in
substantially the form attached to the Agreement as Exhibit L.
"Security Agreement (Intellectual Property)" shall mean the Security
Agree ment (Intellectual Property), entered into among the Lender and each
Borrower on the Closing Date, in substantially the form attached to the
Agreement as Exhibit N.
"Senior Credit Amendments" shall mean the Loan Modification
Agreement, dated as of the date of the Agreement, by and among the
Borrowers and the lenders under the Existing Senior Credit Facility.
"Solvent" shall mean, with respect to any Person on a particular
date, that on such date (a) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured; (b) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature; and (c) such Person is not engaged in a
business or transaction, and is not about to engage in a business or
transaction, for which such Person's property would constitute an
unreasonably small capital.
"Stock" shall mean all shares, options, warrants, general or limited
partner ship interests or other equivalents (regardless of how designated)
of or in a corpora tion, partnership or equivalent entity whether voting or
nonvoting, including com mon stock, preferred stock or any other "equity
security" (as such term is defined in Rule 3a ll-l of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Exchange Act).
"Stockholder Approval" shall mean the affirmative vote of the holders
of a majority of the shares of Common Stock of Parent entitled to vote on
the Charter Amendment.
"Stockholders Agreement" shall mean that certain Stockholders
Agreement, dated as of the date hereof, between Parent, the Lender and the
other parties named therein, in substantially the form as attached to the
Agreement as Exhibit H.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than fifty percent (50%) of the
outstanding Stock having ordinary voting power to elect a majority of the
board of directors of such corpora tion (irrespective of whether, at the
time, Stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is
at the time, directly or indirectly, owned legally or beneficially by such
Person and/or one or more Subsidiaries of such Person, or with respect to
which any such Person has the right to vote or designate the vote of fifty
percent (50%) or more of such Stock whether by proxy, agreement, operation
of law or otherwise, and (b) any partnership or limited liability company
in which such Person and/or one or more Subsidiaries of such Person shall
have an interest (whether in the form of voting or participation in profits
or capital contribution) of more than fifty percent (50%) or of which any
such Person is a general partner or may exercise the powers of a general
partner.
"Sunrise Commitment Letter" shall mean that certain letter agreement,
dated May 17, 2000, among Parent and the Lender.
"Sunrise Directors" shall mean each of David Preiser, Joseph Julian,
Michael Stewart and Irwin Gold.
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or
withhold ings, and all liabilities with respect thereto, excluding taxes
imposed on or measured by the net income of the Lender by the jurisdictions
under the laws of which the Lender is organized or any political
subdivision thereof
"Term A Notes" shall have the meaning ascribed thereto in Section
1.1(a) of the Agreement.
"Term A Securities" shall have the meaning ascribed thereto in
Section 1.1(a) of Agreement.
"Term A Shares" shall have the meaning ascribed thereto in Section
1.1(a) of Agreement.
"Term A Warrants" shall have the meaning ascribed thereto in Section
1.1(a) of Agreement.
"Term B Commitment Period" shall mean the period between the Closing
Date and the date which is 120 days thereafter.
"Term B Notes" shall have the meaning ascribed thereto in Section
1.1(b) of the Agreement.
"Term B Securities" shall have the meaning ascribed thereto in
Section 1.1(a) of Agreement.
"Term B Warrants" shall have the meaning ascribed thereto in Section
1.1(a) of Agreement.
"Term C Commitment Period" shall mean the period beginning on the
date on which the Term B Securities are purchased by the Lender and ending
on January 31, 2001.
"Term C Notes" shall have the meaning ascribed thereto in Section
1.1(c) of the Agreement.
"Term C Notice" shall have the meaning ascribed thereto in Section
1.1(c) of the Agreement.
"Term C Securities" shall have the meaning ascribed thereto in
Section 1.1(a) of Agreement.
"Term C Warrants" shall have the meaning ascribed thereto in Section
1.1(a) of Agreement.
"Termination Date" shall mean the date on which the Notes have been
indefeasibly repaid in full and all other Obligations under the Agreement
and the other Note Documents have been completely discharged and none of
Borrowers shall have any further right to borrow any monies under the
Agreement.
"Title IV Plan" shall mean an employee pension benefit plan, as
defined in Section 3 (2) of ERISA (other than a Multiemployer Plan), which
is covered by Title IV of ERISA, and which any Borrower or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf
of participants who are or were employed by any of them.
"Total Debt" shall mean, with respect to the Borrowers as of any date
of determination, Funded Debt.
"Total Debt to EBITDA Ratio" shall mean, with respect to the
Borrowers as of any date of determination, the ratio of (a) Borrowers'
Total Debt on a combined basis to (b) combined EBITDA of Borrowers
determined as of the last day of each Fiscal Quarter for the four Fiscal
Quarters then ended.
"Trading Price Conversion Event" shall have the meaning ascribed
thereto in Section 2.2.
"Trademark Security Agreements" shall mean the Trademark Security
Agreements made in favor of the Lender by each applicable Borrower.
"Trademark License" shall mean rights under any written agreement now
owned or hereafter acquired by any Borrower granting any right to use any
Trade mark.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Borrower: (a) all trademarks, trade names, corporate names,
busi ness 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 (whether
registered or unregistered), now owned or existing or hereafter adopted or
acquired, 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 of rice
or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all reissues,
extensions or renewals thereof, and (c) all goodwill associated with or
symbolized by any of the foregoing.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of
all accrued benefits under each Title TV Plan exceeds the fair market value
of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions
for funding purposes in effect under such Title IV Plan, and (b) for a
period of five (5) years following a transaction which might reasonably be
expected to be covered by Section 4069 of ERISA, the liabilities (whether
or not accrued) that could be avoided by any Borrower or any ERISA
Affiliate as a result of such transaction.
"Warrants" shall mean the Term A Warrants, the Term B Warrants and
the Term C Warrants, collectively.
All other undefined terms contained in any of the Note Documents
shall, unless the context indicates otherwise, have the meanings provided
for by the Code as in effect in the State of New York to the extent the
same are used or defined therein. Unless otherwise specified, references in
the Agreement or any of the Appendices to a Section, subsection or clause
refer to such Section, subsection or clause as contained in the Agreement.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to the Agreement as a whole, including all Annexes, Exhibits
and Schedules, as the same may from time to time be amended, restated,
modified or supplemented, and not to any particular section, subsection or
clause contained in the Agreement or any such Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term stated in
either the singular of plural shall include the singular and the plural,
and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine or neuter genders. The words "including",
"includes" and "include" shall be deemed to be followed by the words
"without limitation"; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by
the Note Documents) or, in the case of governmental Persons, Persons
succeeding to the relevant functions of such Persons; and all references to
statutes and related regulations shall include any amendments of the same
and any successor statutes and regulations. Whenever any provision in any
Note Document refers to the knowledge (or an analogous phrase) of any
Borrower, such words are intended to signify that such Borrower has actual
knowledge or awareness of a particular fact or circum stance or that such
Borrower, if it had exercised reasonable diligence, would have known or
been aware of such fact or circumstance.
ANNEX B
TO
CONVERTIBLE NOTE AGREEMENT
FINANCIAL COVENANTS
Borrowers shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in
accordance with GAAP consistently applied:
(a) Minimum Consolidated Tangible Net Worth. Borrowers on a
consolidated basis shall have, at the end of each fiscal quarter set forth
below, a Minimum Consolidated Net Worth (as defined below) of an amount
equal to or greater than the amount set forth below for each corresponding
period:
From the Closing Date through and
including September 30, 2000 ($28.0) Million
From October 1, 2000 through and
including December 31, 2000 ($31.0) Million
From January 1, 2001 through and
including March 31, 2001 ($33.0) Million
From April 1, 2001 through and
including June 30, 2001 ($35.0) Million
Thereafter ($35.0) Million
For purposes of this Agreement, "Consolidated Tangible Net Worth"
shall mean the total assets of the Borrowers appearing on the consolidated
balance sheet of the Borrowers prepared in accordance with GAAP, minus (i)
any reserves applicable thereto, (ii) all assets which would be treated as
intangible under GAAP, including, without limitation, such items as good
will, trademarks, trade names, service marks, brand names, copyrights,
patents and licenses, and rights with respect to the forego ing,
unamortized debt discount and expense, and organizational expenses; (iii)
any write-up in the book value of any asset on the books of the Borrower
resulting from a revaluation thereof subsequent to the date of this
Agreement (other than the write-up of the book value of an asset made in
accordance with GAAP in connection with the purchase of such asset); and
(iv) all of the Borrowers liabilities on a consolidated basis (including
accrued and deferred income taxes), all as determined in accordance with
GAAP.
(b) Minimum Net Borrowing Availability
Borrowers shall have, at the end of each month during the
periods set forth below, a Net Borrowing Availability (as defined below) of
an amount equal to or greater than the amount set forth below for each
corresponding period:
For each month in the period betwMinimum Borrowing Availability
---------------------------------------------------------------
The Closing Date through $2.5 Million
December 31, 2001
January 31, 2002 through $2.5 Million
June 30, 2002
July 31, 2002 through $3.0 Million
December 31, 2002
January 31, 2003 and thereafter $3.5 Million
For purposes of this Agreement, "Net Borrowing
Availability"shall mean the Borrowing Availability (as such term is defined
in the Existing Senior Credit Facility) of the Borrowers under the Existing
Senior Credit Facility on the date of such determination plus all available
cash and cash equivalents on deposit in any account maintained by the
Borrowers on such date.
ANNEX C
TO
CONVERTIBLE NOTE AGREEMENT
ANG NOTES
TOTAL BALANCE
ORIGINAL AMOUNT OUTSTANDING AS OF
PAYEE PAYABLE THE CLOSING DATE
The Allard Children's Trust f/b/o $ 275,000.00 $171,875.00
Lisa Dibrigida
The Allard Children's Trust f/b/o 275,000.00 171,875.00
Kim Allard
The Allard Children's Trust f/b/o 275,000.00 171,875.00
Michael E. Allard
Gerald R. Allard 275,000.00 171,875.00
The Daivd and Angella Nazarian 458,150.00 286,343.75
Family Trust
The Samy Nazarian Trust 458,425.00 286,515.63
Younes Nazarian 458,425.00 286,515.62
------------- -------------
Total $2,475,000.00 $1,546,875.00
ANNEX D
TO
CONVERTIBLE NOTE AGREEMENT
PARTICIPATIONS
TERM A PARTICIPATIONS:
INCREMENTAL
ANG CONVERTIBLE TOTAL
PARTICIPANT NOTES NOTES AMOUNT OF
(ROLLOVER) (NEW CASH) PARTICIPATION
The John R. Allard $ 0.00 $107,313.60 $107,313.60
Revocable Trust of 1993
Lisa A. Dibrigida 171,875.00 107,313.60 279,188.60
Kim A. Socha 171,875.00 107,313.60 279,188.60
The Michael E. Allard 171,875.00 107,313.60 279,188.60
Revocable Trust of 1994
Gerald R. Allard 171,875.00 107,313.60 279,188.60
The David and Angella
Nazarian Family Trust 286,343.75 0 286,343.75
The Samy Nazarian Trust 286,515.63 178,856.00 465,371.63
Younes Nazarian 286,515.62 357,712.02 644,227.64
Richard A. Beyer 0.00 50,079.69 50,079.69
------------- ------------- -------------
Total $1,546,875.00 $1,123,215.71 $2,670,090.71
TERM B PARTICIPATIONS:
---------------------
AMOUNT OF
PARTICIPANT PARTICIPATION
The John R. Allard Revocable Trust of 1993 $42,686.40
Lisa A. Dibrigida 42,686.40
Kim A. Socha 42,686.40
The Michael E. Allard Revocable Trust of 1994 42,686.40
Gerald R. Allard 42,686.40
The Samy Nazarian Trust 71,144.00
Younes Nazarian 142,287.99
Richard A. Beyer 19,920.30
-----------
Total $446,784.29
TERM C PARTICIPATIONS:
---------------------
AMOUNT OF
PARTICIPANT PARTICIPATION
The John R. Allard .85% of the Principal Amount of the Term C Note
Revocable Trust of 1993 Lisa A. Dibrigida .85% of the Principal Amount of
the Term C Note
Kim A. Socha .85% of the Principal Amount of the Term C Note
The Michael E. Allard
Revocable Trust of 1994 .85% of the Principal Amount of the Term C Note
Gerald R. Allard .85% of the Principal Amount of the Term C Note
The Samy Nazarian Trust 1.42% of the Principal Amount of the Term C Note
Younes Nazarian 2.85% of the Principal Amount of the Term C Note
Richard A. Beyer .40% of the Principal Amount of the Term C Note
TOTAL 8.93% of the Principal Amount of the Term C Note
ANNEX E
TO
CONVERTIBLE NOTE AGREEMENT
BOARD OF DIRECTOR RESIGNATIONS
Stephen Carlotti
Michael Foster
Irving Gutin
James Risher
Steven Shulman
ANNEX F
PURCHASE PRICE ALLOCATION
TERMS A & B
VALUE TOTAL
PER UNIT # OF UNITS VALUE
Common Stock $1.50 1,833,906 $2,750,859.00
Warrants $0.54 2,184,786 $1,179,784.44
Notes n/a n/a $15,186,231.56
--------------
Total Purchase Price $19,116,875.00
