2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 31, 1996.
AFGL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Commission File Number: 0-23170
NEVADA 75-2134871
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
850 Third Avenue
New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number: (212) 508-3400
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 31, 1996, AFGL International, Inc. ("Company"),
closed the purchase of all of the capital stock of Irene Cohen
Temps, Inc., Corporate Staffing Alternatives, Inc., and Certified
Technical Staffing, Inc., and substantially all the operating
assets of Irene Cohen Personnel, Inc. The capital stock of Irene
Cohen Temps, Inc., Corporate Staffing Alternatives, Inc., and
Certified Technical Staffing, Inc., was purchased for cash from a
small group of stockholders not affiliated with the Company at a
purchase price of $9,362,032, subject to adjustment based on the
closing date balance sheets. The operating assets of Irene Cohen
Personnel, Inc., were purchased for $500,000 payable out of
future earnings derived from use of the assets acquired. The
businesses acquired by the Company offer a broad range of
employment-related services consisting of human resource
administration (including temporary and permanent placement
services), employment regulatory compliance management, workers'
compensation coverage, health care, and other employee benefits.
Prior to and at the time the acquisition was completed, the
Company raised $6,300,000 through a private offering of preferred
stock, and obtained a term loan in the amount of $9,000,000 and a
revolving credit commitment in the amount of $6,000,000 from
Internationale Nederlanden (U.S.) Capital Corporation, a Delaware
corporation. A portion of the debt and equity financing was used
by the Company to complete the acquisition and payoff the
Company's credit facilities with Finova Capital Corporation and
Merrill Lynch Business Financial Services, and the remainder will
be used for working capital needs as they arise.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
It is impracticable for the Company to provide the required
financial statements at the time this report on Form 8-K is
filed. The Company proposes to file the required financial
statements as soon as the statements are available. The Company
expects that it will file the required financial statements no
later than 60 days after the date on which this report on Form 8-
K is required to be filed.
(b) Pro Forma Financial Information
It is impracticable for the Company to provide the required pro
forma financial information at the time this report on Form 8-K
is filed. The Company proposes to file the required pro forma
financial information as soon as it is available. The Company
expects that it will file the required financial information no
later than 60 days after the date on which this report on Form 8-
K is required to be filed.
(c) Exhibits
Included in this report are the following exhibits.
Exhibit No. SEC Ref. Title of Document
No.
1 (2) Stock Purchase Agreement
dated
April 10, 1996
2 (2) Asset Purchase Agreement
dated
May 31, 1996
3 (4) Series C 8% Convertible
Preferred
Stock Designation
4 (4) Series D 8% Convertible
Preferred
Stock Designation
5 (4) Series E Convertible
Preferred
Stock Designation
6 (4) Credit Agreement dated May
31, 1996
7 (4) Revolving Note dated May
31, 1996
8 (4) Term Note dated May 31,
1996
9 (4) Security Agreement dated
May 31, 1996
10 (4) Warrant Agreement dated May
31, 1996
11 (4) Registration Rights
Agreement dated
May 31, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto duly
authorized.
AFGL INTERNATIONAL INC.
DATED: June 14, 1996 By Barry S. Roseman (Signature)
Chief Operating Officer
iv
STOCK PURCHASE AGREEMENT
Between
AFGL INTERNATIONAL, INC.,
IRENE COHEN TEMPS, INC.,
CORPORATE STAFFING ALTERNATIVES, INC.,
CERTIFIED TECHNICAL STAFFING, INC.,
and
THE STOCKHOLDERS OF
THE COMPANIES
Dated April 10, 1996
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS 1
ARTICLE II. REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE
COMPANIES
2.01 Organization 4
2.02 Non-contravention 4
2.03 Authorization of Transaction 5
2.04 Subsidiaries 5
2.05 Capitalization 5
2.06 Financial Statements 5
2.07 Absence of Certain Changes or Events 6
2.08 Title and Related Matters 6
2.09 Tax Matters 7
2.10 Litigation and Proceedings 8
2.11 Contracts 8
2.12 Material Contract Defaults 8
2.13 Governmental Authorizations 8
2.14 Compliance With Laws and Regulations 9
2.15 Insurance 9
2.16 Transactions With Affiliates 9
2.17 Labor Relations 9
2.18 Information 9
2.19 Companies Schedules 9
ARTICLE III. REPRESENTATIONS, COVENANTS, AND WARRANTIES OF AFGL
3.01 Organization 10
3.02 Non-contravention 10
3.03 Authorization of Transaction 11
3.04 Subsidiaries 11
3.05 Capitalization 11
3.06 Financial Statements 11
3.07 Absence of Certain Changes or Events 12
3.08 Title and Related Matters 12
3.09 Tax Matters 13
3.10 Litigation and Proceedings 14
3.11 Contracts 14
3.12 Material Contract Defaults 14
3.13 Governmental Authorizations 14
3.14 Information 14
3.15 AFGL Schedules 14
ARTICLE IV. REPRESENTATIONS, COVENANTS AND WARRANTIES OF EACH
STOCKHOLDER
4.01 By Cohen 15
4.02 By Finegan 16
4.03 By List 17
ARTICLE V. SALE OF STOCK
5.01 Sale of Companies Stock 18
5.02 Preliminary Purchase Price 18
5.03 Preparation of Closing Balance Sheet 18
5.04 Adjustment of Preliminary Purchase Price 19
ARTICLE VI. SPECIAL COVENANTS
6.01 Access to Properties and Records 20
6.02 Actions Prior to Closing 20
6.03 Tax Election 21
6.04 Indemnification 23
6.05 Third Person Consents and Certificates 25
6.06 Employment Arrangements 25
6.07 Termination 25
6.08 Payment of Indebtedness 26
6.09 Public Announcement 26
6.10 Reimbursement of Fees 26
6.11 Additional Covenants 27
6.12 Dispute Resolution Procedures 28
ARTICLE VII. CLOSING
7.01 Closing 28
7.02 Closing Events 28
ARTICLE VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF AFGL
8.01 Accuracy of Representations 29
8.02 Litigation Certificates 29
8.03 No Material Adverse Change 29
8.04 Good Standing 29
8.05 Consents/Agreements 29
8.06 Legal Opinion 29
8.07 Republic Obligation 29
8.08 Balance Sheets 29
8.09 Reimbursement Documents 30
8.10 Other Items 30
ARTICLE IX. CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANIES AND THE STOCKHOLDERS
9.01 Accuracy of Representations 30
9.02 Litigation Certificate 30
9.03 No Material Adverse Change 30
9.04 Good Standing 30
9.05 Consents/Agreements 30
9.06 Legal Opinion 30
9.07 Republic Obligation 30
9.08 Viva Agreement 31
9.09 Other Items 31
ARTICLE X. MISCELLANEOUS
10.01 Brokers 31
10.02 Governing Law 31
10.03 Notices 31
10.04 Attorneys' Fees 32
10.05 Third Party Beneficiaries 32
10.06 Entire Agreement 32
10.07 Counterparts 32
10.08 Amendment or Waiver 32
10.09 Assignment 32
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, is made and entered into as
of the 10th day of April, 1996, by and between AFGL
INTERNATIONAL, INC., a Nevada corporation, IRENE COHEN TEMPS,
INC., a New York corporation, CORPORATE STAFFING ALTERNATIVES,
INC., a New York corporation, CERTIFIED TECHNICAL STAFFING, INC.,
a New York corporation, and each of the STOCKHOLDERS of the
Companies.
Premises
This Agreement provides for the acquisition by AFGL from the
Stockholders of all of the capital stock of the Companies in
exchange for cash, all on the terms and conditions hereinafter
provided.
Agreement
NOW, THEREFORE, on the stated premises and for and in
consideration of the mutual covenants and agreements hereinafter
set forth and the mutual benefits to the Parties to be derived
herefrom, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
Accounting Fee has the meaning set forth in
Section 6.10(a), below.
Reimbursement
Actual Difference has the meaning set forth in
Section 6.03(d), below.
Actual Value has the meaning set forth in
Section 5.03(b), below.
Adverse Consequences means all actions, suits, proceedings,
hearings, investigations, charges,
complaints, claims, demands,
injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties,
fines, costs, reasonable amounts paid in
settlement, liabilities, obligations,
taxes, liens, losses, expenses, and
fees, including court costs and
reasonable attorneys' fees and expenses.
Affiliate has the meaning set forth
in Rule 12b-2 of the regulations
promulgated under the Securities
Exchange Act of 1934, as amended.
AFGL is AFGL
International, Inc., a Nevada
corporation and a Party to this
Agreement.
Agreement means this Stock Purchase
Agreement dated April 10, 1996.
Closing means the acts by the
Parties of endorsing, executing, and/or
delivering the Companies Stock,
certificates of officers and Parties,
schedules, and other instruments
provided for in Articles V, VI, VII,
VIII, and IX of this Agreement.
Cohen is Irene Cohen, who is a
stockholder of one or more of the
Companies as stated in the Stockholder
List and a Party to this Agreement.
Closing Balance Sheet has the meaning set forth in Section
5.03(a), below.
Company means any one or more of
ICTI, CSA, or CTS as the context
indicates.
Companies Stock means all of the issued and
outstanding capital stock of each
Company consisting of such classes and
in such amounts stated on the
Stockholder List.
Combined Book Value means the excess of assets over
liabilities as shown on any of the
balance sheets contemplated by Article
V, below.
CSA is Corporate
Staffing Alternatives, Inc., a New York
corporation and a Party to this
Agreement.
CTS is Certified
Technical Staffing, Inc., a New York
corporation and a Party to this
Agreement.
Draft Closing Balance Sheet has the meaning set forth in
Section 5.03(a), below.
Employment Agreement and has the meaning set forth in Section
Audit Reimbursement 6.10(b), below.
Estimated Balance Sheet has the meaning set forth in Section
5.02, below.
Finegan is Elaine Finegan, who is
a stockholder of one or more of the
Companies as stated in the Stockholder
List and a Party to this Agreement.
GAAP means the United
States generally accepted accounting
principles as in effect from time to
time.
High Difference has the meaning set forth in
Section 6.03(d), below.
High Value has the meaning set forth in Section
5.03(b), below.
Historic Companies has the meaning set forth in Section
2.09(a), below.
ICTI is Irene Cohen
Temps, Inc., a New York corporation and
a Party to this Agreement.
Knowledge means actual knowledge
after reasonable investigation and, with
respect to the Companies refers to
knowledge after reasonable investigation
of any Stockholder, director, or officer
of the Companies.
List is Michael List, who
is a stockholder of one or more of the
Companies as stated in the Stockholder
List and a Party to this Agreement.
Low Difference has the meaning set forth in
Section 6.03(d), below.
Low Value has the meaning set forth
in Section 5.03(b), below.
March Balance Sheet has the meaning set forth in
Section 5.02, below.
Material means, when used as an
adjective in conjunction with an event,
condition, circumstance, effect, or
other item, that there is a substantial
likelihood that a reasonable person
would attach importance to the event,
condition, circumstance, effect, or item
in evaluating the business, operations,
properties, assets, or financial
condition of the Party to which it
relates, taken as a whole (which, in the
case of one or more of the Companies,
means the Companies taken as a whole),
and the transactions herein
contemplated.
Preliminary Purchase Price has the meaning set forth in
Section 5.02, below.
Purchase Price has the meaning set forth in Section
5.04, below.
Ordinary Course of Business means the ordinary course of
business consistent with past custom and
practice (including with respect to
quantity and frequency).
Party means any one or more of
AFGL, the Companies, or the Stockholders
as the context indicates.
Person means an individual, a
partnership, a corporation, an
association, a joint stock company, a
trust, a joint venture, an
unincorporated organization, or a
governmental entity (or any department,
agency, or political subdivision
thereof).
Security Interest means any mortgage, pledge, lien,
encumbrance, charge, or other security
interest, other than: (a) mechanic's,
materialmen's, and similar liens; (b)
liens for taxes not yet due and payable
or for taxes that the taxpayer is
contesting in good faith through
appropriate proceedings; (c) purchase
money liens and liens securing rental
payments under capital lease
arrangements; and (d) other liens
arising in the Ordinary Course of
Business and not incurred in connection
with the borrowing of money.
Stockholder(s) is, when singular, either
Cohen, Finegan, or List, and is, when
plural, two or all of such persons as
the context dictates.
Stockholder List means the list prepared and
delivered by the Companies at Closing
stating the authorized capital of each
Company, the number of issued and
outstanding shares of the capital stock
of each Company, and for each
Stockholder the number of such
outstanding shares held, all as of the
date of Closing.
Subsidiary means any corporation with
respect to which a specified Person (or
a Subsidiary thereof) owns a majority of
the common stock or has the power to
vote or direct the voting of sufficient
securities to elect a majority of the
directors.
Tax means any federal,
state, local, or foreign income, gross
receipts, license, payroll, employment,
excise, severance, stamp, occupation,
premium, windfall profits, environmental
(including taxes under Code Section
59A), customs duties, capital stock,
franchise, profits, withholding, social
security (or similar), unemployment,
disability, real property, personal
property, sales, use, transfer,
registration, value added, alternative
or add-on minimum, estimated, or other
tax of any kind whatsoever, including
any interest, penalty, or addition
thereto, whether disputed or not.
Tax Code and Regulations means the Internal Revenue Code of 1986,
as amended, and (where the context so
requires with respect to time), the
Internal Revenue Code of 1954, as
amended, and all regulations promulgated
thereunder.
Tax Return means any return, declaration,
report, claim for refund, or information
return or statement relating to Taxes,
including any schedule or attachment
thereto, and including any amendment
thereof.
Viva Agreement means the agreement dated
January 2, 1996, by and between Viva
Temporary Services, Inc., ICTI, AFGL,
and Christy & Viener.
Viva Reimbursement has the meaning set forth in set
forth in Section 6.10(c), below.
Viva Transaction means the acquisition by ICTI of
certain assets of Viva Temporary
Services, Inc., and its affiliates,
pursuant to the Asset Purchase Agreement
dated January 2, 1996.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE COMPANIES
As an inducement to, and to obtain the reliance of, AFGL,
the Companies represent and warrant as follows:
Section 2.01 Organization. Each of the Companies is a
corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.
Each of the Companies has the corporate power and is duly
authorized, qualified, franchised, and licensed under all
applicable laws, regulations, ordinances, and orders of public
authorities to own all of their respective properties and assets
and to carry on its business in all material respects as it is
now being conducted.
Section 2.02 Non-contravention. Except as disclosed in
the Companies Schedules or contemplated by the Viva Transaction,
the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement
in accordance with the terms hereof will not: violate any
provision of the articles of incorporation, charter, or bylaws of
any of the Companies; result in the breach of, constitute a
default under, result in the acceleration of, create in any
Person the right to accelerate, terminate, modify, cancel, or
require any notice under, any material agreement, contract,
lease, license, instrument, or other arrangement to which any of
the Companies is a party or by which it is bound or to which any
of its assets is subject; or, violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental
agency, or court to which any of the Companies is subject.
Section 2.03 Authorization of Transaction. Each of the
Companies has full power and authority, and has taken all action
required by law, its articles of incorporation and bylaws, and
otherwise to execute and deliver this Agreement and to perform
its obligations hereunder. Without limiting the generality of
the foregoing, the board of directors of each Company has duly
authorized the execution, delivery, and performance of this
Agreement. This Agreement represents the valid and binding
obligation of each Company enforceable against it in accordance
with its terms, except as limited by bankruptcy and insolvency
laws and by other laws affecting the rights of creditors
generally.
Section 2.04 Subsidiaries. None of the Companies has a
Subsidiary.
Section 2.05 Capitalization. The authorized
capitalization of each Company shall be, as of the Closing, as
stated in the Stockholder List. All issued and outstanding
shares of the capital stock of the Companies on the date of
Closing shall be legally issued, fully paid, and non-assessable
and not issued in violation of the pre-emptive or other rights of
any Person. Except as disclosed herein and in the Companies
Schedules, there are no existing options, warrants, calls, or
commitments of any character relating to the authorized and
unissued capital stock of any of the Companies. Except as
disclosed herein and in the Companies Schedules, there are no
outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to any of
the Companies.
Section 2.06 Financial Statements.
(a) The Companies Schedules contain the unaudited
balance sheet of each of the Companies at December 31, 1995
("Balance Sheet Date"), together with the Accountants'
Review Report pertaining thereto, which includes the related
unaudited statement of operations and retained earnings and
cash flows of each of the Companies for the 12 months then
ended,.
(b) All such financial statements have been prepared
in accordance GAAP, which was applied on a consistent basis
throughout the period covered, present fairly as of their
respective dates the financial condition of each of the
Companies and the results of operations of each of the
Companies with adjustments for accrual accounting, are
correct and complete, and are consistent with the books and
records of each of the Companies after taking into account
the adjustments for accrual accounting (which books and
records are correct and complete).
(c) None of the Companies had as of the Balance Sheet
Date any material liabilities or obligations (whether known
or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, and due or
to become due), including any liability for Taxes, except
for (i) liabilities set forth on the most recent balance
sheet of each of the Companies, (ii) liabilities disclosed
or arising under this Agreement, the Companies Schedules, or
the documents referred to herein and therein.
(d) All notes and accounts receivable of each of the
Companies are reflected properly on its books and records
and, to the knowledge of each of the Companies, are valid
receivables subject to no material setoffs or counterclaims,
are current and collectible, and will be collected in
accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts, if any, set forth
on the face of the most recent balance sheet of each of the
Companies as adjusted for the passage of time through the
date of this Agreement in accordance with the past custom
and practice of each of the Companies.
Section 2.07 Absence of Certain Changes or Events. Except
in relation to the Viva Transaction and as described herein or in
the Companies Schedules, since the Balance Sheet Date:
(a) There has not been (i) any material adverse change
in the business, operations, properties, assets, or
condition of any of the Companies; or (ii) any damage,
destruction, or loss to any of the Companies (whether or not
covered by insurance) materially and adversely affecting its
business, operations, properties, assets, or financial
condition.
(b) None of the Companies has (except for transactions
specified in clauses (v) through (vii), below, involving
officers, directors, Stockholders, and their Affiliates that
shall be completed by the time of Closing) (i) amended its
articles of incorporation, charter, or bylaws; (ii) declared
or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind
whatsoever to stockholders, or purchased or redeemed, or
agreed to purchase or redeem, any of its capital stock;
(iii) waived any rights of value which in the aggregate are
extraordinary or material considering its business; (iv)
made any material change in its method of management,
operation, or accounting; (v) entered into any other
material transaction; (vi) made any accrual or arrangement
for payment of bonuses or special compensation of any kind
or any severance or termination pay to any Person; or (vii)
made any increase in any profit sharing, bonus, deferred
compensation, insurance, pension, retirement, or other
employee benefit plan, payment, or arrangement made to, for,
or with its officers, directors, Affiliates, or employees,
except in the Ordinary Course of Business.
(c) None of the Companies has (i) granted or agreed to
grant any options, warrants, or other rights for its stocks,
bonds, or other corporate securities calling for the
issuance thereof; (ii) borrowed or agreed to borrow any
funds or incurred, or become subject to, any material
obligation or liability (absolute or contingent), except
liabilities incurred in the Ordinary Course of Business,
including liabilities incurred in connection with the
transactions contemplated by this Agreement; (iii) paid any
material obligation or liability (absolute or contingent)
other than current liabilities reflected in or shown on the
balance sheet of each Company as of the Balance Sheet Date,
and current liabilities incurred since that date in the
Ordinary Course of Business, including, the costs incurred
in connection with the transactions contemplated by this
Agreement; (iv) sold or transferred, or agreed to sell or
transfer, any of its assets, properties, or rights (except
assets, properties, or rights not used or useful in its
business which, in the aggregate, have a value of less than
$1,000), or canceled, or agreed to cancel, any debts or
claims in excess of reserves reflected on the balance sheet
of each Company as of the Balance Sheet Date, and additions
thereto (except debts or claims which, in the aggregate, are
of a value of less than $1,000); or (v) made or permitted
any amendment or termination of any contract, agreement, or
license to which it is a party if such amendment or
termination is material, considering its business.
(d) To the knowledge of any of the Companies, it has
not become subject to any law or regulation which materially
and adversely affects, or in the future may adversely affect
its business as conducted on the date hereof.
Section 2.08 Title and Related Matters. Each of the
Companies has good and marketable title to all of its properties,
interests in properties, and assets, real and personal, which are
reflected in the balance sheet of each Company as of the Balance
Sheet Date, or acquired after that date (except properties,
interests in properties, and assets sold or otherwise disposed of
since such date in the Ordinary Course of Business), free and
clear of all Security Interests, except as disclosed in the
Companies Schedules. Except as set forth in the Companies
Schedules, each of the Companies owns free and clear of any
Security Interests any and all trademarks, service marks,
tradenames, copyrights, procedures, techniques, marketing plans,
business plans, methods of management, intellectual property, and
other information utilized in connection with its business.
Except as set forth in the Companies Schedules, no Person has
any right to, and none of the Companies has received any notice
of infringement of, or conflict with, asserted rights of others
with respect to any marketing rights, trade secrets, know-how,
proprietary techniques, trademarks, service marks, tradenames,
copyrights, or intellectual property, which, if the subject of an
unfavorable decision, ruling, or finding, would have a materially
adverse affect on the business, operations, financial condition,
income, or business of any of the Companies, or any material
portion of their properties, assets, or rights.
Section 2.09 Tax Matters.
(a) Each of the Companies has filed, or will have
filed prior to the Closing, all Tax Returns that it was
required to file as of the date of Closing, except where
extensions were obtained. All such Tax Returns were correct
and complete in all material respects. Up to and including
the date of Closing, each of the Companies, any predecessor
corporation or other corporation whose assets were
transferred or retransferred by any Stockholder to any of
the Companies or any predecessor of the Companies
(including, but not by way of limitation, Americana), and
any direct or indirect corporate asset transferor of any of
the Companies or their predecessors (collectively, the
"Historic Companies"): (i) have always been qualified S
corporations under the Tax Code and Regulations; (ii) have
been S corporations of New York State and New Jersey for all
purposes at all times since such states have recognized such
status under state law; and (iii) have never been, at any
time, a corporation taxable as a regular corporation (non-S
corporation) under the Tax Code and Regulations or for New
York State tax purposes. No claim has ever been made by an
authority in a jurisdiction where any of the Historic
Companies have not or do not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the assets of any of the
Companies that arose in connection with any failure (or
alleged failure) to pay any Tax.
(b) Each of the Companies has withheld and paid all
Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee.
(c) To the knowledge of the Companies, no Stockholder
or director or officer (or employee responsible for Tax
matters) of any of the Companies reasonably expects any
authority to assess against any of the Companies any
additional Taxes for any period for which Tax Returns have
been filed. The Companies Schedules include a list of all
federal, state, local, and foreign income Tax Returns filed
with respect to any of the Companies for all taxable periods
ending on or after January 1, 1992, indicates those Tax
Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. Each of
the Companies has made available to AFGL correct and
complete copies of all federal state, and local income Tax
Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of the Companies since
January 1, 1992.
(d) None of the Companies has waived any statute of
limitation in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
Section 2.10 Litigation and Proceedings. Except as set
forth in the Companies Schedules, there are no material actions,
suits, proceedings, or investigations pending or, to the
knowledge of any of the Companies, threatened by or against it or
affecting its properties, at law or in equity, before any court
or other governmental agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind. None of the
Companies has any knowledge of any material default on its part
with respect to any judgment, order, writ, injunction, decree,
award, or ruling of any court, arbitrator, or governmental agency
or instrumentality.
Section 2.11 Contracts.
(a) All contracts, agreements, franchises, license
agreements, and other commitments to which any of the
Companies is a party or by which its properties are bound
and which are material to its operations are, to the
knowledge of the Companies, valid and enforceable by it in
all material respects, except as limited by bankruptcy and
insolvency laws and by other laws affecting rights of
creditors generally.
(b) Except as included or described in the Companies
Schedules or reflected in the balance sheet of any Company
as of the Balance Sheet Date, and except for any contract or
other arrangement that may be terminated by a Company on not
more than 30 days' notice without any liability and any
other contract under which the executory obligation of the
Companies after the Closing will involve an amount less than
$50,000, none of the Companies is a party to any oral or
written: (i) contract for the employment of any officer or
employee which is not terminable on 30 days or less notice;
(ii) profit sharing, bonus, deferred compensation, stock
option, severance pay, pension benefit or retirement plan,
agreement, or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (iii)
agreement, contract, or indenture relating to the borrowing
of money; (iv) guaranty of any obligation, other than one on
which it is a primary obligor, for the borrowing of money or
otherwise, excluding endorsements made for collection and
other guaranties of obligations which, in the aggregate, do
not exceed $10,000; (v) consulting or other similar
contracts with an unexpired term of more than one year or
providing for payments in excess of $10,000 in the
aggregate; (vi) collective bargaining agreement; (vii)
agreement with any present or former officer or director; or
(viii) contract, other agreement, or other commitment .
Section 2.12 Material Contract Defaults. Except as
disclosed in the Companies Schedules, none of the Companies is
in default in any material respect under the terms of any
outstanding contract, agreement, lease, or other commitment which
is material to its business, operations, properties, assets, or
business condition, and there is no event of default on the part
of the Companies or other event which, with notice or lapse of
time or both, would constitute a default on the part of the
Companies in any material respect under any such contract,
agreement, lease, or other commitment in respect of which it has
not taken adequate steps to prevent such a default from
occurring.
Section 2.13 Governmental Authorizations. Except as set
forth in the Companies Schedules, the Companies have all material
licenses, franchises, permits, and other governmental
authorizations that are legally required to enable each of them
to conduct its business in all material respects as conducted on
the date hereof. No authorization, approval, consent, or order
of, or registration, declaration, or filing with, any court or
other governmental body is required in connection with the
execution and delivery by the Companies of this Agreement and the
consummation by the Companies of the transactions contemplated
hereby.
Section 2.14 Compliance With Laws and Regulations. The
Companies have complied with all applicable statutes and
regulations of any country, state, provincial, municipal, or
local governmental entity or agency thereof, except to the extent
that noncompliance would not materially and adversely affect the
business, operations, properties, assets, or business condition
of the Companies, and except to the extent non-compliance would
not result in any material liability.
Section 2.15 Insurance. All the insurable properties of
the Companies are insured in accordance with industry standards
against all risks customarily insured against by persons
operating similar properties in localities where such properties
are located and under valid and enforceable policies by insurers
of recognized responsibility.
Section 2.16 Transactions With Affiliates. Set forth in
the Companies Schedules is a description of every material
contract, agreement, or arrangement between any of the Companies
and any Affiliate under which any of the Companies will be
obligated after the Closing.
Section 2.17 Labor Relations. None of the Companies has
had a material work stoppage resulting from labor problems. To
the knowledge of the Companies, no union or other collective
bargaining organization is organizing or attempting to organize
any employee of the Companies.
Section 2.18 Information. The information concerning the
Companies set forth in this Agreement and in the Companies
Schedules is complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit
to state a material fact required to make the statements made, in
light of the circumstances under which they are made, not
misleading.
Section 2.19 Companies Schedules. Following the signing
and delivery of this Agreement, but in any event not less than 15
days prior to the Closing, the Companies shall make available to
AFGL and the Stockholders, the following documents and
information, which are collectively referred to as the "Companies
Schedules," and both AFGL and the Stockholders will be provided
prior to the Closing all such additional materials and
information as may be reasonably requested, including any
information requested to verify any information furnished:
(a) complete and correct copies of the articles of
incorporation, as amended, and bylaws of each of the
Companies;
(b) the financial statements of the Companies
identified in paragraph 2.06(a);
(c) the income Tax Returns of the Companies identified
in paragraph 2.09(c);
(d) a description of all real property owned and/or
leased by the Companies, together with a description of
every Security Interest in respect thereof;
(e) copies of all material agreements, arrangements,
contracts, or other instruments to which any of the
Companies is a party or by which it or its properties are
bound, together with a description of all oral contracts,
leases, agreements, and other instruments to which any of
the Companies is a party or by which it or its properties
are bound, except for any such items under which none of the
Companies or the Stockholders will have any obligation after
the Closing;
(f) copies of all licenses, permits, and other
governmental authorizations (or requests or applications
therefor) pursuant to which the Companies carry on or
propose to carry on their respective businesses (except
those which, in the aggregate, are immaterial to the present
or proposed business of any of them);
(g) a list of the accounts receivable and notes and
other obligations receivable of the Companies as of the
Balance Sheet Date, or that arose thereafter other than in
the Ordinary Course of Business, indicating the debtor and
amount, and classifying the accounts to show in reasonable
detail the length of time, if any, overdue, and stating the
nature and amount of any refunds, setoffs, reimbursements,
discounts, or other adjustments which are, in the aggregate,
material and due to or claimed by such creditor;
(h) a list of the accounts payable and notes and other
obligations payable of the Companies as of the Balance Sheet
Date or that arose thereafter other than in the Ordinary
Course of Business, indicating the creditor and amount,
classifying the accounts to show in reasonable detail the
length of time, if any, overdue, and stating the nature and
amount of any refunds, setoffs, reimbursements, discounts,
or other adjustments which are, in the aggregate, material
and due or payable to any of the Companies;
(i) a description of any material change in the
business, operations, property, inventory, assets, or
condition of any of the Companies since the Balance Sheet
Date, required to be provided pursuant to Section 2.07
hereof;
(j) a description of transactions with Affiliates
required to be described by Section 2.16; and
(k) a schedule setting forth any other information,
together with any copies of documents, required to be
disclosed in the Companies Schedules by Sections 2.01
through 2.18.
The Companies shall cause the Companies Schedules and the
instruments and data to be delivered to AFGL and the Stockholders
hereunder to be updated after the date of delivery up to and
including the date of Closing.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF AFGL
As an inducement to, and to obtain the reliance of, the
Companies and the Stockholders, AFGL represents and warrants as
follows:
Section 3.01 Organization. AFGL is a corporation, validly
existing, and in good standing under the laws of the state of
Nevada. AFGL has the corporate power and is duly authorized,
qualified, franchised, and licensed under all applicable laws,
regulations, ordinances, and orders of public authorities to own
all of its properties and assets and to carry on its business in
all material respects as it is now being conducted.
Section 3.02 Non-contravention. Except as noted herein or
in the AFGL Schedules, the execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated by this Agreement in accordance with the terms
hereof will not: violate any provision of the articles of
incorporation, charter, or bylaws of AFGL or its subsidiaries;
result in the breach of, constitute a default under, result in
the acceleration of, create in any Person the right to
accelerate, terminate, modify, cancel, or require any notice
under, any material agreement, contract, lease, license,
instrument, or other arrangement to which any of AFGL and its
Subsidiaries is a party or by which it is bound or to which any
of its assets is subject; or, violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental
agency, or court to which any of AFGL and its Subsidiaries is
subject.
Section 3.03 Authorization of Transaction. AFGL has full
power and authority, and has taken all action required by law,
its articles of incorporation and bylaws, and otherwise to
execute and deliver this Agreement and to perform its obligations
hereunder. Without limiting the generality of the foregoing, the
board of directors of AFGL has duly authorized the execution,
delivery, and performance of this Agreement by AFGL. This
Agreement represents the valid and binding obligation of AFGL
enforceable in accordance with its terms, except as limited by
bankruptcy and insolvency laws and by other laws affecting the
rights of creditors generally.
Section 3.04 Subsidiaries. AFGL has three wholly-owned
Subsidiaries, Whitney Partners, Inc., and AFGL, Inc., both
Delaware corporations, and Furash & Company, Inc., a Maryland
corporation.
Section 3.05 Capitalization. The authorized
capitalization of AFGL is 25,000,000 shares, consisting of:
5,000,000 shares of preferred stock, par value $0.001, of which
2,800 shares designated as "Series A 8% Convertible Preferred
Stock," are issued and outstanding, 6,858 shares designated as
"Series B Convertible Preferred Stock" are issued and
outstanding, and 150 shares designated as "Series C 8%
Convertible Preferred Stock" are being offered for sale to a
limited group of investors in an offshore transaction; and
20,000,000 shares are Common Stock, of which 4,597,358 shares are
currently issued and outstanding, and approximately 2,222,223
shares are being offered for sale to a limited group of investors
in a limited offering. All issued and outstanding shares are
legally issued, fully paid, and non-assessable and not issued in
violation of the pre-emptive or other rights of any Person.
Except for 1,332,416 shares of Common Stock reserved for issuance
on conversion of the Series A 8% Convertible Preferred Stock,
685,744 shares of Common Stock reserved for issuance on
conversion of the Series B Convertible Preferred Stock, 795,455
shares of Common Stock reserved for issuance on conversion of the
Series C 8% Convertible Preferred Stock, 3,085,823 shares of
Common Stock reserved for issuance under AFGL's stock incentive
plans, 129,711 shares reserved for issuance under outstanding
warrants, and as disclosed herein and in the AFGL Schedules,
there are no existing options, warrants, calls, or commitments of
any character relating to the authorized and unissued AFGL common
stock, except options, warrants, calls, or commitments, if any,
to which AFGL is not a party and by which it is not bound. There
are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to
AFGL.
Section 3.06 Financial Statements.
(a) The AFGL Schedules contain the unaudited
consolidated balance sheet of AFGL at September 30, 1995,
and the related unaudited consolidated statements of
operations and cash flows for the nine months then ended,
including the notes to such statements; and the audited
consolidated balance sheet of AFGL as of December 31, 1994,
and the related audited consolidated statements of
operations and cash flows for each year in the two year
period ended December 31, 1994, together with the notes to
such statements and the opinion of Mortenson & Co., Inc.,
independent accountants, with respect thereto.
(b) All such financial statements have been prepared
in accordance with GAAP on a consistent basis throughout the
periods covered, present fairly as of their respective dates
the financial condition of AFGL and its Subsidiaries and the
results of operations of AFGL and its Subsidiaries, are
correct and complete, and are consistent with the books and
records of AFGL and its Subsidiaries (which books and
records are correct and complete).
(c) AFGL did not have as of the date of its September
30, 1995, balance sheet any material liabilities or
obligations (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and due or to become due),
including any liability for Taxes, except for (i)
liabilities set forth on the September 30, 1995, balance
sheet of AFGL, and (ii) liabilities disclosed in this
Agreement or the AFGL Schedules.
(d) All notes and accounts receivable of AFGL and its
Subsidiaries are reflected properly on their books and
records and, to the Knowledge of AFGL, are valid receivables
subject to no material setoffs or counterclaims, are current
and collectible, and will be collected in accordance with
their terms at their recorded amounts, subject only to the
reserve for bad debts, if any, set forth on the face of the
September 30, 1995, balance sheet of AFGL as adjusted for
the passage of time through the date of this Agreement in
accordance with the past custom and practice of AFGL and its
Subsidiaries.
Section 3.07 Absence of Certain Changes or Events. Except
as described herein or in the AFGL Schedules, since the date of
the September 30, 1995, AFGL balance sheet:
(a) There has not been (i) any material adverse change
in the business, operations, properties, assets, or
condition of any of AFGL and its Subsidiaries; or (ii) any
damage, destruction, or loss to any of AFGL and its
Subsidiaries (whether or not covered by insurance)
materially and adversely affecting its business, operations,
properties, assets, or financial condition;
(b) None of AFGL and its Subsidiaries has (i) amended
its articles of incorporation, charter, or bylaws; (ii)
waived any rights of value which in the aggregate are
extraordinary or material considering its business; or,
(iii) entered into any other material transaction;
(c) None of AFGL and its Subsidiaries has (i) granted
or agreed to grant any options, warrants, or other rights
for its stocks, bonds, or other corporate securities calling
for the issuance thereof; (ii) borrowed or agreed to borrow
any funds or incurred, or become subject to, any material
obligation or liability (absolute or contingent), except
liabilities incurred in the Ordinary Course of Business,
including liabilities incurred in connection with the
transactions contemplated by this Agreement; or (iii) made
or permitted any amendment or termination of any contract,
agreement, or license to which it is a party if such
amendment or termination is material, considering its
business.
(d) To the knowledge of any of AFGL and its
Subsidiaries, it has not become subject to any law or
regulation which materially and adversely affects, or in the
future may adversely affect its business as conducted on the
date hereof.
Section 3.08 Title and Related Matters. Each of AFGL and
its Subsidiaries has good and marketable title to all of its
properties, inventory, interests in properties, and assets, real
and personal, which are reflected in the September 30, 1995, AFGL
balance sheet or acquired after that date (except properties,
interests in properties, and assets sold or otherwise disposed of
since such date in the Ordinary Course of Business), free and
clear of all Security Interests, except as disclosed in the AFGL
Schedules. Except as set forth in the AFGL Schedules, each of
AFGL and its Subsidiaries owns free and clear of any Security
Interests any and all trademarks, service marks, tradenames,
copyrights, procedures, techniques, marketing plans, business
plans, methods of management, intellectual property, and other
information utilized in connection with its business. Except as
set forth in the AFGL Schedules, no Person has any right to, and
none of AFGL and its Subsidiaries has received any notice of
infringement of, or conflict with, asserted rights of others with
respect to any marketing rights, trade secrets, know-how,
proprietary techniques, trademarks, service marks, tradenames,
copyrights, or intellectual property, which, if the subject of an
unfavorable decision, ruling, or finding, would have a materially
adverse affect on the business, operations, financial condition,
income, or business of any of AFGL and its Subsidiaries, or any
material portion of its properties, assets, or rights.
Section 3.09 Tax Matters.
(a) Each of AFGL and its Subsidiaries has filed, or
will have filed prior to the Closing, all Tax Returns that
it was required to file as of the date of Closing, except
where extensions were obtained. All such Tax Returns were
correct and complete in all respects. All Taxes owed by any
of AFGL and its Subsidiaries (as shown on any Tax Return)
have been paid. None of AFGL and its Subsidiaries currently
is the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where any of AFGL and its
Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of AFGL that arose
in connection with any failure (or alleged failure) to pay
any Tax.
(b) Each of AFGL and its Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other
Person.
(c) No AFGL director or officer (or employee
responsible for Tax matters) reasonably expects any
authority to assess against any of AFGL and its Subsidiaries
any additional Taxes for any period for which Tax Returns
have been filed, except as disclosed in the AFGL Schedules.
There is no dispute or claim concerning any Tax liability of
any of AFGL and its Subsidiaries either (i) claimed or
raised by an authority in writing or, (ii) as to which any
of the AFGL directors and officers (and employees
responsible for Tax matters) has knowledge based upon
personal contact with any agent of such authority, except as
disclosed in the AFGL Schedules. The AFGL Schedules include
a list of all federal, state, local, and foreign income Tax
Returns filed with respect to any of AFGL and its
Subsidiaries for taxable periods commencing on or after
January 1, 1992, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are
the subject of audit. AFGL has made available to the
Companies and the Stockholders correct and complete copies
of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by
any of AFGL and its Subsidiaries since January 1, 1992.
(d) None of AFGL and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or
deficiency.
(e) The unpaid Taxes of AFGL and its Subsidiaries (i)
did not, as of the September 30, 1995, balance sheet of
AFGL, exceed the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the
face of said balance sheet, and (ii) do not exceed that
reserve as adjusted for the passage of time through the date
of Closing in accordance with the past custom and practice
of AFGL in filing its Tax Returns.
Section 3.10 Litigation and Proceedings. Except as set
forth in the AFGL Schedules, there are no material actions,
suits, proceedings, or investigations pending or, to the
knowledge of any of AFGL and its Subsidiaries, threatened by or
against it or affecting its properties, at law or in equity,
before any court or other governmental agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind. None
of AFGL and its Subsidiaries has any knowledge of any material
default on its part with respect to any judgment, order, writ,
injunction, decree, award, or ruling of any court, arbitrator, or
governmental agency or instrumentality.
Section 3.11 Contracts. All contracts, agreements,
franchises, license agreements, and other commitments to which
any of AFGL and its Subsidiaries is a party or by which its
properties are bound and which are material to its operations
are, to the knowledge of AFGL, valid and enforceable by it in all
material respects, except as limited by bankruptcy and insolvency
laws and by other laws affecting the rights of creditors
generally.
Section 3.12 Material Contract Defaults. Except as
disclosed in the AFGL Schedules, none of AFGL and its
Subsidiaries is in default in any material respect under the
terms of any outstanding contract, agreement, lease, or other
commitment which is material to its business, operations,
properties, assets, or business condition, and there is no event
of default or other event which, with notice or lapse of time or
both, would constitute a default in any material respect under
any such contract, agreement, lease, or other commitment in
respect of which it has not taken adequate steps to prevent such
a default from occurring.
Section 3.13 Governmental Authorizations. Except as set
forth in the AFGL Schedules, AFGL and its Subsidiaries have all
material licenses, franchises, permits, and other governmental
authorizations that are legally required to enable each of them
to conduct its business in all material respects as conducted on
the date hereof. No material authorization, approval, consent,
or order of, or registration, declaration, or filing with, any
court or other governmental body is required in connection with
the execution and delivery by AFGL of this Agreement and the
consummation by AFGL of the transactions contemplated hereby.
Section 3.14 Information. The information concerning AFGL
and its Subsidiaries set forth in this Agreement and in the AFGL
Schedules is complete and accurate in all material respects and
does not contain any untrue statement of a material fact or omit
to state a material fact required to make the statements made, in
light of the circumstances under which they are made, not
misleading.
Section 3.15 AFGL Schedules. Following the signing and
delivery of this Agreement, but in any event not less than 15
days prior to the Closing, AFGL shall make available to the
Companies and the Stockholders, the following documents and
information, which are collectively referred to as the "AFGL
Schedules," and the Companies and the Stockholders will be
provided prior to the Closing all such additional materials and
information as may be reasonably requested, including any
information requested to verify any information furnished:
(a) complete and correct copies of the articles of
incorporation, as amended, and bylaws of AFGL in effect as
of the date of Closing;
(b) the quarterly reports on Form 10-QSB of AFGL for
the periods ended March 31, June 30, and September 30, 1995;
(c) the annual report on Form 10-KSB of AFGL for the
fiscal year ended December 31, 1994, together with a copy of
AFGL's 1994 Annual Report to shareholders and Information
Statement dated June 7, 1995;
(d) the income Tax Returns of AFGL identified in
paragraph 3.09(c);
(e) a description of any material change in the
business, operations, property, inventory, assets, or
condition of any of AFGL and its Subsidiaries since
September 30, 1995, required to be provided pursuant to
Section 3.07 hereof; and
(f) a schedule setting forth any other information,
together with any copies of documents, required to be
disclosed in the AFGL Schedules by Sections 3.01 through
3.14.
AFGL shall cause the AFGL Schedules and the instruments and data
to be delivered to the Companies and the Stockholders hereunder
to be updated after the date of delivery up to and including the
date of Closing.
ARTICLE IV
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF EACH STOCKHOLDER
As an inducement to, and to obtain the reliance of, AFGL,
each Stockholder makes the following representations and
warranties, each for herself or himself.
Section 4.01 By Cohen. Cohen represents and warrants as
follows:
(a) Except as set forth in the Companies Schedules,
the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not:
result in the breach of, constitute a default under, result
in the acceleration of, create in any Person the right to
accelerate, terminate, modify, cancel, or require any notice
under, any material agreement, contract, lease, license,
instrument, or other arrangement to which Cohen is a party
or by which she is bound; or, violate any constitution,
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Cohen is
subject.
(b) Except as set forth in the Companies Schedules,
Cohen has full power and authority, and has taken all action
required by law and otherwise to execute and deliver this
Agreement and to perform her obligations hereunder. This
Agreement represents the valid and binding obligation of
Cohen enforceable against her in accordance with its terms,
except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally.
(c) No authorization, approval, consent, or order of,
or registration, declaration, or filing with, any court or
other governmental body is required in connection with the
execution and delivery by Cohen of this Agreement and the
consummation by her of the transactions contemplated hereby.
(d) Except as set forth in the Companies Schedules,
Cohen is the legal and beneficial owner of the Companies
stock set forth on the Stockholder List, free and clear of
any claims, charges, equities, liens, security interests,
and encumbrances whatsoever, and Cohen has full right,
power, and authority to transfer, assign, convey, and
deliver the Companies Stock; and delivery of such stock at
the Closing will convey to AFGL good and marketable title to
the Companies Stock free and clear of any claims, charges,
equities, liens, Security Interests, and encumbrances
whatsoever.
(e) At all times up to and including the date of
Closing, each of the Companies, any predecessor corporation
or other corporation whose assets were transferred or
retransferred by any Stockholder to any of the Companies or
any predecessor of the Companies (including, but not by way
of limitation, Americana), and any direct or indirect
corporate asset transferor of any of the Historic Companies:
(i) have always been qualified S corporations under the Tax
Code and Regulations; (ii) have been S corporations of New
York State and New Jersey for all purposes at all times
since such states have recognized such status under state
law; and (iii) have never been, at any time, a corporation
taxable as a regular corporation (non-S corporation) under
the Tax Code and Regulations or for New York State tax
purposes.
(f) To the knowledge of Cohen, the information
concerning the Companies and herself set forth in this
Agreement under Article II and this Section 4.01 is complete
and accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light
of the circumstances under which they are made, not
misleading.
Section 4.02 By Finegan. Finegan represents and warrants
as follows:
(a) Except as set forth in the Companies Schedules,
the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not:
result in the breach of, constitute a default under, result
in the acceleration of, create in any Person the right to
accelerate, terminate, modify, cancel, or require any notice
under, any material agreement, contract, lease, license,
instrument, or other arrangement to which Finegan is a party
or by which she is bound; or, violate any constitution,
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Finegan
is subject.
(b) Except as set forth in the Companies Schedules,
Finegan has full power , and has taken all action required
by law and otherwise to execute and deliver this Agreement
and to perform her obligations hereunder. This Agreement
represents the valid and binding obligation of Finegan
enforceable against her in accordance with its terms,
except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally.
(c) No authorization, approval, consent, or order of,
or registration, declaration, or filing with, any court or
other governmental body is required in connection with the
execution and delivery by Finegan of this Agreement and the
consummation by her of the transactions contemplated hereby.
(d) Except as set forth in the Companies Schedules,
Finegan is the legal and beneficial owner of the Companies
Stock set forth on the Stockholder List, free and clear of
any claims, charges, equities, liens, security interests,
and encumbrances whatsoever, and Finegan has full right,
power, and authority to transfer, assign, convey, and
deliver the Companies Stock; and delivery of such stock at
the Closing will convey to AFGL good and marketable title to
the Companies Stock free and clear of any claims, charges,
equities, liens, Security Interests, and encumbrances
whatsoever.
(e) At all times up to and including the date of
Closing, each of the Companies, any predecessor corporation
or other corporation whose assets were transferred or
retransferred by any Stockholder to any of the Companies or
any predecessor of the Companies (including, but not by way
of limitation, Americana), and any direct or indirect
corporate asset transferor of any of the Historic Companies:
(i) have always been qualified S corporations under the Tax
Code and Regulations; (ii) have been S corporations of New
York State and New Jersey for all purposes at all times
since such states have recognized such status under state
law; and (iii) have never been, at any time, a corporation
taxable as a regular corporation (non-S corporation) under
the Tax Code and Regulations or for New York State tax
purposes.
(f) To the knowledge of Finegan, the information
concerning the Companies and herself set forth in this
Agreement under Article II and this Section 4.02 is complete
and accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light
of the circumstances under which they are made, not
misleading.
Section 4.03 By List. List represents and warrants as
follows:
(a) Except as set forth in the Companies Schedules,
the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not:
result in the breach of, constitute a default under, result
in the acceleration of, create in any Person the right to
accelerate, terminate, modify, cancel, or require any notice
under, any material agreement, contract, lease, license,
instrument, or other arrangement to which List is a party or
by which he is bound; or, violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government,
governmental agency, or court to which List is subject.
(b) Except as set forth in the Companies Schedules,
list has full power and authority, and has taken all action
required by law and otherwise to execute and deliver this
Agreement and to perform his obligations hereunder. This
Agreement represents the valid and binding obligation of
List enforceable against him in accordance with its terms,
except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally.
(c) No authorization, approval, consent, or order of,
or registration, declaration, or filing with, any court or
other governmental body is required in connection with the
execution and delivery by List of this Agreement and the
consummation by him of the transactions contemplated hereby.
(d) Except as set forth in the Companies Schedules,
List is the legal and beneficial owner of the Companies
Stock set forth on the Stockholder List,, free and clear of
any claims, charges, equities, liens, security interests,
and encumbrances whatsoever, and List has full right, power,
and authority to transfer, assign, convey, and deliver the
Companies Stock; and delivery of such stock at the Closing
will convey to AFGL good and marketable title to the
Companies Stock free and clear of any claims, charges,
equities, liens, Security Interests, and encumbrances
whatsoever.
(e) At all times up to and including the date of
Closing, each of the Companies, any predecessor corporation
or other corporation whose assets were transferred or
retransferred by any Stockholder to any of the Companies or
any predecessor of the Companies (including, but not by way
of limitation, Americana), and any direct or indirect
corporate asset transferor of any of the Historic Companies:
(i) have always been qualified S corporations under the Tax
Code and Regulations; (ii) have been S corporations of New
York State and New Jersey for all purposes at all times
since such states have recognized such status under state
law; and (iii) have never been, at any time, a corporation
taxable as a regular corporation (non-S corporation) under
the Tax Code and Regulations or for New York State tax
purposes.
(f) To the knowledge of List, the information
concerning List and the Companies set forth in this
Agreement under Article II and this Section 4.03 is complete
and accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light
of the circumstances under which they are made, not
misleading.
ARTICLE V
SALE OF STOCK
Section 5.01 Sale of Companies Stock. On and subject to
the terms and conditions of this Agreement, AFGL agrees to
purchase from each of the Stockholders, and each of the
Stockholders agrees to sell to AFGL, all of her or his Companies
Stock for the consideration specified below.
Section 5.02 Preliminary Purchase Price. AFGL agrees to
pay to the Stockholders at the Closing (hereinafter the
"Preliminary Purchase Price"), $8,260,000 plus the amount (the
"Additional Amount") by which the Combined Book Value of the
Companies exceeds $2,100,000 as reflected on a combined balance
sheet of the Companies as of March 31, 1996, prepared by the
Companies, certified by an executive officer of the Companies,
and delivered to AFGL two business days prior to the date of
Closing (the "March Balance Sheet") by (i) a deposit of $100,000
by certified check or by wire transfer of funds to an escrow
account established by Morgan, Lewis & Bockius, LLP, concurrently
with the signing and delivery of this Agreement, which will be
paid over to the Stockholders at Closing, and (ii) cash for the
balance of the Preliminary Purchase Price payable at Closing by
wire transfer or delivery of other immediately available funds.
The Preliminary Purchase Price shall be allocated among the
Stockholders in proportion to their respective holdings of
Companies Stock as set forth in the Stockholder List delivered by
the Stockholders at Closing. In addition to the Preliminary
Purchase Price, AFGL will deposit at Closing by wire transfer or
delivery of other immediately available funds in the escrow
account established under this Section 5.02 (the "Escrowed
Funds"), an amount equal to the difference between the
Preliminary Purchase Price and the Combined Book Value of the
Companies as reflected on a date of Closing combined estimated
balance sheet as of the date of Closing prepared by the Companies
and delivered to AFGL two business days prior to the Closing (the
"Estimated Balance Sheet"). The Preliminary Purchase Price will
be subject to post-Closing adjustment as set forth below in
Sections 5.03, 5.04, and 6.03, as applicable.
Section 5.03 Preparation of Closing Balance Sheet. The
Closing Balance Sheet will be prepared as follows.
(a) Within 45 days following the date of Closing, AFGL
will prepare and deliver to the Stockholders a draft
combined accrual basis balance sheet (the "Draft Closing
Balance Sheet") for the Companies as of the close of
business on the Closing Date (determined on a pro forma
basis as though the Parties had not consummated the
transactions contemplated by this Agreement). AFGL will
prepare the Draft Closing Balance Sheet in accordance with
GAAP applied on a basis consistent with prior periods. If
the Stockholders have any objections to the Draft Closing
Balance Sheet, they will deliver a detailed statement
describing their objections to AFGL within 45 days after
receiving the Draft Closing Balance Sheet. AFGL and the
Stockholders will use reasonable efforts to resolve any such
objections themselves. If AFGL and the Stockholders do not
obtain a final resolution within 30 days after AFGL has
received the statement of objections, however, AFGL and the
Stockholders will select an accounting firm mutually
acceptable to them to resolve any remaining objections. If
AFGL and the Stockholders are unable to agree on the choice
of an accounting firm, they will select a nationally-
recognized accounting firm by lot (after excluding their
respective regular outside accounting firms). The
determination of any accounting firm so selected will be set
forth in writing and will be conclusive and binding upon the
Parties. AFGL will revise the Draft Closing Balance Sheet
as appropriate to reflect the resolution of any objections
thereto pursuant to this paragraph. The "Closing Balance
Sheet" shall mean the Draft Closing Balance Sheet together
with any revisions thereto pursuant to this paragraph.
(b) In the event the Parties submit any unresolved
objections to an accounting firm for resolution as provided
in paragraph (a) of this Section 5.03, AFGL and the
Stockholders will share responsibility for the fees and
expenses of the accounting firm as follows: (i) if the
accounting firm resolves all of the remaining objections in
favor of AFGL (the Combined Book Value so determined from
the Closing Balance Sheet is referred to herein as the "Low
Value"), the Stockholders will be responsible for all of the
fees and expenses of the accounting firm; (ii) if the
accounting firm resolves all of the remaining objections in
favor of the Stockholders (the Combined Book Value so
determined from the Closing Balance Sheet is referred to
herein as the "High Value"), AFGL will be responsible for
all of the fees and expenses of the accounting firm; and
(iii) if the accounting firm resolves some of the remaining
objections in favor of AFGL and the rest of the remaining
objections in favor of the Stockholders (the Combined Book
Value so determined from the Closing Balance Sheet is
referred to herein as the "Actual Value"), the Stockholders
will be responsible for that fraction of the fees and
expenses of the accounting firm equal to (x) the difference
between the High Value and the Actual Value over (y) the
difference between the High Value and the Low Value, and
AFGL will be responsible for the remainder of the fees and
expenses.
(c) AFGL will make the work papers and back-up
materials used in preparing the Draft Closing Balance Sheet,
and the books, records, and financial staff of the
Companies, available to the Stockholders and their
accountants and other representatives at reasonable times
and upon reasonable notice at any time during (i) the
preparation by AFGL of the Draft Closing Balance Sheet, (ii)
the review by the Stockholders of the Draft Closing Balance
Sheet, and (iii) the resolution by the Parties of any
objections thereto.
Section 5.04 Adjustment of Preliminary Purchase Price.
The Preliminary Purchase Price will be adjusted as follows and as
provided in Section 6.03, and the amount as so adjusted by this
Section 5.04 and Section 6.03 is the "Purchase Price":
(a) If the Combined Book Value of the Companies
reflected on the Closing Balance Sheet is equal to or
greater than $2,100,000, but the sum of the cash and
accounts receivable reflected on the Closing Balance Sheet
is less than $2,100,000, the Stockholders will pay to AFGL
the amount equal to the difference between $2,100,000 and
the sum of the cash and accounts receivable reflected on the
Closing Balance Sheet (the "Deficit"), first by release and
delivery to AFGL of the Escrowed Funds and second, to the
extent the Deficit is greater than the Escrowed Funds, by
wire transfer or delivery of other immediately available
funds within three business days after the date on which the
Closing Balance Sheet finally is determined pursuant to
Section 5.03, above. The Stockholders will pay the Deficit
in proportion to their respective holdings of Companies
Stock as set forth on the Stockholder List.
(b) Regardless of the cash and accounts receivable
reflected on the Closing Balance Sheet, if the Combined Book
Value of the Companies as reflected on the Closing Balance
Sheet is less than the Combined Book Value reflected on the
Estimated Balance Sheet (the "Book Value Deficit"), the
Stockholders will pay to AFGL the amount of the Book Value
Deficit, first by release and delivery to AFGL of the
Escrowed Funds and second, to the extent the Book Value
Deficit is greater than the Escrowed Funds, by wire transfer
or delivery of other immediately available funds within
three business days after the date on which the Closing
Balance Sheet finally is determined pursuant to Section
5.03, above. The Stockholders will pay the Book Value
Deficit in proportion to their respective holdings of
Companies Stock as set forth on the Stockholder List.
(c) If the sum of the cash and accounts receivable
reflected on the Closing Balance Sheet is equal to or
greater than $2,100,000, and the Combined Book Value is
greater than the Preliminary Purchase Price, AFGL will pay
(subject to the provisions of Section 6.03) to the
Stockholders the amount equal to the difference between the
Preliminary Purchase Price paid at Closing and the Combined
Book Value (the "Surplus"), first by release and delivery to
the Stockholders of the Escrowed Funds and second, to the
extent the Surplus is greater than the Escrowed Funds by
wire transfer or delivery of other immediately available
funds within three business days after the date on which the
Closing Balance Sheet finally is determined pursuant to
Section 5.03, above. AFGL will pay the Surplus to the
Stockholders in proportion to their respective holdings of
Companies Stock as set forth on the Stockholder List.
ARTICLE VI
SPECIAL COVENANTS
Section 6.01 Access to Properties and Records. AFGL and
each of the Companies will each afford to the officers and
authorized representatives of the other, and to the Stockholders,
full access to its properties, books, and records in order that
each may have full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the
other, and each will furnish the other with such additional
financial and operating data and other information as to its
business and properties as the other shall from time to time
reasonably request. In this regard, concurrently with the
execution and delivery of this Agreement, AFGL is delivering to
the Stockholders true and correct copies of all letters of
intent, term sheets, and commitment letters related to debt and
equity financing to be obtained by AFGL in connection with the
transactions described in this Agreement, and AFGL covenants and
agrees to update the Stockholders regularly between the date of
this Agreement and the date of Closing on the status of AFGL's
debt and equity financing arrangements, including prompt
notification of any material adverse developments in connection
with such financing arrangements.
Section 6.02 Actions Prior to Closing.
(a) From and after the date of this Agreement, each of
the Companies will: (i) carry on its business in
substantially the same manner as it has heretofore; (ii)
maintain and keep its properties in states of good repair
and condition as at present, except for depreciation due to
ordinary wear and tear and damage due to casualty; (iii)
maintain in full force and effect insurance comparable in
amount and in scope of coverage to that now maintained by
it; (iv) perform in all material respects all of its
obligation under material contracts, leases, and instruments
relating to or affecting its assets, properties, and
business; (v) use commercially reasonable efforts to
maintain and preserve its business organization intact, to
retain its key employees, and to maintain its relationship
with its material suppliers and customers; and (vi) fully
comply with and perform in all material respects all
material obligations and duties imposed on it by all federal
and state laws and all rules, regulations, and orders
imposed by federal or state governmental authorities.
(b) From and after the date of this Agreement until
the date of Closing Date, none of the Companies will : (i)
make any change in its articles of incorporation or bylaws;
(ii) take any action described in Section 2.07 (all except
as permitted therein or as disclosed in the Companies
Schedules); or (iii) enter into or amend any contract,
agreement, or other instrument of any of the types described
in the Companies Schedules, except that the Companies may
enter into or amend any contract, agreement, or other
instrument in the Ordinary Course of Business and terminate
any contract, agreement, or other arrangement with any
officer, director, or Stockholder of the Companies.
(c) Notwithstanding the provisions of this Section
6.02, or any other contrary provision of this Agreement,
AFGL agrees and acknowledges that the Stockholders are
entitled to distribute cash and other property of the
Companies to themselves following the date of this Agreement
and prior to the Closing; provided, that at the time of
Closing the Stockholders reasonably believe in good faith
that the Closing Balance Sheet will show the sum of cash and
accounts receivable of at least $2,100,000, and a Combined
Book Value of at least $2,100,000,
Section 6.03 Tax Election and Certain Tax Matters.
(a) AFGL agrees to prepare, file and pay any tax shown
on any part or full year New York City General Corporation
Income Tax return for any of the Companies for all periods
commencing January 1, 1996; provided, that the New York City
General Corporation Income Tax on the operations of the
Companies from January 1, 1996, through and including the
date of Closing (excluding any gain from the asset sale
resulting from Section 338(h)(10) treatment of the purchase
contemplated hereby under the Tax Code and Regulations, if
any) will be accrued and reflected in the March Balance
Sheet, Estimated Balance Sheet, and Closing Balance Sheet.
(b) AFGL agrees to pay any tax shown on any New York
State Corporation Income Tax Return (Form CT-3-S) for any of
the Companies for the period commencing January 1, 1996
through and including the date of Closing; provided, that
the New York State Corporation Income Tax on the operations
of the Companies from January 1, 1996, through and including
the date of Closing (excluding any gain from the asset sale
resulting from Section 338(h)(10) treatment of the purchase
contemplated hereby under the Tax Code and Regulations, if
any) will be accrued and reflected in the March Balance
Sheet, Estimated Balance Sheet, and Closing Balance Sheet..
(c) The Parties agree and acknowledge that an election
will be made under Section 338(h)(10) of the Tax Code and
Regulations to treat the purchase of the Companies Stock by
AFGL as a sale by the Companies of all of their assets to
AFGL followed by a complete liquidation. At the time the
Draft Closing Balance Sheet is delivered to the Stockholders
under Section 5.03, AFGL will deliver a schedule, including
the Internal Revenue Service Form 8023A (with supporting
schedules), allocating the proposed Purchase Price among the
assets of the Companies. On completion of the Closing
Balance Sheet, the allocation of the Purchase Price will be
finalized in a further schedule delivered to the
Stockholders. Following completion of the Closing Balance
Sheet and final adjustments to the Preliminary Purchase
Price, and as a condition precedent to the payment of any
remaining portion of the Purchase Price under Section
5.04(c), all of the Stockholders shall deliver to AFGL
properly completed and signed forms required to make the
election under Section 338(h)(10). The Parties hereto
further agree to prepare, sign, deliver, and file, any and
all additional tax forms, and take all such further action
as may be reasonably required to make the afore-said
election.
(d) Within 75 days after Closing, the Stockholders
will submit to AFGL an analysis and computation (the
"Computation") describing in detail any circumstance or
transaction which would result in a gain on a sale of the
Companies assets (pursuant to the 338(h)(10) tax election
described above) which would exceed the actual gain on the
sale of stock to AFGL (if the transaction was treated as a
stock sale for tax purposes); provided, that the
Stockholders shall not claim any excessive gain hereunder on
the basis of any circumstance or transaction consisting of
or arising from (i) an exclusion of income from the Tax
Return of any Person; (ii) an excessive or erroneous
deduction on the Tax Return of any Person; (iii) any
computational mistake on the Tax Return of any Person; (iv)
any period during which any of the Historic Companies was
not a valid S corporation under the Tax Code and
Regulations; and (v) any change in basis of the Companies
Stock held by any Stockholder arising from the death of a
prior shareholder of any of the Historic Companies or a
purchase of shares of any of the Historic Companies. If
AFGL has any objections to the Computation, it will deliver
a detailed statement describing its objections to the
Stockholders within 45 days after receiving the Computation.
AFGL and the Stockholders will use reasonable efforts to
resolve any such objections themselves. If AFGL and the
Stockholders do not obtain a final resolution within 30 days
after the Stockholders have received the statement of
objections, however, AFGL and the Stockholders will select
an accounting firm mutually acceptable to them to resolve
any remaining objections. If AFGL and the Stockholders are
unable to agree on the choice of an accounting firm, they
will select a nationally-recognized accounting firm by lot
(after excluding their respective regular outside accounting
firms). The determination of any accounting firm so
selected will be set forth in writing and will be conclusive
and binding upon the Parties. The Stockholders will revise
the Computation as appropriate to reflect the resolution of
any objections thereto pursuant to this paragraph. The
"Inside/Outside Difference" shall mean the excess gain set
forth in the Computation as finally adjusted pursuant to
this paragraph. In the event the Parties submit any
unresolved objections to an accounting firm for resolution
as provided in this paragraph (d), AFGL and the Stockholders
will share responsibility for the fees and expenses of the
accounting firm as follows: (i) if the accounting firm
resolves all of the remaining objections in favor of AFGL
(the Inside/Outside Difference so determined is referred to
herein as the "Low Difference"), the Stockholders will be
responsible for all of the fees and expenses of the
accounting firm; (ii) if the accounting firm resolves all of
the remaining objections in favor of the Stockholders (the
Inside/Outside Difference so determined is referred to
herein as the "High Difference"), AFGL will be responsible
for all of the fees and expenses of the accounting firm; and
(iii) if the accounting firm resolves some of the remaining
objections in favor of AFGL and the rest of the remaining
objections in favor of the Stockholders (the Inside/Outside
Difference so determined is referred to herein as the
"Actual Difference"), the Stockholders will be responsible
for that fraction of the fees and expenses of the accounting
firm equal to (x) the difference between the High Difference
and the Actual Value over (y) the difference between the
High Difference and the Low Difference, and AFGL will be
responsible for the remainder of the fees and expenses.
(e) AFGL agrees to pay to the Stockholders, within 30
days of final determination of the Inside/Outside
Difference, an amount equal to 33.5 % of the Inside/Outside
Difference divided by a gross-up percentage of .665,
allocated among the Stockholders in proportion to their
respective holdings of the Companies' stock as set forth in
the Stockholder List.
(f) The covenant contained in this Section 6.03 shall
survive the Closing and the consummation of the transactions
herein contemplated.
Section 6.04 Indemnification.
(a) All of the representations and warranties of the
Parties contained in this Agreement shall survive the
Closing hereunder and continue in full force and effect for
a period of eighteen months thereafter; provided, however,
that the representations and warranties set forth in
Sections 2.09, 4.01(e), 4.02(e), and 4.03(e), shall survive
the Closing and continue in full force and effect until
expiration of the statute of limitations applicable to all
Tax Returns covering the operations of the Companies for the
year ending December 31, 1996, filed with the applicable
federal, state, and local authorities. In the event any
Party breaches (or in the event any third Person alleges
facts that, if true, would mean any Party has breached) any
of its representations and warranties contained herein,
provided a written claim for indemnification against the
breaching Party is made within any applicable survival
period specified in this paragraph (a) of Section 6.04, then
the breaching Party (the "Indemnifying Party") agrees to
indemnify the other Parties (the "Indemnified Parties") from
and against the entirety of any Adverse Consequences the
Indemnified Parties may suffer through and after the date of
the claim for indemnification (including any Adverse
Consequences the Indemnified Parties may suffer after the
end of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by
the breach (or the alleged breach); provided, however, that
no Indemnifying Party shall have any obligation to indemnify
any Indemnified Party from and against any Adverse
Consequences resulting from, arising out of, relating to, in
the nature of, or caused by the breach (or alleged breach)
of any representation, warranty, or covenant of the
Indemnifying Party until the Indemnified Parties have
suffered Adverse Consequences by reason of all such breaches
(or alleged breaches) in excess of a $100,000 aggregate
threshold, at which point the Indemnifying Party will be
obligated to indemnify the Indemnified Parties from and
against all such Adverse Consequences that are in excess of
the first $50,000 of Adverse Consequences; provided further,
that the indemnification obligation of each Stockholder when
two or more Stockholders are Indemnifying Parties shall be
apportioned between them on the basis of a fraction, the
numerator of which is the amount of Companies Stock owned by
each indemnifying Stockholder as set forth on the
Stockholder List, and the denominator of which is the total
of the Companies Stock held by all indemnifying Stockholders
as set forth on the Stockholder List; and provided further,
that the maximum obligation to indemnify all Indemnified
Parties from and against Adverse Consequences resulting
from, arising out of, relating to, in the nature of, or
caused by the breach (or alleged breach) of any
representation, warranty, or covenant of the Indemnifying
Party shall not exceed, in the aggregate, the Purchase
Price.
(b) If any third Person shall notify any Indemnified
Party with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against
any Indemnifying Party under this Section 6.04, then the
Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; provided, however, that no delay
on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced. Any
Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel
of it choice reasonably satisfactory to the Indemnified
Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other
equitable relief, (iv) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish
a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and
(v) the Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently. So long as the
Indemnifying Party is conducting the defense of the Third
Party Claim in accordance with this paragraph, the
Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third
Party Claim, the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld
unreasonably), and the Indemnifying Party will not consent
to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld
unreasonably). In the event any of the conditions in
clauses (i) through (v) of this paragraph is or becomes
unsatisfied, the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any
manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection
therewith), the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and the
Indemnifying Party will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent
provided in this Section 6.04.
(c) Notwithstanding the provisions of this Section
6.04, no Party may recover for any Adverse Consequences
suffered after the Closing arising from the breach of any
representation or warranty known by the Party to be false or
inaccurate as of the Closing; provided that this limitation
shall not apply to any of the representations and warranties
contained in Sections 2.09, 4.01(e), 4.02(e), and 4.03(e) of
this Agreement.
(d) In the event there is a breach of a representation
or warranty that results in Adverse Consequences to any
Party, such Party shall act reasonably to mitigate any such
Adverse Consequences. The amount recoverable for Adverse
Consequences arising from the breach of any representation
or warranty by an Indemnifying Party shall be reduced by the
amount recovered by the Indemnified Parties from any
insurance or other indemnification arrangements.
(e) The remedy set forth in this Section 6.04 will be
the exclusive remedy for recovering on Adverse Consequences
resulting from the breach of any representations and
warranties set forth in this Agreement, but is not the
exclusive remedy for any default or breach of performance of
a post-Closing covenant or agreement. In no event shall any
Indemnified Party be entitled to set off against any amounts
which are owing or payable to any Indemnifying Party, with
respect to any amount claimed on the basis of any Adverse
Consequences and the indemnification obligation set forth in
this Section 6.04.
Section 6.05 Third Person Consents. The Parties agree to
cooperate with each other in order to obtain any required third
Person consents to this Agreement and the transactions herein
contemplated. In this regard, the Parties acknowledge that AFGL
must obtain the consent of FINOVA Capital Corporation, Merrill
Lynch Financial Services Inc., and True North Communications,
Inc. (formerly Foote, Cone & Belding Communications, Inc.).
Section 6.06 Employment Arrangements. At the Closing,
AFGL and the successor to ICTI shall enter into employment
agreements with Cohen, List, and Ronald Wendlinger in the forms
negotiated by each such individual.
Section 6.07 Termination.
(a) This Agreement may be terminated by the board of
directors of any Party at any time prior to the Closing if:
(i) A Party shall have received notice of
any actual or threatened material action or proceeding
before any court or any governmental body which shall
seek to restrain, prohibit, or invalidate the
transactions contemplated by this Agreement and which,
in the judgment of such board of directors, made in
good faith and based on the advice of its legal
counsel, makes it inadvisable to proceed with the
transactions contemplated by this Agreement;
(ii) There shall have been any change after
the Balance Sheet Date in the assets, properties,
business, or financial condition, of the Companies,
which is reasonably likely to have a material adverse
effect on the value of the Companies taken as a whole,
except any changes disclosed in the Companies
Schedules, which shall be disclosed as soon as any of
the Companies has knowledge of the change;
(iii) There shall have been any change
after the date of the September 30, 1995, AFGL balance
sheet in its assets, properties, business, or financial
condition, which is reasonably likely to have a
material adverse effect on the value of the business,
except any changes disclosed in the AFGL Schedules,
which shall be disclosed as soon as AFGL has knowledge
of the change; or
(iv) Any one or more of the Companies or the
Stockholders shall fail to comply in any material
respect with any of their respective material covenants
or agreements contained in this Agreement or if any of
their respective material representations or warranties
contained herein shall be inaccurate in any material
respect.
In the event of termination pursuant to this Section
6.07(a), no obligation, right, or liability shall arise
hereunder; each Party shall bear all of the expenses
incurred by it in connection with the negotiation, drafting,
and execution of this Agreement and the transactions herein
contemplated; the Companies and the Stockholders shall
refund to AFGL the $100,000 deposit made under Article V of
this Agreement; provided, however, that the preceding
sentence shall not apply in the event of termination upon
(y) any material action against AFGL and its Subsidiaries
described in clause (i) of Section 6.07(a), and (z) any
change in the AFGL balance sheet dated September 30, 1995,
described in clause (iii) of Section 6.07(a).
(b) This Agreement may be terminated by the board of
directors of any Party with respect to clause (iii) below,
and by the board of directors of AFGL with respect to clause
(i) and (ii) below if:
(i) AFGL shall fail to obtain the consents
or waivers required of any third Person for it to
consummate the transactions contemplated by this
Agreement;
(ii) AFGL shall fail to obtain the financing
required to effectuate the purchase of the Companies
Stock under Article V of this Agreement; or
(iii) AFGL shall fail to comply in any
material respect with any of its covenants or
agreements contained in this Agreement or if any of its
representations or warranties contained herein shall be
inaccurate in any material respect.
In the event of termination pursuant to this Section
6.07(b), AFGL shall pay the expenses of all Parties as
provided in Section 6.10, below; the Stockholders shall
retain the $100,000 deposit made under Article V of this
Agreement; and, except as specifically provided in this
Section 6.07(b), no obligation, right, or liability shall
arise hereunder.
Section 6.08 Payment of Indebtedness. At the closing the
stockholders shall deliver a payoff letter from Republic Bank
setting forth the total amount which must be paid to Republic
Bank to pay in full as of the date of Closing all notes and other
obligations payable to Republic Bank on which any of the
Companies is directly liable as a maker or endorser or given its
corporate guaranty, or on which Republic Bank holds a Security
Interest in any of the assets of the Companies (the "Republic
Bank Obligation"). The parties agree and acknowledge that a
portion of the Preliminary Purchase Price shall be paid by wire
transfer of funds required to pay the Republic Bank Obligation in
full as of the date of Closing.
Section 6.09 Public Announcement. The parties covenant
and agree to keep confidential this Agreement and the
transactions contemplated hereby, except as may be required by
applicable law. In the event any party is required by law to
make a disclosure regarding this Agreement and the transactions
contemplated hereby, such party shall obtain the approval of the
other parties before issuing a press release or making any other
public statement, which approval shall not be unreasonably
withheld.
Section 6.10 Reimbursement of Fees. AFGL covenants and
agrees to reimburse the Companies and/or the Stockholders for the
certain fees and other expenses incurred in connection with the
transactions contemplated by this Agreement on the following
terms and conditions.
(a) AFGL shall pay all of the accounting fees incurred
by the Companies in connection with the purchase transaction
contemplated by Article V and the tax matters contemplated
by Section 6.03 of this Agreement, all of which accounting
fees are hereinafter referred to as the "Accounting Fee
Reimbursement". At the time of signing and delivery of this
Agreement, the Companies are delivering to AFGL all billings
for the Accounting Fee Reimbursement previously received by
the Companies showing in reasonable detail the services and
amounts billed, and AFGL is delivering to the Companies 50%
of the Accounting Fee Reimbursement as shown on such bills.
Upon Closing, AFGL shall pay to the Companies the remainder
of the Accounting Fee Reimbursement billed as of the date of
Closing. Subsequent to the Closing, AFGL covenants and
agrees to pay the full amount of post-Closing Accounting Fee
Reimbursements upon receipt of invoices directly from the
accountants; provided, that the obligation of AFGL to pay
Accounting Fee Reimbursements for costs incurred in making
determination of the Inside/Outside Difference under Section
6.03 of this Agreement shall not exceed $12,500.
(b) AFGL shall pay all of the accounting fees incurred
by the Companies in connection with auditing financial
statements of the Companies for any period prior to or
subsequent to the date of Closing and 50% of the costs to
the Stockholders of negotiating and preparing the employment
agreements contemplated by Section 6.06 of this Agreement,
all of which fees are hereinafter referred to as the
"Employment Agreement and Audit Reimbursement." At the time
of signing and delivery of this Agreement, the Companies are
delivering to AFGL all billings for the Employment Agreement
and Audit Reimbursement previously received by the Companies
showing in reasonable detail the services and amounts
billed, and AFGL is delivering as directed by the Companies
50% of the Employment Agreement and Audit Reimbursement as
shown on such bills. Upon Closing, AFGL shall pay to the
Companies and Stockholders remainder of the Employment
Agreement and Audit Reimbursement billed as of the date of
Closing.
(c) At the Closing, AFGL covenants and agrees to
reimburse the Companies for 100% of the fees incurred by the
Companies in connection with the Viva Transaction, which is
herein referred to as the "Viva Fee Reimbursement." The
amount of the Viva Fee Reimbursement payable at Closing is
$25,000.
(d) In the event this Agreement is terminated because
the transactions contemplated hereby are not closed within
the time period stated in Section 7.01, or this Agreement is
terminated on the basis of any material action against AFGL
and its Subsidiaries described in clause (i) of Section
6.07(a), any change in the AFGL balance sheet dated
September 30, 1995, described in clause (iii) of Section
6.07(a), or any of the provisions of Section 6.07(b), AFGL
shall promptly pay to the Companies and Stockholders, as
applicable, the Accounting Fee Reimbursement for all fees
incurred up to and including the date of termination upon
receipt of invoices for such reimbursement, the Employment
Agreement and Audit Reimbursement for all fees incurred up
to and including the date of termination upon receipt of
invoices for such reimbursement, the remaining 50% of the
costs to the Stockholders of negotiating and preparing the
employment agreements contemplated by Section 6.06 of this
Agreement which is not included in the Employment Agreement
and Audit Reimbursement, and all costs incurred by the
Companies in negotiating this Agreement up to and including
the date of termination upon receipt of invoices for such
reimbursement.
Section 6.11 Additional Covenants.
(a) AFGL covenants and agrees to take whatever actions
are necessary to release the Companies and the Stockholders,
officers, and directors of the Companies from any
liabilities incurred in connection with the Viva
Transaction, including delivering the promissory note of
AFGL contemplated by the Viva Agreement.
(b) Each of the Parties hereto covenants and agrees to
disclose to the other Parties prior to Closing any events or
circumstances that give that Party reason to believe that
there may be a breach of any other Parties' representations
and warranties set forth in this Agreement.
(c) Each of the Parties hereto covenants and agrees to
use commercially reasonable efforts to satisfy the
conditions specified in this Agreement to the extent that
such satisfaction shall be within its control.
Section 6.12 Dispute Resolution Procedures. In the event
of dispute between the Parties as to the performance or breach
hereof, this Agreement shall be and remain in full force and
effect and all terms hereof shall continue to be complied with by
both parties, and such dispute shall be resolved in accordance
with the procedures set forth in this section.
(a) If the Parties are unable to resolve a dispute by
good faith negotiation within thirty (30) days after the
dispute arises, the Parties shall attempt in good faith to
resolve the dispute by mediation pursuant to the procedures
of the American Arbitration Association applicable to the
mediation of commercial disputes. If the Parties are unable
to agree on a mediator, the mediator shall be selected
pursuant to the Commercial Mediation Rules of the American
Arbitration Association.
(b) If the dispute or claim has not been resolved by
mediation within thirty (30) days of the initiation thereof,
the dispute shall be resolved by arbitration conducted in
New York City by a single arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration
Association then in effect or such other rules as mutually
agreed upon by the Parties. Judgment upon the award
rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Each party shall bear its own
costs and attorneys' fees incurred in connection with
arbitration, except that if the arbitration pertains to any
indemnification obligation of the Stockholders under Section
6.04 with respect to any Adverse Consequence arising from a
breach of the representations and warranties set forth in
Sections 4.01(e), 4.02(e), and 4.03(e), and AFGL prevails in
such arbitration, the Stockholders shall, in addition to
their own costs, bear all of the costs, including attorney's
fees, incurred in connection therewith and in enforcing and
collecting any judgment rendered therein.
ARTICLE VII
CLOSING
Section 7.01 Closing. The Closing of the transactions
contemplated by this Agreement shall occur at 10:00 AM, New York
City time on April 30, 1996, at the offices of AFGL, 850 Third
Avenue, 11th Floor, New York, New York, or on such other date and
at such time and place as the Parties may agree. In the event
the Closing is not held on or before May 31, 1996, and provided
that the Companies and the Stockholders shall not, as of that
time, have breached any of their material covenants,
representations, or warranties, AFGL shall pay the expenses of
all Parties as provided in Section 6.10, above; the Stockholders
shall retain the $100,000 deposit made under Article V of this
Agreement; and, except as specifically provided in this Section
7.01, no obligation, right, or liability shall arise hereunder.
Section 7.02 Closing Events. At the Closing, each of the
respective Parties hereto shall execute, acknowledge, and deliver
(or shall cause to be executed, acknowledged, and delivered) any
and all certificates, financial statements, schedules,
agreements, resolutions, rulings, or other instruments required
by this Agreement to be so delivered at or prior to the Closing,
together with such other items as may be reasonably requested by
the Parties hereto and their respective legal counsel in order to
effectuate or evidence the transactions contemplated hereby.
ARTICLE VIII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF AFGL
The obligations of AFGL under this Agreement are subject to
the satisfaction, at or before the Closing, of the following
conditions:
Section 8.01 Accuracy of Representations. The
representations and warranties made by the Companies and the
Stockholders in this Agreement were true when made and shall be
true as of the date of Closing with the same force and effect as
if such representations and warranties were made at and as of the
date of Closing (except for changes therein permitted by this
Agreement), and each of the Companies and the Stockholders shall
have performed or complied with all covenants and conditions
required by this Agreement to be performed or complied with by
them prior to or at the Closing. AFGL shall be furnished with
certificates signed by a duly authorized officer of each of the
Companies and signed by each Stockholder, each dated the date of
Closing, to the foregoing effect.
Section 8.02 Litigation Certificates. AFGL shall have
been furnished with certificates dated the date of Closing and
signed by a duly authorized officer of each of the Companies and
signed by each Stockholder to the effect that no litigation,
proceeding, investigation, or inquiry is pending which might
result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Agreement.
Section 8.03 No Material Adverse Change. Prior to the
Closing, there shall not have occurred any material adverse
change in the financial condition, business, or operations of the
Companies.
Section 8.04 Good Standing. AFGL shall have received a
certificate of good standing from the Secretary of State of the
state of New York dated as of a date within ten days prior to the
Closing certifying that each of the Companies is in good standing
as a corporation in such state.
Section 8.05 Consents/ Agreements. The Parties shall have
obtained any third Person consents pursuant to Section 6.05.
Section 8.06 Legal Opinion. AFGL shall have received from
counsel to the Companies a legal opinion in the form agreed to by
the Parties prior to Closing.
Section 8.07 Republic Obligation. The Companies and
Stockholders shall take all actions reasonably required to apply
at the Closing a portion of the Preliminary Purchase Price to
repayment of the Republic Bank Obligation in full, and to release
any and all corporate obligations and guarantees given by the
Companies for the Republic Bank Obligation, and all Security
Interests granted to Republic Bank by the Companies thereunder.
Section 8.08 Balance Sheets. The Companies shall have
delivered to AFGL the March Balance Sheet and Estimated Balance
Sheet in accordance with the requirements of Section 5.02 of this
Agreement.
Section 8.09 Reimbursement Documents. The Companies
and/or Stockholders shall have delivered to AFGL billing
statements, invoices, and other documents reasonably required by
AFGL to make payment of the Accounting Fee Reimbursement,
Employment Agreement and Audit Reimbursement, and Viva Fee
Reimbursement in accordance with Section 6.10 at the Closing.
Section 8.10 Other Items. AFGL shall have received such
further documents, certificates, or instruments relating to the
transactions contemplated hereby as AFGL may reasonably request.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANIES
AND STOCKHOLDERS
The obligations of the Companies and the Stockholders under
this Agreement are subject to the satisfaction, at or before the
Closing, of the following conditions:
Section 9.01 Accuracy of Representations. The
representations and warranties made by AFGL in this Agreement
were true when made and shall be true as of the date of Closing
with the same force and effect as if such representations and
warranties were made at and as of the date of Closing (except for
changes therein permitted by this Agreement), and AFGL shall have
performed or complied with all covenants and conditions required
by this Agreement to be performed or complied with by it prior to
or at the Closing. The Companies and the Stockholders shall be
furnished with a certificate, signed by a duly authorized officer
of AFGL and dated the date of Closing, to the foregoing effect.
Section 9.02 Litigation Certificate. The Companies and
the Stockholders shall have been furnished with a certificate
dated the date of Closing and signed by a duly authorized officer
of AFGL to the effect that no litigation, proceeding,
investigation, or inquiry is pending which might result in an
action to enjoin or prevent the consummation of the transactions
contemplated by this Agreement.
Section 9.03 No Material Adverse Change. Prior to the
Closing, there shall not have occurred any material adverse
change in the financial condition, business, or operations of
AFGL and its Subsidiaries.
Section 9.04 Good Standing. The Companies and the
Stockholders shall have received a certificate of good standing
from the Secretary of State of the state of Nevada and a
certificate of authority from the Secretary of State of the state
of New York, each dated as of a date within ten days prior to the
Closing certifying that AFGL is in good standing as a corporation
in such states.
Section 9.05 Consents/ Agreements. The Parties shall have
obtained any third Person consents pursuant to Section 6.05.
Section 9.06 Legal Opinion. The Companies and the
Stockholders shall have received from counsel to AFGL a legal
opinion in the form in the form agreed to by the Parties prior to
Closing.
Section 9.07 Republic Obligation. At the Closing AFGL
shall take all action reasonably required to apply a portion of
the Preliminary Purchase Price to repayment of the Republic
Obligation contemplated by Section 6.08.
Section 9.08 Viva Agreement. At the closing AFGL shall
prepare, sign, and deliver all documents, instruments, and other
agreements required by the terms and provisions of the Viva
Agreement, so that all Companies Stock is released from escrow,
free of any Security Interest, to the Stockholders at Closing.
Section 9.09 Other Items. The Companies and the
Stockholders shall have received such further documents,
certificates, or instruments relating to the transactions
contemplated hereby as they may reasonably request.
ARTICLE X
MISCELLANEOUS
Section 10.01 Brokers. The Parties agree that there were
no finders or brokers involved in bringing the Parties together
or who were instrumental in the negotiation, execution, or
consummation of this Agreement. The Parties each agree to
indemnify the other against any claim by any Person for any
commission, brokerage, or finders' fee arising from the
transactions contemplated hereby based on any alleged agreement
or understanding between the indemnifying Party and such Person,
whether express or implied from the actions of the indemnifying
Party.
Section 10.02 Governing Law. This Agreement shall be
governed by, enforced, and construed under and in accordance with
the laws of the United States of America and, with respect to
matters of state law, with the laws of New York.
Section 10.03 Notices. Any notices or other communications
required or permitted hereunder shall be sufficiently given if in
writing and if personally delivered to it or sent by registered
mail or certified mail, postage prepaid, or by prepaid telegram
addressed as follows:
If to AFGL, to: AFGL INTERNATIONAL, INC.
Attn: Barry S. Roseman
850 Third Avenue, 11th Floor
New York, New York 10022
With copies to: LEHMAN, JENSEN & DONAHUE, L.C.
Attn: Mark E. Lehman
8 East Broadway, Suite 620
Salt Lake City, Utah 84111
If to the Companies or
the Stockholders, to: IRENE COHEN TEMPS, INC.
Attn: Michael List
475 Fifth Avenue, Second Floor
New York, New York 10017
With copies to: MORGAN, LEWIS & BOCKIUS LLP
Attn: Thomas Sharbaugh
2000 One Logan Square
Philadelphia, Pennsylvania 19103
or such other addresses as shall be furnished in writing by any
Party in the manner for giving notices hereunder, and any such
notice or communication shall be deemed to have been given as of
the date so delivered, mailed, or telegraphed.
Section 10.04 Attorneys' Fees. In the event that any Party
institutes any action or suit to enforce this Agreement or to
secure relief from any default hereunder or breach hereof, the
Parties participating in the action or suit shall each bear their
own costs, including attorneys' fees, incurred in connection
therewith and in enforcing or collecting any judgment rendered
therein; provided, that in the event AFGL institutes any action
to enforce any indemnification obligation of the Stockholders
under Section 6.04 with respect to any Adverse Consequence
arising from a breach of the representations and warranties set
forth in Sections 4.01(e), 4.02(e), and 4.03(e), and AFGL
prevails in such action, the Stockholders shall, in addition to
their own costs, bear all of the costs, including attorney's
fees, costs on appeal, and interest from the date of judgment at
the applicable judgment rate, incurred in connection therewith
and in enforcing and collecting any judgment rendered therein.
Section 10.05 Third Party Beneficiaries. This Agreement is
solely between the Parties hereto, and except as specifically
provided no director, officer, stockholder, employee, agent,
independent contractor, or any other Person shall be deemed to be
a third party beneficiary of this Agreement.
Section 10.06 Entire Agreement. This Agreement, including
the exhibits and schedules hereto, represents the entire
agreement between the Parties relating to the subject matter
hereof, including the letter agreement dated October 20, 1995,
which is merged into this Agreement. This Agreement fully and
completely expresses the agreement of the Parties. There are no
other courses of dealing, understandings, agreements,
representations, or warranties, written or oral, except as set
forth herein. None of the Parties hereto is making any
representations or warranties to another Party except to the
extent that the Companies have made representations and
warranties in Article II, AFGL has made representations and
warranties in Article III, and the Stockholders have made
representations and warranties in Article IV.
Section 10.07 Counterparts. This Agreement may be executed
in multiple counterparts, each of which shall be deemed an
original and all of which taken together shall be but a single
instrument.
Section 10.08 Amendment or Waiver. Every right and remedy
provided herein shall be cumulative with every other right and
remedy, whether conferred herein, at law, or in equity, and may
be enforced concurrently herewith, and no waiver by any Party of
the performance of any obligation by the other Parties shall be
construed as a waiver of the same or any other default then,
theretofore, or thereafter occurring or existing. At any time
prior to the Closing, this Agreement may be amended by a writing
signed by all Parties hereto with respect to any of the terms
contained herein, and any term or condition of this Agreement may
be waived or the time for performance hereof may be extended by a
writing signed by the Party or Parties for whose benefit the
provision is intended.
Section 10.09 Assignment. This Agreement shall be binding
upon and in order to the benefit of and by enforceable by the
respective heirs, legal representatives, successors, and
permitted assigns of the parties hereto; provided, however, that
no party hereto shall sign this Agreement or any rights, benefit,
or obligation hereunder without the prior written consent of all
of the parties hereto.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement, or caused this Agreement to be executed by their
officers hereunto duly authorized, as of the date first above-
written.
AFGL INTERNATIONAL, INC.
By /s/
Barry S Roseman
Chief Operating Officer
IRENE COHEN TEMPS, INC.
By /s/
Michael List, President
CORPORATE STAFFING ALTERNATIVES,
INC.
By /s/
Irene Cohen, President
CERTIFIED TECHNICAL STAFFING, INC.
By /s/
Michael List, President
STOCKHOLDERS
/s/
Irene Cohen
/s/
Elaine Finegan
/s/
Michael List
AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 ("Amendment") to the Stock Purchase
Agreement dated April 10, 1996 ("Agreement") is made and entered
into as of the 30th day of May, 1996, by and between AFGL
INTERNATIONAL, INC., a Nevada corporation, IRENE COHEN TEMPS,
INC., a New York corporation, CORPORATE STAFFING ALTERNATIVES,
INC., a New York corporation, CERTIFIED TECHNICAL STAFFING, INC.,
a New York corporation, each of the STOCKHOLDERS of the Companies
as originally defined in the Agreement, and SEYMOUR COHEN.
Capitalized terms not otherwise defined in this Amendment have
the meaning given them in the Agreement.
Premises
The Agreement provides for the acquisition by AFGL from the
Stockholders of all of the capital stock of the Companies. At
the time the Agreement was entered into, the Companies and
Stockholders anticipated that Seymour Cohen would transfer all of
the capital stock he owns in CSA to other Stockholders prior to
the Closing of the transactions contemplated by the Agreement.
CSA and the Stockholders have since determined not to make said
transfer, so that as of the date of Closing Seymour Cohen will
own shares of the capital stock of CSA. In order to effectuate
the sale of CSA to AFGL, the Parties desire to amend the
Agreement to include Seymour Cohen as a Stockholder, and Seymour
Cohen desires to become a Party to the Agreement in order to
effect the sale of CSA contemplated thereby.
Agreement
NOW, THEREFORE, on the stated premises and for and in
consideration of the mutual covenants and agreements hereinafter
set forth and the mutual benefits to the Parties to be derived
herefrom, it is hereby agreed as follows:
1. Definitions. The definitions set forth in Article I of
the Agreement are hereby amended to add a definition for
"S.Cohen", add a definition for "April Balance Sheet", modify the
definition of "Stockholder(s)", and delete the definition of
"March Balance Sheet", all as follows:
April Balance Sheet has the meaning set forth in Section
5.02, below.
S.Cohen is Seymour Cohen,
who is a stockholder of one or more of
the Companies as stated in the
Stockholder List and a Party to this
Agreement.
Stockholder(s) is, when singular,
either Cohen, Finegan, List, or S.Cohen,
and is, when plural, two or all of such
persons as the context dictates.
The definition for the term "March Balance Sheet" is hereby
deleted.
2. Stockholder Representations and Warranties. Article IV
of the Agreement is hereby amended by the addition of Section
4.04 as follows:
Section 4.04 By S.Cohen. S.Cohen represents and
warrants as follows:
(a) Except as set forth in the Companies
Schedules, the execution and delivery of this Agreement
does not, and the consummation of the transactions
contemplated by this Agreement in accordance with the
terms hereof will not: result in the breach of,
constitute a default under, result in the acceleration
of, create in any Person the right to accelerate,
terminate, modify, cancel, or require any notice under,
any material agreement, contract, lease, license,
instrument, or other arrangement to which S.Cohen is a
party or by which he is bound; or, violate any
constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or
court to which S.Cohen is subject.
(b) Except as set forth in the Companies
Schedules, S.Cohen has full power and authority, and
has taken all action required by law and otherwise to
execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement represents the
valid and binding obligation of S.Cohen enforceable
against him in accordance with its terms, except as
limited by bankruptcy and insolvency laws and by other
laws affecting the rights of creditors generally.
(c) No authorization, approval, consent, or order
of, or registration, declaration, or filing with, any
court or other governmental body is required in
connection with the execution and delivery by S.Cohen
of this Agreement and the consummation by him of the
transactions contemplated hereby.
(d) Except as set forth in the Companies
Schedules, S.Cohen is the legal and beneficial owner of
the Companies Stock set forth on the Stockholder List,,
free and clear of any claims, charges, equities, liens,
security interests, and encumbrances whatsoever, and
S.Cohen has full right, power, and authority to
transfer, assign, convey, and deliver the Companies
Stock; and delivery of such stock at the Closing will
convey to AFGL good and marketable title to the
Companies Stock free and clear of any claims, charges,
equities, liens, Security Interests, and encumbrances
whatsoever.
(e) At all times up to and including the date of
Closing, each of the Companies, any predecessor
corporation or other corporation whose assets were
transferred or retransferred by any Stockholder to any
of the Companies or any predecessor of the Companies
(including, but not by way of limitation, Americana),
and any direct or indirect corporate asset transferor
of any of the Historic Companies: (i) have always been
qualified S corporations under the Tax Code and
Regulations; (ii) have been S corporations of New York
State and New Jersey for all purposes at all times
since such states have recognized such status under
state law; and (iii) have never been, at any time, a
corporation taxable as a regular corporation (non-S
corporation) under the Tax Code and Regulations or for
New York State tax purposes.
(f) To the knowledge of S.Cohen, the information
concerning S.Cohen and the Companies set forth in this
Agreement under Article II and this Section 4.04 is
complete and accurate in all material respects and does
not contain any untrue statement of a material fact or
omit to state a material fact required to make the
statements made, in light of the circumstances under
which they are made, not misleading.
3. Definition of March Balance Sheet..
(a) Article V of the Agreement is hereby amended by
deleting all of Section 5.02 and inserting the following in lieu
thereof:
Section 5.02 Preliminary Purchase Price. AFGL agrees
to pay to the Stockholders at the Closing (hereinafter the
"Preliminary Purchase Price"), $8,260,000 plus the amount
(the "Additional Amount") by which the Combined Book Value
of the Companies exceeds $2,100,000 as reflected on a
combined balance sheet of the Companies as of April 30,
1996, prepared by the Companies, certified by an executive
officer of the Companies, and delivered to AFGL two business
days prior to the date of Closing (the "April Balance
Sheet") by (i) a deposit of $100,000 by certified check or
by wire transfer of funds to an escrow account established
by Morgan, Lewis & Bockius, LLP, concurrently with the
signing and delivery of this Agreement, which will be paid
over to the Stockholders at Closing, and (ii) cash for the
balance of the Preliminary Purchase Price payable at Closing
by wire transfer or delivery of other immediately available
funds. The Preliminary Purchase Price shall be allocated
among the Stockholders in proportion to their respective
holdings of Companies Stock as set forth in the Stockholder
List delivered by the Stockholders at Closing. In addition
to the Preliminary Purchase Price, AFGL will deposit at
Closing by wire transfer or delivery of other immediately
available funds in the escrow account established under this
Section 5.02 (the "Escrowed Funds"), an amount equal to the
difference between the Preliminary Purchase Price and the
Combined Book Value of the Companies as reflected on a date
of Closing combined estimated balance sheet as of the date
of Closing prepared by the Companies and delivered to AFGL
two business days prior to the Closing (the "Estimated
Balance Sheet"). The Preliminary Purchase Price will be
subject to post-Closing adjustment as set forth below in
Sections 5.03, 5.04, and 6.03, as applicable.
(b) All references in the Agreement to the term "March
Balance Sheet" are deemed for all purposes to be "April Balance
Sheet."
4. Acceptance. By the execution hereof, Seymour Cohen
agrees and acknowledges that he is a Stockholder and Party to the
Agreement for all purposes as though he were an original
signatory thereto, makes the representations and warranties set
forth in paragraph 2 of this Amendment and agrees that such
representations and warranties shall be deemed a part of the
Agreement for all purposes, and agrees to be bound by all of the
terms and conditions of the Agreement as amended by this
Amendment.
4. Miscellaneous.
(a) Except as specifically amended by this Amendment, the
Agreement shall be unchanged and remain in full force and effect.
From and after the date of this Amendment, all references to the
Agreement contained herein and in the Agreement shall be deemed
to be references to the Agreement as amended hereby.
(b) This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original and all
of which taken together shall be but a single instrument.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement, or caused this Agreement to be executed by their
officers hereunto duly authorized, as of the date first above-
written.
AFGL INTERNATIONAL, INC.
By /s/
Barry S Roseman
Chief Operating Officer
IRENE COHEN TEMPS, INC.
By /s/
Michael List, President
CORPORATE STAFFING ALTERNATIVES,
INC.
By /s/
Irene Cohen, President
CERTIFIED TECHNICAL STAFFING, INC.
By /s/
Michael List, President
STOCKHOLDERS
/s/
Irene Cohen
/s/
Elaine Finegan
/s/
Michael List
/s/
Seymour Cohen
17
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into this
31st day of May, 1996, by and between AFGL INTERNATIONAL, INC., a
Nevada corporation ("AFGL"), and HEADWAY CORPORATE STAFFING
SERVICES, INC., a Delaware corporation ("CSS") (AFGL and CSS are
collectively referred to as the "Buyer"), IRENE COHEN PERSONNEL,
INC., a New York corporation ("SELLER"), and IRENE COHEN and
SEYMOUR COHEN, stockholders of SELLER (collectively "Cohen").
1. Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below unless the context
otherwise requires:
"Agreement" means this Asset Purchase Agreement together
with all exhibits attached hereto and incorporated herein by
reference.
"ICP Assets" means the assets of SELLER consisting of office
equipment and furniture located at the office of SELLER at
475 Fifth Avenue, New York, New York, the name "Irene Cohen
Personnel", data bases, client lists, and other items more
particularly described in Exhibit "A" hereto.
"Excluded Assets" means the assets of SELLER not listed in
Exhibit "A" and, (i) all artwork and sculptures located at
the offices of SELLER, and (ii) all items located in Seymour
Cohen's office located at the offices of Seller.
"Assumed Liabilities" means the liabilities of SELLER listed
in Exhibit "B" hereto.
"Excluded Liabilities" means the liabilities of SELLER not
listed in Exhibit "B".
"Effective Date" means 12:01 a.m., Eastern Time on the date
of "Closing", as that term is defined in the Stock Purchase
Agreement dated April 10, 1996, to which AFGL and Irene
Cohen (among others) are parties.
"Net Income" means net income determined in accordance with
generally accepted accounting principles, consistently
applied throughout the relevant periods, except that the
following expenses shall not be deducted in the calculation
of Net Income: (a) any allocations of corporate overhead
expenses directly incurred by the BUYER, or any affiliates,
subsidiaries, or divisions of the BUYER; (b) any computer
software or network and programming expenses which have not
been requested directly by Geraldine Steel); (c) all other
moving and relocation expenses of Perm Operations (as
hereinafter defined); (d) any rental/occupancy costs beyond
the figure in a budget approved by the board of directors;
and (e) any compensation or benefits paid to Ronald
Wendlinger, Michael List, and any person not employed by in
Perm Operations and who does not work in Perm Operations.
"Pro-Rated Adjustment" means any expenses of SELLER which
have been paid by SELLER and for which the Company derives
benefit from such pre-paid expense after the Effective Date.
All SELLER expenses subject to the Pro-Rated Adjustment are
listed in Exhibit "C" hereto.
"Reimbursable Draws" means the schedule of "draws"
identified on Exhibit "B" hereto previously paid by SELLER
to SELLER employees which are included in the Assumed
Liabilities.
"Reimbursable Receivables" means (i) the "receivables" of
SELLER for which invoices or bills have been presented to
SELLER customers by SELLER prior to the Effective Date and
which remain outstanding and (ii) the "work-in-progress" of
SELLER for work that has been generated by SELLER employees
prior to the Effective Date. Work is considered "work in
progress" when an interview scheduled prior to the Effective
Date by a SELLER employee is the last interview prior to the
hire of an applicant for employment with a customer of
SELLER. Both such receivables and work in progress are
identified on Exhibit "B" hereto which are included in the
Assumed Liabilities.
2. Purchase and Sale of Assets. Subject to the terms and
conditions of this Agreement, SELLER hereby sells, assigns,
conveys, transfers, and delivers to BUYER, and BUYER hereby
purchases, acquires, and accepts delivery from SELLER, of all of
the ICP Assets free and clear of any liens, claims, or
encumbrances, except as specifically provided for herein. Upon
acquisition of the ICP Assets, the BUYER covenants and agrees
that it will hold and operate the assets as a separate division
for a period not less than one year following the Effective Date,
and that it will assume and discharge in accordance with its
terms all of the Assumed Liabilities.
3. Purchase Price.
(a) (i) The purchase price for the ICP Assets shall be
$500,000.00 ("Purchase Price"), plus the amount of the
Assumed Liabilities. Payment of the Purchase Price
shall be made out of the Net Income derived from
operations utilizing the Perm Assets (the "Perm
Operations") in an amount equal to: 50% of Perm
Operations Net Income for the seven-month period ending
December 31, 1996; 50% of Perm Operations Net Income
for the calendar year ending December 31, 1997; 50% of
Perm Operations Net Income for each successive calendar
year in which Net Income is at least $250,000; and, 40%
of Perm Operations Net Income for each successive
calendar year in which Net Income is less than
$250,000. Within 90 days following the end of each
calendar year for which Net Income is calculated
hereunder (a "Payment Period"), the BUYER shall prepare
and deliver to SELLER an income statement showing the
calculation of Net Income for the applicable Payment
Period (the "Income Statement"). (ii) If SELLER has
any objections to the Income Statement, it will deliver
a detailed statement describing its objections to BUYER
within 15 days after receiving the Income Statement.
If no written statement of objections is delivered to
the Buyer within said 15 day period, the Income
Statement delivered by BUYER to SELLER shall be
conclusive, final, and binding on the parties. If a
statement of objections is timely delivered, BUYER and
SELLER will use reasonable efforts to resolve any such
objections themselves and, if appropriate, BUYER will
prepare and issue to SELLER a revised Income Statement
for the Payment Period within 10 days after BUYER and
SELLER reach a final resolution. If BUYER and SELLER
do not reach a final resolution within 30 days after
BUYER has received the statement of objections,
however, BUYER and SELLER will select an accounting
firm mutually acceptable to them to resolve any
remaining objections. If BUYER and SELLER are unable
to agree on the choice of an accounting firm, they will
select a nationally-recognized accounting firm by lot
(after excluding their respective regular outside
accounting firms). The determination of any accounting
firm so selected will be set forth in writing and will
be conclusive, final, and binding upon the parties, and
all costs of such accounting firm shall be paid in
equal shares by the BUYER and SELLER. BUYER, within 10
days after issuance of the determination of the
accounting firm so selected, will prepare and deliver
to SELLER a revised Income Statement as appropriate to
reflect the resolution of any objections thereto
pursuant to this paragraph. (iii) Payment of the
Purchase Price covering the payment period, determined
in accordance with the terms of this paragraph 3(a)
shall be made in cash or by wire transfer to SELLER by
the BUYER in the following manner; (x) as to the amount
of Net Income set forth in the Income Statement
prepared by BUYER during the 90 day period for the
Payment Period, payment shall be made to SELLER (or to
any party so designated in writing by SELLER) within 15
days following the date on which the Income Statement
is delivered to SELLER, and (y) as to any additional
amount of Net Income as set forth in a revised Income
Statement, if any, for the Payment Period, payment
shall be made to SELLER (or to any party so designated
in writing by SELLER) within 5 days after the date on
which the revised Income Statement for the Payment
Period is prepared and delivered to SELLER and becomes
final pursuant to Section 3 (a) (ii) above.
(b) In the event BUYER, after one year following the
Effective Date, seeks or declares its intention to
terminate or discontinue the Perm Operations (a
"Termination") , then the obligation of BUYER to make
further payments of the Purchase Price shall terminate
and BUYER shall have no further liability in respect
thereof, provided that Geraldine Steel and/or Diane
Cohen have been afforded the opportunity to exercise
their rights under paragraphs 14(c) and 13(c) of their
respective employment contracts described in paragraph
5(b) of this Agreement.
(c) In the event BUYER seeks or declares its intention
to engage in any of the following transactions:
(i) the sale of substantially all of the assets
of CSS (exclusive of ICP Assets) or substantially
all of the ICP Assets (exclusive of the assets
referred to in paragraph 14(c) or 13(c) of the
respective employment agreements of Geraldine
Steel and/or Diane Cohen) to a single purchaser or
to a group of associated purchasers;
(ii) the sale, exchange, or other disposition to a
single entity or group of entities under common
control in one transaction or series of related
transactions of greater than 50% of the
outstanding shares of CSS's common stock;
(iii) the merger or consolidation of CSS in a
transaction in which the shareholders of CSS
immediately prior to such merger or consolidation
receive less than 50 percent of the outstanding
voting shares of the new or continuing
corporation; or
(iv) the merger or consolidation of the Perm
Operations, within three years of the Effective
Date, with any business, including affiliates of
BUYER engaged in whole or in part in the same
business as the Perm Operations where the
counselors of such business are -not placed under
the management of Geraldine Steel.
(each of the above, a "Transfer) , and provided that in
the event that Geraldine Steel and Diane Cohen elect to
waive the termination provisions of paragraphs 14 (c)
and 13 (c) of their respective employment agreements,
then BUYER may consummate such Transfer, upon the
occurrence of either of the following: (i) the
purchaser or successor to the Perm Operations shall
assume BUYER's obligations to pay the remaining unpaid
portion of the Purchase Price to SELLER in accordance
with the terms of this Agreement and such purchaser or
successor to the Perm Operations shall agree to require
that any and all subsequent purchasers assume the
obligation to pay any remaining unpaid portions of the
Purchase Price to SELLER in accordance with the terms
of this Agreement and shall further assume the
obligations, restrictions, and conditions set forth in
Paragraphs 14(c) and 13(c) of Geraldine Steel's and
Diane Cohen's respective employment agreements or (ii)
BUYER shall pay the remaining unpaid portion of the
Purchase Price, payment of which shall be made at the
time of the consummation of the Transfer.
(d) Upon the occurrence of a Termination or a
Transfer, with respect to the less than 12-month period
of time following the last 12-month period in which the
BUYER was obligated to prepare and deliver an Income-
Statement to SELLER pursuant to paragraph 3(a) of this
Agreement, an Income Statement showing the Net Income
of the Perm Operations for such less-than-12 month
period, shall be prepared and delivered to SELLER no
earlier than 90 days and no later than 120 days
following the date of a Termination or Transfer, and
the Income Statement shall also determine Net Income on
an annualized 12-month basis for determining whether
the payment during the less-than-12-month period shall
be calculated at 40% or 50% of Net Income. Such Income
Statement shall be treated by the parties as an Income
Statement prepared under paragraph 3(a)(i) of this
Agreement, and all the provisions of paragraph 3(a)(i),
(ii) and (iii) of this Agreement shall govern and apply
to such Income Statement. As to any income received
after the preparation of the Income Statement under
this subparagraph (d), supplemental Income Statement
(s) shall be prepared at reasonable intervals, and the
applicable provisions of this subparagraph (d) shall
apply with respect to such supplemental Income
Statement.
4. Other Liabilities and Contingent Claims
(a) After the Effective Date, SELLER shall continue to
be liable for all Excluded Liabilities and all
contingent liabilities, losses, injuries, damages, and
claims against SELLER, whether known or unknown, where
the event of loss occurred prior to the Effective Date
(without regard to when a claim is made), and BUYER
shall be liable for all losses, injuries, damages, and
claims related to the ICP Assets, where the event of
loss occurred after the Effective Date. Each party
agrees to promptly give notice of any claim to the
other party, to render reasonable cooperation with the
other party in connection therewith, and to keep the
other party reasonably and promptly informed of the
status and progress in resolving the same.
(b) Except as specifically provided for in this
Agreement, SELLER shall be responsible for, and make
prompt payment of, any wages and salaries of SELLER
employees accrued but not paid as of the Effective
Date, including federal and state withholding tax and
FICA contributions. BUYER shall be responsible for
salaries and wages, including withholding taxes and
FICA contributions, for any SELLER employee employed by
BUYER and accruing on or after the Effective Date.
(c) After the Effective Date, BUYER shall pay to
SELLER 45% of all fees collected from SELLER customers
related to Reimbursable Receivables, within 10 days
from BUYER's collection of such fees. BUYER shall then
pay, using the 55% remaining fee balance, (i) to SELLER
employees, commissions and payroll taxes related to the
Reimbursable Receivables and (ii) to SELLER, 100%
reimbursement of the Reimbursable Draws paid to any of
SELLER's counselors prior to the Effective Time.
(d) On the Effective Date, BUYER shall pay to SELLER
the Pro-Rated Adjustment by reimbursement of the fees
for expenses listed on Exhibit "D" hereto, pro-rated
for the portion allocable to the time prior to the
Effective Time.
5. Employees.
(a) SELLER and BUYER agree that the employees of
SELLER listed in Exhibit "D" hereto will be offered
employment, including referral fee arrangements with
affiliates of BUYER, in Perm Operations commencing the
Effective Date on the same terms of employment or
referral fee, as applicable, under which the employees
were employed or paid commissions, as applicable,
immediately prior to the Effective Date.
(b) The BUYER is entering into employment agreements
with Geraldine Steel and Diane Cohen commencing the
Effective Date, copies of which are attached hereto as
Exhibits "E" and "F". The BUYER acknowledges that the
aforementioned employment agreements contain additional
restrictions and conditions relating to the operations,
termination and transfer of the Perm Operators and the
ICP Assets.
6. Risk of Loss. Title to and risk of loss with respect
to the ICP Assets shall pass to BUYER on the Effective date.
7. Representations and Warranties of SELLER. SELLER and
Cohen hereby represent and warrant to BUYER that:
(a) SELLER is a corporation duly organized, validly
existing and in good standing under the laws of the
state of New York with all requisite corporate power
and authority to carry on the business of SELLER as now
conducted and to execute, deliver, and perform this
Agreement.
(b) The execution, delivery, and performance by SELLER
of this Agreement, and any other agreements or
documents referred to in this Agreement, and the
consummation of the transaction contemplated hereby and
thereby by SELLER have been duly and validly authorized
by all necessary corporate action on the part of the
board of directors and shareholders of SELLER, and this
Agreement is a valid and legally binding obligation of
SELLER enforceable in accordance with its terms, except
as enforcement may be limited by bankruptcy,
insolvency, moratorium, or similar laws affecting the
enforcement of creditors' rights and by the
availability of injunctive relief or specific
performance.
(c) Except as specifically provided in this Agreement,
neither the execution and delivery by SELLER of this
Agreement, nor the fulfillment of or compliance with
the terms or provisions hereof by SELLER will result in
a breach of the terms, conditions, or provisions of, or
constitute a default under, or result in a violation
of, the corporate charter or bylaws of SELLER, or any
agreement, contract, instrument, order, judgment, or
decree to which SELLER is a party or by which it is
bound, or violate any provision of any applicable law,
statute, rule or regulation, or any order, decree,
writ, or injunction of any court or governmental
entity.
(d) No consent from or approval of any court,
governmental entity, or any other person is necessary
in connection with the execution, delivery, or
performance of this Agreement by SELLER other than
consents and approvals which have already been
obtained, and the consummation of the transactions
contemplated by this Agreement will not require the
approval of any entity or person in order to prevent
the termination of any material right, privilege,
license, or agreement of SELLER.
(e) SELLER has good and marketable title to all of the
ICP Assets (tangible and intangible), free and clear of
all charges, claims, equities, liens, mortgages,
options, restrictions, security agreements, and other
encumbrances of any kind or nature whatsoever. The
transfer, conveyance, and assignment of the ICP Assets
by SELLER to BUYER hereby entitles BUYER to the quiet
enjoyment thereof. The ICP Assets are being sold
pursuant to this Agreement in their respective "as is,
where is" condition without any other representation,
warranty, liability, or other obligation on the part of
SELLER whatsoever, whether expressed or implied.
(f) All accounts receivable of SELLER reflected on
Exhibit "B" to this Agreement are valid receivables
subject to no material setoffs or counterclaims, are
current and collectible, and will be collected in
accordance with their terms at their recorded amounts.
(g) SELLER does not have as of the date of this
Agreement any liabilities or obligations (whether known
or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due), including any
liability for federal, state, or local taxes of any
kind, except for liabilities reflected on Exhibit "B"
to this Agreement.
(h) SELLER is in compliance with all applicable laws,
ordinances, statutes, rules, regulations, and orders
promulgated by any federal, state, or local
governmental body or agency relating to the business or
SELLER and the operation of the ICP Assets.
(i) Except as set forth in the exhibits to this
Agreement, there is no suit, action or any arbitration,
administrative, legal, or other proceeding of any kind
or character, or any governmental investigation pending
or threatened against SELLER affecting the ICP Assets,
the business of SELLER, or the employees of SELLER.
SELLER is not in default with respect to any order,
decree, writ, or injunction or any court or
governmental body or agency which affects the ICP
Assets or the business of SELLER. There are no pending
or (to the best of SELLER's knowledge) threatened
actions or proceedings before any court, arbitrator, or
administrative agency which would, if adversely
determined, individually or in the aggregate,
materially and adversely affect the ICP Assets or the
business of SELLER.
(j) Except as provided in Exhibit "B," SELLER has duly
filed all tax reports and returns required to be filed
by it and has duly paid all taxes (including, but not
limited to, ad valorem, franchise, income, property,
sales, social security, use, value added, and
withholding taxes) relating to SELLER and the ICP
Assets due or claimed to be due from it by federal,
state, and local taxing authorities.
(k) SELLER has incurred no brokers' fee, sales
commission, finders' fee, financial advisory fees, or
other fees or expenses for which BUYER shall be liable.
(l) No representation or warranty by SELLER in this
Agreement or in any of the exhibits hereto, or other
statement in writing or certificate furnished to BUYER
by or on behalf of SELLER in connection with the
transactions hereby contemplated, contains any untrue
statement of a material fact, or omits to state a
material fact necessary to make the statements
contained therein not misleading in light of the
circumstances in which they are made. There is, to the
best of SELLER's knowledge, no fact pertaining to the
ICP Assets or the business of SELLER which materially
and adversely affects, or in the future will materially
and adversely affect, the ICP Assets or the SELLER
business which is known to SELLER and has not been
disclosed to BUYER.
8. Representations, Warranties and Covenants of BUYER.
Each BUYER hereby represents warrants and covenants to SELLER
that:
(a) Each BUYER is a corporation duly organized,
validly existing and in good standing under the laws of
the state of its incorporation, with all requisite
corporate power and authority to execute, deliver, and
perform this Agreement.
(b) The execution, delivery, and performance by each
BUYER of this Agreement, and any other agreements or
documents referred to in this Agreement, and the
consummation of the transaction contemplated hereby and
thereby by each BUYER have been duly and validly
authorized by all necessary corporate action on the
part of the board of directors of each BUYER, and this
Agreement is a valid and legally binding obligation of
each BUYER enforceable in accordance with its terms,
except as enforcement may be limited by bankruptcy,
insolvency, moratorium, or similar laws affecting the
enforcement of creditors' rights and by the
availability of injunctive relief or specific
performance.
(c) Neither the execution and delivery by each BUYER
of this Agreement, or any other agreement or document
referred to in this Agreement, nor the fulfillment of
or compliance with the terms or provisions hereof or
thereof by each BUYER will result in a breach of the
terms, conditions, or provisions of, or constitute a
default under or result in a violation of, the
corporate charter or bylaws of either BUYER or any
agreement, contract, instrument, order, judgment, or
decree to which either BUYER is a party or by which it
is bound, or violate any provision of any applicable
law, statute, rule or regulation, or any order, decree,
writ, or injunction of any court or governmental
entity.
(d) No consent from or approval of any court,
governmental entity, or any other person is necessary
in connection with the execution, delivery, or
performance of this Agreement by the BUYER other than
consents and approvals which have already been
obtained.
(e) BUYER has incurred no brokers' fee, sales
commission, finders' fees, financial advisory fees, or
other fees or expenses for which SELLER shall be
liable.
(f) BUYER covenants that it will provide appropriate
offices for the Perm Operations' staff employees at the
same location as the offices of Geraldine Steel and
Diane Cohen and BUYER shall maintain at least 12 desks
for Perm Operations counselors, so long as the gross
margin of Perm Operations, determined in accordance
with Paragraph 6 (a) of Geraldine Steel's employment
agreement, is at least $500,000.
(g) BUYER covenants that it shall prepare monthly
profit and loss statements with respect to the Perm
Operations and shall allow SELLER to have access at all
times to obtain copies of such profit and loss
statements or to obtain any information contained in
such statements,
(h) No representation,, warranty or covenant by either
BUYER in this Agreement or in any of the exhibits
hereto, or other statement in writing or certificate
furnished to SELLER by or on behalf of either BUYER in
connection with the transaction hereby contemplated
contains any untrue statement of a material fact, or
omits to state a material fact necessary to make the
statements contained therein not misleading in light of
the circumstances in which they are made.
9. Bulk Transfer Statute. In reliance on the
representations of SELLER and the assumption of the Assumed
Liabilities by BUYER, all as provided in this Agreement, the
parties hereto hereby waive compliance with the provisions of the
New York Bulk Transfer Statute.
10. Deliveries of SELLER. BUYER hereby acknowledges
receipt from SELLER of: (i) possession of the ICP Assets; (ii)
an executed bill of sale in the form of Exhibit "G" attached
hereto and other instruments as BUYER may reasonably request in
form and substance acceptable to each party for the purpose of
conveying the ICP Assets to BUYER; and (iii) certified copies of
corporate resolutions of the board of directors and shareholders
of SELLER authorizing the consummation of the transactions
contemplated by this Agreement in accordance with the corporation
law of the state of New York.
11. Indemnification.
(a) SELLER and Cohen agree to indemnify, defend, and
hold harmless each BUYER and its shareholders,
directors, officers, employees, agents and
representatives against and in respect of any cost,
damage, expense (including legal fees and expenses),
liability or loss incurred or suffered by any of them
resulting from or arising out of (i) the breach,
inaccuracy, misrepresentation, or untruth of any
representation, warranty, or the nonfulfillment of any
agreement or covenant of SELLER contained in this
Agreement or in any document delivered by SELLER to
BUYER pursuant hereto; (ii) any liability, obligation,
and claim against ICP, known or unknown, contingent or
asserted (including, but not by way of limitation,
product liability claims), arising from or related in
any way to the use and operation by ICP of the ICP
Assets prior to the Effective Date; and (iii) any
action, assessment, claim, demand, proceeding, or suit
incident to any of the foregoing.
(b) Each BUYER agrees to indemnify, defend, and hold
harmless SELLER and its shareholders, directors,
officers, employees, agents, and representatives
against and in respect of any cost, damage, expense
(including legal fees and expenses), liability, or loss
incurred or suffered by SELLER resulting from or
arising out of (i) the breach, inaccuracy,
misrepresentation, or untruth of any representation,
warranty, or the nonfulfillment of any agreement or
covenant of BUYER contained in this Agreement or in any
document delivered by BUYER to SELLER pursuant hereto;
(ii) any liability, obligation, and claim against
SELLER, known or unknown, contingent or asserted
(including, but not by way of limitation, product
liability claims), arising from or related in any way
to the use and operation by SELLER arising from and
after the Effective Date of or pertaining to the
ownership and operation of the ICP Assets; and (iii)
any action, assessment, claim, demand, proceeding, or
suit incident to any of the foregoing.
(c) All of the representations and warranties of the
parties contained in this Agreement shall survive the
Effective Date hereunder and continue in full force and
effect for a period of eighteen months following the
date on which the Purchase Price is paid in full. No
party ("Indemnifying Party") shall have any obligation
to indemnify any other party ("Indemnified Party") from
and against any Adverse Consequences (as hereinafter
defined) resulting from, arising out of, relating to,
in the nature of, or caused by the breach (or alleged
breach) of any representation, warranty, or covenant of
the Indemnifying Party under clause (i) of paragraph
11(a) or clause (i) of paragraph 11(b), as the case may
be, until the Indemnified Party has suffered Adverse
Consequences by reason of all such breaches (or alleged
breaches) in excess of a $5,000 aggregate threshold, at
which point the Indemnifying Party will be obligated to
indemnify the Indemnified Parties from and against all
such Adverse Consequences that are in excess of the
first $2,500 of Adverse Consequences; and provided
further, that the maximum obligation to indemnify all
Indemnified Parties from and against Adverse
Consequences resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or
alleged breach) of any representation, warranty, or
covenant of the Indemnifying Party shall not exceed, in
the aggregate, the sum of the Assumed Liabilities and
the amount of the Purchase Price actually paid under
paragraph 3, above. For purposes of this Agreement,
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties,
fines, costs, reasonable amounts paid in settlement,
liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and
reasonable attorneys' fees and expenses.
(d) Anything in this Agreement to the contrary
notwithstanding, in no case shall any person be liable
under this Agreement with respect to any action claim
or proceeding by a third party against any Indemnified
Party unless the Indemnified Party shall notify the
Indemnifying Party of the assertion or commencement of
such action, claim, or proceeding within a reasonable
period of time or, if citation or service of process
has been made, within 20 days thereafter. The
Indemnifying Party may, at its option and at its sole
expense, participate in the defense of and contest any
such action, claim, or proceeding; provided, the
Indemnified Party shall at all times also have the
right to participate fully therein. If the
Indemnifying Party, within a reasonable time after
receiving such notice, fails to participate, the
Indemnified Party shall have the right, but shall not
be obligated, to undertake the defense of the action,
claim, or proceeding for the account of and at the risk
of the Indemnifying Party; provided, however, in the
event that the Indemnified Party shall determine to
compromise or settle (exercising its judgment in good
faith) any such action, claim, or proceeding, the
Indemnified Party shall be required to give the
Indemnifying Party 15 days notice of such
determination. If the Indemnifying Party shall not
undertake the defense of such action, claim, or
proceeding prior to the expiration of such 15 day
period, the Indemnified Party shall then be entitled to
compromise or settle the action, claim, or proceeding
for the account of and at the risk of the Indemnifying
Party. The parties agree that any Indemnified Party
may join any Indemnifying Party in any action, claim,
or proceeding brought by a third party, as to which any
right of indemnity created by this Agreement would or
might apply, for the purpose of enforcing any right of
the indemnity granted to such Indemnified Party
pursuant to this Agreement. SELLER hereby specifically
grants to BUYER the right of offset on any
indemnification for which SELLER is liable hereunder to
BUYER against any payment of the Purchase Price BUYER
is required to pay pursuant to paragraph 3.
(e) Any right of indemnity of any party pursuant to
this paragraph 11 of this Agreement shall be in
addition to and shall not operate as a limitation on
any other right to indemnity of such party pursuant to
this Agreement, any document or instrument executed in
connection with the consummation of the transaction
contemplated hereby, or otherwise.
12. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given on the date of service, if served
personally on the party to whom notice is to be given, or on the
3rd day after mailing, if mailed to the party to whom notice is
to be given, by first class mail postage prepaid and properly
addressed as follows:
BUYER: AFGL International, Inc..
ATTN: Gary S. Goldstein
850 Third Avenue, 11th Floor
New York, New York 10022
SELLER and Cohen: Irene Cohen Personnel, Inc.
ATTN: Irene Cohen
13A Dogwood Lane
Westport, Connecticut 06880
With a coy to: Richard J. Reibstein
McDermott, Will & Emery
1211 Avenue of the Americas
New York, New York 10036
or, after September 30, 1996, to 30 Rockefeller Plaza
New York, New York 10020
Each party shall be entitled to specify a different address by
giving notice as aforesaid to the other.
13. Dispute Resolution Procedures. In the event of dispute
between the parties as to the performance or breach hereof, this
Agreement shall be and remain in full force and effect and all
terms hereof shall continue to be complied with by all parties,
and such dispute shall be resolved in accordance with the
procedures set forth in this section.
(a) If the parties are unable to resolve a dispute by good
faith negotiation within thirty (30) days after the
dispute arises, the parties shall attempt in good faith
to resolve the dispute by mediation pursuant to the
procedures of the American Arbitration Association
applicable to the mediation of commercial disputes. If
the parties are unable to agree on a mediator, the
mediator shall be selected pursuant to the Commercial
Mediation Rules of the American Arbitration
Association.
(b) If the dispute or claim has not been resolved by
mediation within thirty (30) days of the initiation
thereof, the dispute shall be resolved by arbitration
conducted in New York City by a single arbitrator
pursuant to the Commercial Arbitration Rules of the
American Arbitration Association then in effect or such
other rules as mutually agreed upon by the parties.
Judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof.
Each party shall bear its own costs and attorneys' fees
incurred in connection with arbitration.
14. Miscellaneous.
(a) This Agreement, together with the exhibits
attached hereto, and the employment agreement between
Irene Cohen and the BUYER of even date herewith,
constitutes the entire agreement between the parties
with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements,
understandings, negotiations, and discussions, whether
oral or written. No supplement, modification, or
waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
(b) Section and paragraph headings are not to be
considered part of this Agreement, are included solely
for convenience, and are not intended to be a full or
accurate description of the contents thereof.
(c) SELLER and BUYER agree to pay its own fees and
expenses incurred in connection with the negotiation
and consummation of the transactions contemplated
hereby, exclusive of the employment agreements attached
hereto as Exhibits "E", and "F" and the employment
agreement of Irene Cohen referenced in Section 14(a),
above; including all investment banking, financial
advisory, legal, accounting, finders, brokers,
consultants, and other fees and expenses incurred.
Each party will hold the other harmless from and
against any and all claims or liabilities arising in
connection therewith.
(d) The exhibits referred to in this Agreement are
incorporated by reference herein and constitute a part
of this Agreement for all purposes.
(e) All of the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of
the parties hereto and their respective transferees,
successors, and assigns.
(f) This Agreement shall be governed, construed and
enforced in accordance with the laws of the state of
New York
(g) Notwithstanding any other provision of this
Agreement, this Agreement shall not create any rights
or benefits on behalf of any employee, organization,
third party, or other person, and this Agreement shall
be effective only as to the parties hereto, their
successors and permitted assigns.
(h) This Agreement may be executed in multiple
counterparts, all of which taken together shall
constitute one and the same instrument.
(i) The respective representations, warranties,
covenants, agreements, and indemnities of the parties
hereunder shall survive the execution and delivery
hereof and shall be applicable and binding hereafter.
(j) In the event that any party institutes any
proceeding action or suit to enforce this Agreement or
to secure relief from any default hereunder or breach
hereof, the parties participating in the action or suit
shall each bear their own costs, including attorneys'
fees, incurred in connection therewith and in enforcing
or collecting any accrual or judgment rendered therein;
provided, that in the event BUYER institutes any
proceeding or action to enforce any indemnification
obligation of SELLER and/or Cohen under clause (ii) of
paragraph 11(a) with respect to any obligation
referenced therein or in paragraph 4(a), or SELLER
and/or Cohen institutes any action to enforce any
indemnification obligation of BUYER under clause (ii)
of paragraph 11(b) with respect to any obligation
referenced therein or in paragraph 4(b), 4(c) and 4(d)
or any obligation of BUYER under paragraph 3 hereof and
the party bringing such proceeding or action prevails,
the non-prevailing party shall, in addition to their
own costs, bear all of the prevailing parties' costs,
including attorney's fees, costs on appeal, and
interest from the date of accrual or judgment at the
applicable judgment rate, incurred in connection
therewith and in enforcing and collecting any accrual
or judgment rendered therein.
(k) BUYER agrees that the Perm Operations may continue
to utilize the advertising services of IC Associates
for its placement of advertising.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered the day and year
first-above written.
AFGL INTERNATIONAL, INC.
By /s/
Gary S. Goldstein, President
HEADWAY CORPORATE STAFFING
SERVICES, INC.
By /s/
Duly Authorized Officer
IRENE COHEN PERSONNEL, INC.
By /s/
Duly Authorized Officer
/s/
Irene Cohen
/s/
Seymour Cohen
8
SERIES C 8% CONVERTIBLE PREFERRED STOCK
CERTIFICATE OF DESIGNATION
FOR
AFGL INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
SERIES C 8% CONVERTIBLE PREFERRED STOCK
OF
AFGL INTERNATIONAL, INC.
Pursuant to Section 78.195 of the
Nevada Revised Statues
AFGL INTERNATIONAL, INC. a corporation organized and
existing under the laws of the State of Nevada (the
"Corporation"), in accordance with Section 78.195 of the Nevada
Revised Statutes, DOES HEREBY CERTIFY:
1. The Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), fixes the total
number of shares of all classes of capital stock which the
Corporation shall have the authority to issue at Twenty-Five
Million (25,000,000) shares, of which Five Million (5,000,000)
shares shall be shares of Preferred Stock, par value $.001 per
share (herein referred to as "Preferred Stock"), and Twenty
Million (20,000,000) shares shall be shares of Common Stock, par
value $.01 per share (herein referred to as "Common Stock").
2. The Certificate of Incorporation expressly grants to
the Board of Directors of the Corporation authority to provide
for the issuance of said Preferred Stock in one or more series,
with such voting powers, full or limited but not to exceed one
vote per share, or without voting powers, and with such
designations, preferences and relative, participating, optional
or other special rights and qualifications limitations or
restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue thereof
adopted by the Board of Directors and as are not stated and
expressed in the Certificate of Incorporation.
3. Pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Board of
Directors, on April 2, 1996, (by unanimous written consent), duly
authorized and adopted the following resolutions providing for an
issue of a series of its Preferred Stock to be designated "Series
C Convertible Preferred Stock."
"RESOLVED, that an issue of a series of Preferred Stock,
$.001 par value per share, of the Corporation (the Preferred
Stock of the Corporation being herein referred to as
"Preferred Stock", which term shall include any additional
shares of Preferred Stock of the same class hereafter
authorized to be issued by the Corporation), consisting of
One Hundred Fifty (150) shares is hereby provided for, and
the voting power, designation, preferences and relative
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of such
series shall be as set forth below:
Designation: Number of Shares.
(a) The designation of such series of Preferred Stock
(which includes all sub-series) shall be "Series C Convertible
Preferred Stock" (hereinafter referred to as the "Series C
Stock") and the number of authorized shares constituting the
Series C Stock is One Hundred Fifty (150). The Series C Stock
shall be deemed a separate class of Preferred Stock, and shall be
apart from any other series of Preferred Stock.
Part 1. Liquidation.
Upon any liquidation, dissolution, or winding up of the
Corporation, the holders of Series C Stock will be entitled to be
paid, after any distribution or payment is made upon any Series A
Stock and Series B Stock and before any distribution or payment
is made upon Junior Securities, an amount in cash equal to the
aggregate Liquidation Value of all shares of Series C Stock
outstanding, and the holders of Series C Stock will not be
entitled to any further payment. If upon any such liquidation,
dissolution, or winding up of the Corporation, the Corporation's
assets to be distributed among the holders of Series C Stock are
insufficient to permit payment to such holders of the aggregate
amount which they are entitled to be paid, then the entire assets
to be distributed will be distributed ratably among such holders
based upon the aggregate Liquidation Value of the Series C Stock
held by each such holder. The Corporation will mail written
notice of such liquidation, dissolution, or winding up not less
then 30 days prior to the payment date stated therein, to each
record holder of Series C Stock. Neither the consolidation or
merger of the Corporation into or with any other corporation or
corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reduction of the capital stock
of the Corporation, will be deemed to be liquidation,
dissolution, or winding up of the Corporation within the meaning
of this Part 1.
Part 2. Dividends.
2A. Entitlement. The holders of Series C Stock, shall
be entitled to receive cumulative dividends. Such dividends
shall be paid to the holders in cash or in-kind through the
issuance of Common Stock, as determined at the election of the
Corporation, on conversion of the Series C Stock in accordance
with Part 3, below, except as provided in Part 5, below.
2B. Accrual Rate. Dividends on each share of Series C
Stock shall accrue on a daily basis at the rate of 8.000% per
annum of the Face Value (as defined below), from and including
the Date of Issuance of such share to and including the date on
which the Redemption Price (as defined below) of such share is
paid or the date on which such share is converted into Common
Stock. Such dividends shall accrue whether or not they have been
declared and whether or not there are profits, surplus or other
funds of the Corporation legally available for the payment of
dividends. The date on which the Corporation initially issues
any share of the Series C Stock will be deemed to be its "Date of
Issuance" as that term is uses herein, regardless of the number
of times transfer of any such share is made on the stock records
maintained by or for the Corporation and regardless of the number
of certificates which may be issued to evidence any such share.
Part 3. Conversion Rights.
3A. Conversion Procedure. Subject to the provisions
set forth below, each share of Series C Stock shall be
convertible at the option of the holder thereof, in the manner
hereinafter set forth, into that number of fully paid and
nonassessable shares of Common Stock determined as set forth
below. Any holder of Series C Stock desiring to convert such
shares into shares of Common Stock shall surrender the
certificate or certificates for the shares being converted, duly
endorsed or assigned to the Corporation or in blank, at the
principal office of the Corporation or at the bank or trust
company appointed by the Corporation for that purpose,
accompanied by a written notice of conversion specifying the
number of shares of Series C Stock to be converted (provided that
the number of shares tendered for conversion at any one time
shall not be less than $100,000 in Face Value) and the name or
names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. The date of execution
of the notice of conversion and delivery thereof to the
Corporation by facsimile transmission at (212) 508-3540 shall be
the "Conversion Date"; provided, that if the certificate
representing the shares of Series C Stock to be converted as
stated in the notice of conversion is not received by the
Corporation or its designated agent within three business days of
receiving said facsimile transmission, the Conversion Date shall
be the date on which the Series C Stock certificates are actually
received by the Corporation or agent. After the receipt of such
notice of conversion and the certificates for the Series C Stock
converted, the Corporation shall promptly issue and deliver or
cause to be issued and delivered to such holder a certificate or
certificates for shares of Common Stock resulting from such
conversion. In case less than all of the shares of Series C
Stock represented by a certificate are to be converted by a
holder, upon such conversion the Corporation shall also deliver
or cause to be delivered to such holder a certificate or
certificates for the shares of Series C Stock not so converted.
The Corporation shall pay all transfer agent fees and expenses
payable upon the conversion of Series C Stock.
3B. Conversion Rate. The number of shares issuable on
conversion of the Series C Stock shall be determined by dividing
the Face Value of the Series C Stock being converted plus (if the
Corporation elects to paid accrued dividends in-kind with Common
Stock) the amount of accrued dividends on such Face Amount as of
the Conversion Date, by the lesser of (i) 110% of the market
price on the Date of Issuance, or (ii) 80% of the market price on
the Conversion Date. For purposes of this Part 3B, "market
price" on a given date shall be the average closing bid prices of
the Common Stock for the five NASDAQ trading days immediately
preceding the applicable date as reported by the National
Association of Securities Dealers Automated Quotation System or
such other inter-dealer quotation system as may report quotations
on the Common Stock. In the event any fractional share of Common
Stock would become issuable under the calculation contained in
this Part 3B, the number of shares issuable shall be rounded up
to the nearest whole number.
3C. Conversion Dates The right to convert the Series
C Stock into shares of Common Stock shall vest over a 95-day
period following the Date of Issuance as set forth below:
(i) With respect to 33% of the shares of Series C
Stock held, 42 days following the Date of Issuance;
(ii) With respect to 33% of the shares of Series C
Stock held, 65 days following the Date of Issuance; and
(iii) With respect to 34% of the shares of
Series C Stock held, 95 days following the Date of
Issuance.
3D. Fundamental Changes. In case the Corporation
shall effect any stock split, reverse stock split, or capital
reorganization of the Common Stock, or shall consolidate, merge,
or engage in a statutory share exchange with or into any other
corporation (other than a consolidation, merger, or share
exchange in which the Corporation is the surviving corporation
and each share of Common Stock outstanding immediately prior to
such consolidation or merger is to remain outstanding immediately
after such consolidation or merger) or shall sell or transfer all
or substantially all its assets to any other corporation, lawful
provision shall be made as a part of the terms of such
transaction whereby the holders of shares of the Series C Stock
shall receive upon conversion thereof, in lieu of each share of
Common Stock which would have been issuable upon conversion of
such stock if converted immediately prior to the consummation of
such transaction, the same kind and amount of stock (or other
securities, cash, or property, if any) as may be issuable or
distributable in connection with such transaction with respect to
each share of Common Stock outstanding at the effective time of
such transaction.
3E. Converted Shares and Common Stock Held for
Conversion. Any shares of Series C Stock which at any time have
been converted shall be canceled and may not be reissued. The
Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, for the
purpose of issuance upon conversion of shares of Series C Stock
then outstanding and shall take all action necessary so that
shares of Common Stock so issued will be validly issued, fully
paid and nonassessable.
Part 4. Voting Rights.
The Series C Stock shall have no voting rights, except
as required in the specific instance by the Nevada Revise
Statutes and except the right to approve by majority vote of the
holders of the Series C Stock: the authorization and issuance of
any class or series of Preferred Stock senior to the Series C
Stock which is not authorized and issued as of March 1, 1996; any
amendment, modification, or repeal of the articles of
incorporation of the Corporation if the powers, preferences, or
special rights of the Series C Stock would be adversely affected;
and, the imposition of any restriction on the Series C Stock,
other than restrictions arising under the Nevada Revised Statutes
or existing under the articles of incorporation as in effect at
March 1, 1996.
Part 5. Redemption.
5A. Redemption Price. For each share of Series C
Stock which is to be redeemed, the Corporation will be obligated
on the Redemption Date (as defined below) to pay to the holder
thereof (upon surrender by such holder at the Corporation's
principal office or to the Corporation's transfer agent of the
certificates representing such shares of Series C Stock) an
amount in immediately available funds equal to the Face Value
thereof plus all accrued dividends as of the Redemption Date;
provided, that if redemption is effected pursuant to Part 5F, the
amount payable on the Redemption Date shall be 120% of the Face
Value plus all accrued dividends as of that date.
5B. Notice of Redemption. The Corporation will mail
written notice of each redemption of Series C Stock to each
record holder of Series C Stock not more than sixty (60) nor less
than ten (10) days prior to the date on which such redemption is
to be made. The date specified in such notice for redemption is
herein referred to as the "Redemption Date."
5C. Termination of Rights. On the Redemption Date all
rights pertaining to the Series C Stock, including, but not
limited to, any right of conversion, will cease, and such Series
C Stock will not be deemed to be outstanding.
5D. Redeemed or Otherwise Acquire Shares. Any shares
of Series C Stock which are redeemed or otherwise acquired by the
Corporation shall be canceled and may not be reissued.
5E. Optional Redemption. Except as provided in Part
5F, the Corporation may, at any time after April 1, 1997, redeem
all or any portion of the Series C Stock.
5F. Redemption upon Specific Event. In the event any
shares of the Series C Stock are submitted for conversion under
Part 3 and the market price for the Common Stock on the
Conversion Date as determined under Part 3B is less than $2.00
per share, the Corporation may, at its option, elect to redeem
the Series C Stock tendered for conversion rather than convert
the shares.
Part 6. Definitions.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New
York are authorized by law to close.
"Common Stock" means the Common Stock, $0.01 par value
per share, of the Corporation and any capital stock of any class
of the Corporation hereafter authorized which is not limited to a
fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in
the distribution or assets upon any liquidation, dissolution, or
winding up of the Corporation.
"Face Value" of any Series C Stock as of any particular
date will be equal to $20,000 per share.
"Junior Securities" means any of the Corporation's
equity securities other than the Series A Stock and Series B
Stock.
"Liquidation Value" of any Series C Stock as of any
particular date will be equal to $20,000 per share.
"Person" means an individual, a partnership, a
corporation, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision
thereof.
* * *
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be executed by Gary S. Goldstein, its President,
and attested to by Barry S. Roseman, its Secretary, this
day of April, 1996.
AFGL INTERNATIONAL, INC.
By: /s/
Gary S. Goldstein, President
ATTEST
By: /s/
Barry S. Roseman, Secretary
ACKNOWLEDGMENT
STATE OF NEW YORK )
)ss
COUNTY OF NEW YORK )
I, Gary S. Goldstein, hereby certify that I am the duly
elected and qualified President of AFGL INTERNATIONAL, INC., that
the foregoing instrument is the act and deed of the Corporation
and the facts stated therein are true.
/S/
Gary S. Goldstein, President
Subscribed and sworn to before me the undersigned, a Notary
Public in and for said county and state.
/S/
Notary Public
8
SERIES D 8% CONVERTIBLE PREFERRED STOCK
CERTIFICATE OF DESIGNATION
FOR
AFGL INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
SERIES D 8% CONVERTIBLE PREFERRED STOCK
OF
AFGL INTERNATIONAL, INC.
Pursuant to Section 78.195 of the
Nevada Revised Statues
AFGL INTERNATIONAL, INC. a corporation organized and
existing under the laws of the State of Nevada (the
"Corporation"), in accordance with Section 78.195 of the Nevada
Revised Statutes, DOES HEREBY CERTIFY:
1. The Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), fixes the total
number of shares of all classes of capital stock which the
Corporation shall have the authority to issue at Twenty-Five
Million (25,000,000) shares, of which Five Million (5,000,000)
shares shall be shares of Preferred Stock, par value $.001 per
share (herein referred to as "Preferred Stock"), and Twenty
Million (20,000,000) shares shall be shares of Common Stock, par
value $.01 per share (herein referred to as "Common Stock").
2. The Certificate of Incorporation expressly grants to
the Board of Directors of the Corporation authority to provide
for the issuance of said Preferred Stock in one or more series,
with such voting powers, full or limited but not to exceed one
vote per share, or without voting powers, and with such
designations, preferences and relative, participating, optional
or other special rights and qualifications limitations or
restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue thereof
adopted by the Board of Directors and as are not stated and
expressed in the Certificate of Incorporation.
3. Pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Board of
Directors, on May 24, 1996, (by unanimous written consent), duly
authorized and adopted the following resolutions providing for an
issue of a series of its Preferred Stock to be designated "Series
D Convertible Preferred Stock."
"RESOLVED, that an issue of a series of Preferred Stock,
$.001 par value per share, of the Corporation (the Preferred
Stock of the Corporation being herein referred to as
"Preferred Stock", which term shall include any additional
shares of Preferred Stock of the same class hereafter
authorized to be issued by the Corporation), consisting of
Eighty (80) shares is hereby provided for, and the voting
power, designation, preferences and relative participating,
optional or other special rights, and the qualifications,
limitations or restrictions thereof, of such series shall be
as set forth below:
Designation: Number of Shares.
(a) The designation of such series of Preferred Stock shall
be "Series D Convertible Preferred Stock" (hereinafter referred
to as the "Series D Stock") and the number of authorized shares
constituting the Series D Stock is Eighty (80). The Series D
Stock shall be deemed a separate class of Preferred Stock, and
shall be apart from any other series of Preferred Stock.
Part 1. Liquidation.
Upon any liquidation, dissolution, or winding up of the
Corporation, the holders of Series D Stock will be entitled to be
paid, after any distribution or payment is made upon any Senior
Securities and before any distribution or payment is made upon
Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all shares of Series D Stock outstanding,
and the holders of Series D Stock will not be entitled to any
further payment. If upon any such liquidation, dissolution, or
winding up of the Corporation, the Corporation's assets to be
distributed among the holders of Series D Stock are insufficient
to permit payment to such holders of the aggregate amount which
they are entitled to be paid, then the entire assets to be
distributed will be distributed ratably among such holders based
upon the aggregate Liquidation Value of the Series D Stock held
by each such holder. The Corporation will mail written notice of
such liquidation, dissolution, or winding up not less then 30
days prior to the payment date stated therein, to each record
holder of Series D Stock. Neither the consolidation or merger of
the Corporation into or with any other corporation or
corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reduction of the capital stock
of the Corporation, will be deemed to be liquidation,
dissolution, or winding up of the Corporation within the meaning
of this Part 1.
Part 2. Dividends.
2A. Entitlement. The holders of Series D Stock, shall
be entitled to receive cumulative dividends. Such dividends
shall be paid to the holders in cash or in-kind through the
issuance of Common Stock, as determined at the election of the
Corporation, on conversion of the Series D Stock in accordance
with Part 3, below, except as provided in Part 5, below.
2B. Accrual Rate. Dividends on each share of Series D
Stock shall accrue on a daily basis at the rate of 8.000% per
annum of the Face Value (as defined below), from and including
the Date of Issuance of such share to and including the date on
which the Redemption Price (as defined below) of such share is
paid or the date on which such share is converted into Common
Stock. Such dividends shall accrue whether or not they have been
declared and whether or not there are profits, surplus or other
funds of the Corporation legally available for the payment of
dividends. The date on which the Corporation initially issues
any share of the Series D Stock will be deemed to be its "Date of
Issuance" as that term is used herein, regardless of the number
of times transfer of any such share is made on the stock records
maintained by or for the Corporation and regardless of the number
of certificates which may be issued to evidence any such share.
Part 3. Conversion Rights.
3A. Conversion Procedure. Subject to the provisions
set forth below, each share of Series D Stock shall be
convertible at the option of the holder thereof, in the manner
hereinafter set forth, into that number of fully paid and
nonassessable shares of Common Stock determined as set forth
below. Any holder of Series D Stock desiring to convert such
shares into shares of Common Stock shall surrender the
certificate or certificates for the shares being converted, duly
endorsed or assigned to the Corporation or in blank, at the
principal office of the Corporation or at the bank or trust
company appointed by the Corporation for that purpose,
accompanied by a written notice of conversion specifying the
number of shares of Series D Stock to be converted (provided that
the number of shares tendered for conversion at any one time
shall not be less than $100,000 in Face Value) and the name or
names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. The date of execution
of the notice of conversion and delivery thereof to the
Corporation by facsimile transmission at (212) 508-3540 shall be
the "Conversion Date"; provided, that if the certificate
representing the shares of Series D Stock to be converted as
stated in the notice of conversion is not received by the
Corporation or its designated agent within three business days of
receiving said facsimile transmission, the Conversion Date shall
be the date on which the Series D Stock certificates are actually
received by the Corporation or agent. After the receipt of such
notice of conversion and the certificates for the Series D Stock
converted, the Corporation shall promptly issue and deliver or
cause to be issued and delivered to such holder a certificate or
certificates for shares of Common Stock resulting from such
conversion. In case less than all of the shares of Series D
Stock represented by a certificate are to be converted by a
holder, upon such conversion the Corporation shall also deliver
or cause to be delivered to such holder a certificate or
certificates for the shares of Series D Stock not so converted.
The Corporation shall pay all transfer agent fees and expenses
payable upon the conversion of Series D Stock.
3B. Conversion Rate. The number of shares issuable on
conversion of the Series D Stock shall be determined by dividing
the Face Value of the Series D Stock being converted plus (if the
Corporation elects to paid accrued dividends in-kind with Common
Stock) the amount of accrued dividends on such Face Amount as of
the Conversion Date, by the lesser of (i) 105% of the average
closing bid prices for the Common Stock during the month of June
1996, as reported by the National Association of Securities
Dealers Automated Quotation System or such other inter-dealer
quotation system as may report quotations on the Common Stock, or
(ii) 80% of the market price on the Conversion Date. For
purposes of this Part 3B, "market price" on a given date shall be
the average closing bid prices of the Common Stock for the five
NASDAQ trading days immediately preceding the applicable date as
reported by the National Association of Securities Dealers
Automated Quotation System or such other inter-dealer quotation
system as may report quotations on the Common Stock. In the
event any fractional share of Common Stock would become issuable
under the calculation contained in this Part 3B, the number of
shares issuable shall be rounded up to the nearest whole number.
3C. Conversion Dates The right to convert the Series
D Stock into shares of Common Stock shall vest over a 100-day
period following the Date of Issuance as set forth below:
(i) With respect to 50% of the shares of Series D
Stock held, shall commence 70 days following the Date
of Issuance; and
(ii) With respect to any remaining shares of
Series D Stock held, shall commence 100 days following
the Date of Issuance.
Any shares of Series D Stock that remain outstanding at 12:01
a.m., New York City time on June 1, 1998, shall there upon be
automatically converted to Common Stock without any action on the
part of the holder thereof, and all certificates that theretofore
represented shares of Series D Stock shall represent only the
right to receive shares of Common Stock on surrender of the
certificates to the Corporation as provided in this Part 3
3D. Fundamental Changes. In case the Corporation
shall effect any stock split, reverse stock split, or capital
reorganization of the Common Stock, or shall consolidate, merge,
or engage in a statutory share exchange with or into any other
corporation (other than a consolidation, merger, or share
exchange in which the Corporation is the surviving corporation
and each share of Common Stock outstanding immediately prior to
such consolidation or merger is to remain outstanding immediately
after such consolidation or merger) or shall sell or transfer all
or substantially all its assets to any other corporation, lawful
provision shall be made as a part of the terms of such
transaction whereby the holders of shares of the Series D Stock
shall receive upon conversion thereof, in lieu of each share of
Common Stock which would have been issuable upon conversion of
such stock if converted immediately prior to the consummation of
such transaction, the same kind and amount of stock (or other
securities, cash, or property, if any) as may be issuable or
distributable in connection with such transaction with respect to
each share of Common Stock outstanding at the effective time of
such transaction.
3E. Converted Shares and Common Stock Held for
Conversion. Any shares of Series D Stock which at any time have
been converted shall be canceled and may not be reissued. The
Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, for the
purpose of issuance upon conversion of shares of Series D Stock
then outstanding and shall take all action necessary so that
shares of Common Stock so issued will be validly issued, fully
paid and nonassessable.
Part 4. Voting Rights.
The Series D Stock shall have no voting rights, except
as required in the specific instance by the Nevada Revise
Statutes and except the right to approve by majority vote of the
holders of the Series D Stock: the authorization and issuance of
any class or series of Preferred Stock senior to the Series D
Stock which is not authorized as of June 1, 1996; any amendment,
modification, or repeal of the articles of incorporation of the
Corporation if the powers, preferences, or special rights of the
Series D Stock would be adversely affected; and, the imposition
of any restriction on the Series D Stock, other than restrictions
arising under the Nevada Revised Statutes or existing under the
articles of incorporation as in effect at June 1, 1996.
Part 5. Redemption.
5A. Redemption Price. For each share of Series D
Stock which is to be redeemed, the Corporation will be obligated
on the Redemption Date (as defined below) to pay to the holder
thereof (upon surrender by such holder at the Corporation's
principal office or to the Corporation's transfer agent of the
certificates representing such shares of Series D Stock) an
amount in immediately available funds equal to 120% of the
Liquidation Value thereof plus all accrued dividends as of the
Redemption Date.
5B. Redemption upon Specific Event. In the event any
shares of the Series D Stock are submitted for conversion under
Part 3 and the market price for the Common Stock on the
Conversion Date as determined under Part 3B is less than $2.00
per share, the Corporation may, at its option, elect to redeem
the Series D Stock tendered for conversion rather than convert
the shares.
5C. Notice of Redemption. The Corporation will mail
written notice of redemption of Series D Stock to the record
holder submitting the Series D Stock to the Corporation for
conversion not later than the close of the next Business Day
following the date on which the shares of Series D Stock are
tendered to the Corporation for conversion. The date specified
in such notice for redemption is herein referred to as the
"Redemption Date."
5D. Termination of Rights. On the Redemption Date all
rights pertaining to the Series D Stock, including, but not
limited to, any right of conversion, will cease, and such Series
D Stock will not be deemed to be outstanding.
5E. Redeemed or Otherwise Acquire Shares. Any shares
of Series D Stock which are redeemed or otherwise acquired by the
Corporation shall be canceled and may not be reissued.
Part 6. Definitions.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New
York are authorized by law to close.
"Common Stock" means the Common Stock, $0.01 par value
per share, of the Corporation and any capital stock of any class
of the Corporation hereafter authorized which is not limited to a
fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in
the distribution or assets upon any liquidation, dissolution, or
winding up of the Corporation.
"Junior Securities" means any of the Corporation's
equity securities other than the Senior Securities.
"Liquidation Value" of any Series D Stock as of any
particular date will be equal to $50,000 per share.
"Person" means an individual, a partnership, a
corporation, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision
thereof.
"Senior Securities" means the Corporation's Series A
Stock, Series B Stock, and Series C Stock.
* * *
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be executed by Gary S. Goldstein, its President,
and attested to by Barry S. Roseman, its Secretary, this ______
day of May, 1996.
AFGL INTERNATIONAL, INC.
By: /s/
Gary S. Goldstein, President
ATTEST
By: /s/
Barry S. Roseman, Secretary
ACKNOWLEDGMENT
STATE OF NEW YORK )
)ss
COUNTY OF NEW YORK )
I, Gary S. Goldstein, hereby certify that I am the duly
elected and qualified President of AFGL INTERNATIONAL, INC., that
the foregoing instrument is the act and deed of the Corporation
and the facts stated therein are true.
/S/
Gary S. Goldstein, President
Subscribed and sworn to before me the undersigned, a Notary
Public in and for said county and state this 29th day of May,
1996.
/s/
Notary Public
18
SERIES E CONVERTIBLE PREFERRED STOCK
CERTIFICATE OF DESIGNATION
FOR
AFGL INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
SERIES E CONVERTIBLE PREFERRED STOCK
OF
AFGL INTERNATIONAL, INC.
Pursuant to Section 78.195 of the
Nevada Revised Statues
AFGL INTERNATIONAL, INC. a corporation organized and
existing under the laws of the State of Nevada (the
"Corporation"), in accordance with Section 78.195 of the Nevada
Revised Statutes, DOES HEREBY CERTIFY:
1. The Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), fixes the total
number of shares of all classes of capital stock which the
Corporation shall have the authority to issue at Twenty-Five
Million (25,000,000) shares, of which Five Million (5,000,000)
shares shall be shares of Preferred Stock, par value $.001 per
share (herein referred to as "Preferred Stock"), and Twenty
Million (20,000,000) shares shall be shares of Common Stock, par
value $.01 per share (herein referred to as "Common Stock").
2. The Certificate of Incorporation expressly grants to
the Board of Directors of the Corporation authority to provide
for the issuance of said Preferred Stock in one or more series,
with such voting powers, full or limited but not to exceed one
vote per share, or without voting powers, and with such
designations, preferences and relative, participating, optional
or other special rights and qualifications limitations or
restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue thereof
adopted by the Board of Directors and as are not stated and
expressed in the Certificate of Incorporation.
3. Pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Board of
Directors, on May 24, 1996, (by unanimous written consent), duly
authorized and adopted the following resolutions providing for an
issue of a series of its Preferred Stock to be designated "Series
E Convertible Preferred Stock.
"RESOLVED, that an issue of a series of Preferred Stock,
$.001 par value per share, of the Corporation (the Preferred
Stock of the Corporation being herein referred to as
"Preferred Stock", which term shall include any additional
shares of Preferred Stock of the same class hereafter
authorized to be issued by the Corporation), consisting of
Five Hundred Seventy Five Thousand (575,000) shares is
hereby provided for, and the voting power, designation,
preferences and relative participating, optional or other
special rights, and the qualifications, limitations or
restrictions thereof, of such series shall be as set forth
below:
Designation: Number of Shares.
(a) The designation of such series of Preferred Stock shall
be "Series E Convertible Preferred Stock" (hereinafter referred
to as the "Series E Stock") and the number of authorized shares
constituting the Series E Stock is Five Hundred Seventy Five
Thousand (575,000). The Series E Stock shall be deemed a
separate class of Preferred Stock, and shall be apart from any
other series of Preferred Stock.
Part 1. Liquidation.
Upon any liquidation, dissolution, or winding up of the
Corporation, the holders of Series E Stock will be entitled to be
paid, after any distribution or payment is made upon any Senior
Securities and before any distribution or payment is made upon
Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all shares of Series E Stock outstanding,
and the holders of Series E Stock will not be entitled to any
further payment. If upon any such liquidation, dissolution, or
winding up of the Corporation, the Corporation's assets to be
distributed among the holders of Series E Stock are insufficient
to permit payment to such holders of the aggregate amount which
they are entitled to be paid, then the entire assets to be
distributed will be distributed ratably among such holders based
upon the aggregate Liquidation Value of the Series E Stock held
by each such holder. The Corporation will mail written notice of
such liquidation, dissolution, or winding up not less then 30
days prior to the payment date stated therein, to each record
holder of Series E Stock. Neither the consolidation or merger of
the Corporation into or with any other corporation or
corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reduction of the capital stock
of the Corporation, will be deemed to be liquidation,
dissolution, or winding up of the Corporation within the meaning
of this Part 1.
Part 2. Conversion Rights.
2A. Conversion Procedure. Subject to the provisions
set forth below, each share of Series E Stock shall be
convertible at the option of the holder thereof, in the manner
hereinafter set forth, into that number of fully paid and
nonassessable shares of Common Stock determined as set forth
below. Any holder of Series E Stock desiring to convert such
shares into shares of Common Stock shall surrender the
certificate or certificates for the shares being converted, duly
endorsed or assigned to the Corporation or in blank, at the
principal office of the Corporation or at the bank or trust
company appointed by the Corporation for that purpose,
accompanied by a written notice of conversion specifying the
number of shares of Series E Stock to be converted and the name
or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued; in case
such notice shall specify a name or names other then that of such
transfer taxes payable upon the issue of shares of Common Stock
in such name or names. After the receipt of such notice of
conversion, the Corporation shall, within thirty (30) days after
receipt of such notice, issue and deliver or cause to be issued
and delivered to such holder a certificate or certificates for
shares of Common Stock resulting from such conversion. In case
less than all of the shares of Series E Stock represented by a
certificate are to be converted by a holder, upon such conversion
the Corporation shall also deliver or cause to be delivered to
such holder a certificate or certificates for the shares of
Series E stock not so converted.
2B. Conversion Privilege and Rate. The right to
convert the Series E Stock into shares of Common Stock shall vest
immediately on the date of issuance of the Series E Stock. Each
share of Series E Stock is convertible into One (1) newly issued
share of Common Stock of the Corporation (the "Conversion Rate"),
which is subject to adjustment as provided in part 2C, below;
provided, however, that shares of Series E Stock may be converted
into shares of Common Stock only after the holder of such shares
of Series E Stock shall have certified to the Corporation that it
is not a "bank holding company" or a "subsidiary" of a "bank
holding company" within the meaning of Section 4 of the Bank
Holding Company Act of 1954, as amended, and Regulation Y
promulgated thereunder, or one of the following shall have
occurred: (1) the bona fide sale to any purchaser (including,
without limitation, any underwriter) of such shares of Series E
Stock (x) pursuant to a registration statement declared effective
by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), covering the offer and sale
of the Corporation's common stock in a bona fide public offering,
or (y) pursuant to Rules 144 and 144A promulgated under the Act,
or in a public distribution pursuant to Regulation A of the
General Rules and Regulations under the Act; (2) the bona fide
sale to any purchaser of such shares of Series E Stock in a
transaction not involving a sale of the Corporation's common
stock to the public, provided that such purchaser does not
immediately after such transaction hold shares of Common Stock
(including any shares converting to Common Stock in accordance
herewith) equaling two percent (2%) or more of the then-
outstanding shares of Common Stock; or (3) the receipt by the
Corporation of (y) a staff opinion, ruling or other written
advice from the Board of Governors of the Federal Reserve System,
or from the appropriate Federal Reserve Bank, or (z) an opinion
of counsel experienced in bank regulatory matters, in each case
to the effect that such shares of Series E Stock may be converted
into shares of Common Stock without violation of Section 4 of the
Bank Holding Company Act of 1954, as amended, and Regulation Y
promulgated thereunder.
2C. Adjustment of Conversion Rate. The Conversion
Rate is subject to adjustment from time to time upon the
occurrence of any of the events enumerated in this Part 2C. Such
adjustments shall be made in respect of any such events occurring
from and after the date on which any warrants to purchase shares
of Series E Stock are first issued and shall be applicable to all
authorized shares of Series E Stock whether or not any such
shares are issued and outstanding.
a. Adjustment for Change in Capital Stock of the
Corporation. If the Corporation (i) pays a dividend or makes
a distribution on any class of its Common Stock in shares of
any class of its Common Stock, (ii) subdivides its
outstanding shares of any class of Common Stock into a
greater number of shares, (iii) combines its outstanding
shares of any class of Common Stock into a smaller number of
shares, (iv) makes a distribution on any class of its Common
Stock in shares of its Stock other than Common Stock, or (v)
issues by reclassification of any class of its Common Stock
any shares of its Stock, then the Conversion Rate in effect
immediately prior to such action shall be proportionately
adjusted so that any holder of any Series E Stock (a
"Holder") thereafter exercised may receive the aggregate
number and kind of shares of capital stock of the
Corporation which it would have owned immediately following
such action if such Series E Stock had been issued and
outstanding (if not then issued and outstanding) and
converted immediately prior to such action. Such adjustment
shall be made successively whenever any event listed above
shall occur, and 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. If after an
adjustment a Holder may receive shares of two or more
classes of capital stock of the Corporation, the Board of
Directors of the Corporation shall determine in the good
faith exercise of its reasonable business judgment the
allocation of the adjusted Conversion Rate between the
classes of capital stock. After such allocation, the
exercise privilege and the Conversion Rate of each class of
capital stock shall thereafter be subject to adjustment on
terms comparable to those in this Part 2C.
b. Adjustment for Common Stock Issues. If the
Corporation issues shares of Common Stock for a
consideration per share less than the Fair Market Value per
Share (as defined in paragraph (1) of this Part 2C) on the
date the Corporation fixes the offering price of such
additional shares, the Conversion Rate shall be adjusted in
accordance with the following formula:
E' = E x A
P
O + M
where: E' = the adjusted Conversion Rate;
E = the then current Conversion Rate;
O = the number of shares of Common Stock
outstanding immediately prior to the issuance
of such additional shares;
P = the aggregate consideration received for the
issuance of such additional shares;
M = the Fair Market Value per Share on the date
the Corporation fixes the offering price of
such additional shares; and
A = the number of shares of Common Stock
outstanding immediately after the issuance of
such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately
after such issuance. The provisions of this subsection (b)
do not apply (i) to of the transactions described in
subsection (a) of this Part 2C or (ii) any transaction for
which an adjustment has been made pursuant to the provisions
of paragraphs (c) or (d) of this Part 2C or (iii) the
issuance of any Excluded Shares (as defined in paragraph (l)
of this Part 2C).
c. Adjustment for Convertible Securities Issues.
If the Corporation issues any evidences of indebtedness,
shares of stock or other securities which are convertible
into or exchangeable, with or without payment of additional
consideration in cash or property, for shares of Stock,
either immediately or upon the occurrence of a specifie date
or a specified event ("Convertible Securities"), other than
shares of Series E Stock for which an adjustment has been
made pursuant to the provisions of subsection (d) of this
Part 2C, whether or not the right to convert or exchange
thereunder is immediately exercisable or is conditioned upon
the passage of time, the occurrence or non-occurrence of
some other event, or both, for a consideration per share of
Stock initially deliverable upon conversion or exchange of
such Convertible Securities less than the Fair Market Value
per Share on the date of issuance of such Convertible
Securities, the Conversion Rate shall be adjusted in
accordance with this formula:
E' = E x O + D
P
O + M
where: E' = the adjusted Conversion Rate;
E = the then current Conversion Rate;
O = the number of shares of Common Stock
outstanding immediately prior to the issuance
of such Convertible Securities;
P = the aggregate consideration received for the
issuance of such Convertible Securities; and
M = the Fair Market Value per Share on the date
of issuance of such Convertible Securities;
and
D = the maximum number of shares
of Common Stock deliverable upon exercise,
conversion or in exchange of such Convertible
Securities at the Minimum Price.
In this subsection (c), the term "Minimum Price" means the
lowest price at which the Convertible Securities can be
converted into or exchanged for Common Stock, regardless of
whether that is the initial rate or is conditioned upon the
passage of time, the occurrence or non-occurrence of some
other event, or both. The adjustment shall be made
successively whenever any such issuance is made, and shall
become effective immediately after such issuance. If all of
the Stock deliverable upon conversion or exchange of such
Convertible Securities has not been issued when such
Convertible Securities are no longer outstanding, then the
Conversion Rate shall promptly be readjusted to the
Conversion Rate which would then be in effect had the
adjustment upon the issuance of such Convertible Securities
been made on the basis of the actual number of shares of
Stock issued upon conversion or exchange of such Convertible
Securities.
d. Adjustment for Right, Option and Warrant
Issues. If the Corporation issues any rights, options or
warrants to subscribe for or purchase or otherwise acquire
Stock, whether or not the right to exercise such rights,
options or warrants is immediately exercisable or is
conditioned upon the passage of time, the occurrence or non-
occurrence of some other event, or both (the "Option
Securities"), for a consideration per share of Stock
initially deliverable upon exercise of such Option
Securities less than the Fair Market Value per Share on the
date of issuance of such Option Securities, the Conversion
Rate shall be adjusted in accordance with this formula:
E' = E x O + D
P
O + M
where: E' = the adjusted Conversion Rate;
E = the then current Conversion Rate;
O = the number of shares of Common Stock
outstanding immediately prior to the issuance
of such Option Securities;
P = the aggregate consideration received for
the issuance of such Option Securities;
M = the Fair Market Value per Share on the
date of issuance of such Option Securities;
and
D = the maximum number of shares of Common
Stock deliverable upon exercise, conversion
or in exchange of such Option Securities at
the Minimum Price.
As used in this subsection (d), the term "Minimum Price"
means the lowest price at which the Option Securities may be
exercised to purchase or otherwise acquire Common Stock,
regardless of whether that is the initial price or is
conditioned upon the passage of time, the occurrence or non-
occurrence of some other event, or both. The adjustment
shall be made successively whenever any such issuance is
made, and shall become effective immediately after such
issuance. If all of the Common Stock deliverable upon
exercise of such Option Securities has not been issued when
such Option Securities are no longer outstanding, then the
Conversion Rate shall promptly be readjusted to the
Conversion Rate which would then be in effect had the
adjustment upon the issuance of such Option Securities been
made on the basis of the actual number of shares of Common
Stock issued upon such exercise of such Option Securities.
e. Consideration Received. For purposes of any
computation respecting consideration received pursuant to
any subsection of this Part 2C, the following shall apply:
(1) in the case of the issuance of shares of
Common Stock for cash, the consideration received shall
be the amount of cash received by the Corporation
therefor, without deduction therefrom of any reasonable
expenses incurred by the Corporation in connection
therewith or any reasonable underwriters' discounts,
fees and commissions paid or allowed by the Corporation
in connection therewith.
(2) in the case of the issuance of shares of
Common Stock for a consideration consisting in whole or
in part of other than cash, the consideration other
than cash shall be deemed to be the fair market value
thereof as determined by the Board of Directors of the
Corporation in the good faith exercise of its business
judgment, without deduction therefrom of any reasonable
expenses incurred by the Corporation in connection
therewith. In any circumstances in which the fair
market value of any such consideration is to be
determined pursuant to this paragraph (2), the
Corporation shall give to the Holders (or, if such
determination affects less than all of the Holders, to
the Holders so affected) written notice of the proposed
fair market value, as determined in good faith by the
Board of Directors of the Corporation. If, within
thirty (30) days after the date such notice is given,
the Corporation and such Holders agree upon the fair
market value then the fair market value for purposes of
this paragraph (2) shall be as so agreed. If such
Holders and the Corporation do not agree upon such fair
market value within such 30-day period, then the
Required Holders (as defined in paragraph (l) of this
Part 2C) and the Corporation shall appoint a recognized
investment banking firm of national reputation,
reasonably acceptable to the Required Holders and the
Corporation. If the Corporation and the Required
Holders cannot agree on the appointment of a mutually
acceptable investment banking firm, or if the firm so
appointed declines or fails to serve, then the Required
Holders and the Corporation shall each choose one such
investment banking firm and the respective firms so
chosen shall appoint another recognized investment
banking firm of national reputation. The investment
banking firm so selected shall appraise the fair market
value for the purposes of this paragraph (2), and such
investment banking firm shall make such appraisal
(which shall be in the form of a written report signed
by such investment banking firm) and, for the purposes
of determining the fair market value pursuant to this
paragraph (2), such appraised fair market value
determined as herein provided shall be final and
conclusive on the Corporation and the Holders. If the
fair market value of the consideration as determined by
such investment banking firm is equal to or less than
that determined by the Board of Directors of the
Corporation in accordance with this paragraph (2), then
all fees and expenses of such investment banking firm
shall be paid by the Required Holders requesting such
appraisal. If the appraised fair market value of the
consideration as determined by such investment banking
firm is greater than that determined by the Board of
Directors in accordance with this paragraph (2), then
all fees and expenses of such investment banking firm
shall be paid by the Corporation.
(3) in the case of the issuance of
Convertible Securities or securities issuable upon the
exercise of Option Securities, the aggregate
consideration received therefor shall be deemed to be
the consideration received by the Corporation for the
issuance of such Convertible Securities, plus the
consideration, if any, received by the Corporation for
the issuance of such Option Securities, plus the
additional minimum consideration, if any, to be
received by the Corporation upon the conversion,
exchange or exercise thereof (the consideration in each
case to be determined in the same manner as provided in
clauses (1) and (2) of this subsection (e)).
f. Special Adjustments. If the purchase price
provided for in any Option Securities, the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities or the rate at which
any Convertible Securities are convertible into or
exchangeable for Stock shall change, the Conversion Rate in
effect at the time of such event shall forthwith be
readjusted. The Conversion Rate shall be adjusted to those
amounts which would have been in effect at such time had
such Option Securities or Convertible Securities outstanding
at such time initially been granted, issued or sold and the
Conversion Rate initially adjusted as provided in the
applicable subsection of this Part 2C, whichever was
applicable, except that the minimum amount of additional
consideration payable and the total maximum number of shares
issuable shall be determined after giving effect to such
event (and any prior event or events).
g. When No Adjustment Required. No adjustment
need be made for a change in the par value or absence of par
value of any Common Stock. No adjustment in the Conversion
Rate need be made unless adjustment would require an
increase or decrease of at least 1% of the Conversion Rate.
Any adjustments that are not made but deferred pursuant to
this subsection shall be carried forward and taken into
account in any subsequent adjustment.
h. Determination of Fair Market Value per
Share; Notice of Adjustment. Prior to issuing any shares of
Common Stock, any Convertible Securities or any Option
Securities, the Corporation shall cause the Board of
Directors of the Corporation to determine in good faith the
Fair Market Value per Share, as of the date on which the
Corporation fixes the offering price of such shares or as of
the date of issuance of such Convertible Securities or
Option Securities, as the case may be. Within five (5) days
of such determination by the Board of Directors of the
Corporation, but in no event later than thirty (30) days
prior to issuance of such Common Stock, Convertible
Securities or Option Securities, the Corporation shall give
the Holders written notice of the proposed Fair Market Value
per Share. If within such thirty (30) day period, the
Corporation and such Holders agree upon the Fair Market
Value per Share, then the Fair Market Value per Share shall
be as so agreed. If, within such thirty (30) day period,
the Corporation and the Required Holders (as defined in
paragraph (l) of this Part 2C) do not agree upon such Fair
Market Value per Share, then the Fair Market Value per Share
shall be determined as provided in clause (b) of the
definition thereof.
i. When Issuance or Payment May Be Deferred. In
any case in which this Part 2C shall require that an
adjustment in the Conversion Rate be made effective as of a
record date for a specified event, the Corporation may elect
to defer until the occurrence of such event (i) issuing to
the Holder of any Series E Stock converted after such record
date the shares of Stock issuable upon such conversion over
and above the shares of Stock issuable upon such conversion
on the basis of the Conversion Rate prior to such adjustment
and (ii) paying to such Holder any amount in cash in lieu of
a fractional share pursuant to paragraph (j), provided,
however, that the Corporation shall deliver to such Holder a
bill or other appropriate instrument evidencing such
Holder's right to receive such additional shares of stock
and cash upon the occurrence of the event requiring such
adjustment.
j. Fractional Interests. The Corporation shall
not be required to issue fractional shares of Common Stock
on the conversion of the Series E Stock. If more than one
share certificate shall be presented for conversion in full
at the same time by the same Holder, the number of full
shares of Common Stock which shall be issuable upon
conversion thereof shall be computed on the basis of the
aggregate number of shares issuable on conversion of the
Series E Stock evidenced by all share certificates so
presented. If any fraction of the shares of Common Stock
would, except for the provisions of this Part 2C, be
issuable on conversion of any shares of Series E Stock (or
specified portion thereof), the Corporation shall pay an
amount in cash equal to the Fair Market Value per Share on
the day immediately preceding the date the share certificate
evidencing such Series E Stock is presented for conversion,
multiplied by such fraction.
k. Par Value of Common Stock. Before taking any
action which (i) would cause an adjustment in the Conversion
Rate pursuant to Part 2C such that the aggregate par value
of the shares of Common Stock (including fractional shares)
into which a share of Series E Stock is convertible is
greater than $0.02 per share or (ii) would otherwise result
in the par value of the Common Stock increasing to greater
than $0.02 per share, the Corporation shall receive the
consent of the Required Holders to such adjustment or change
in the par value of the Common Stock and shall take any
corporate action necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable
shares of Common Stock on the basis of the Conversion Rate
as so adjusted.
l. Definitions. For purposes of this Part 2C,
the following terms shall have the following meanings:
(1) "Excluded Shares" means (i) shares of
Common Stock to be issued upon exercise or conversion
of the Corporation's Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible
Preferred Stock, Series E Stock, and warrants to
purchase Series E Stock, (ii) shares of Stock issued on
exercise of warrants to purchase Common Stock which the
Board of Directors has, by resolution duly adopted
prior to May 31, 1996, authorized to be granted or
issued, not to exceed 809,711 shares, and (iii) shares
of Stock issued to officers, directors, or employees
of, or consultants to, the Corporation upon exercise of
any stock option granted on or prior to May 31, 1996,
not in excess of 1,151,113 shares, plus shares issued
or options granted to employees pursuant to a stock
option plan approved in good faith by the Board of
Directors of the Corporation after May 31, 1996, not
exceeding 500,000 shares.
(2) "Fair Market Value per Share" means the
fair market value of a share of Common Stock of the
Corporation, and shall be equal to the quotient of (i)
the fair market value of the Corporation and its
subsidiaries taken as a whole on the date of
determination, taking into account all the factors
relevant thereto, including, without limitation, the
highest of the prices that could be obtained from an
arms' length sale without time constraints of (A) all
or substantially all of the assets of the Corporation
and the subsidiaries subject to or after satisfaction
of all liabilities of the Corporation and the
subsidiaries or (B) all of the Fully Diluted Shares of
Common Stock of the Corporation, whether by stock sale,
merger, consolidation or otherwise, divided by (ii) the
number of Fully Diluted Shares of Common Stock on the
date of determination. In no event shall the Fair
Market Value per Share be reduced or discounted on the
basis that any securities to be valued on the basis of
such Fair Market Value per Share may represent the
fight to acquire a minority interest in the Corporation
or may not be freely transferable under federal or
state securities laws, or for any other reason. The
Fair Market Value per Share shall be determined as
provided in clause (X) or (Y) below, as applicable.
(X) In any circumstances in which the
Fair Market Value per Share is required to be
determined, not later than ten (10) days following
the date as of which such determination is
required to be made, the Board of Directors of the
Corporation shall determine in good faith the Fair
Market Value per Share, and the Corporation shall
give to the Holders (or, if such determination
affects less than all of the Holders, to the
Holders so affected) prompt written notice of such
determination. If within thirty (30) days after
the date such notice is given, the Corporation and
the Required Holders agree upon the Fair Value per
Share, then the Fair Market Value per Share shall
be as so agreed. If within such 30-day period,
the Corporation and the Required Holders do not
agree upon such Fair Market Value per Share, then
the Fair Market Value per Share shall be
determined as provided in clause (Y) of this
definition.
(Y) If the Required Holders and the
Corporation do not agree upon such Fair Market
Value per Share within the 30-day period specified
in clause (X) of this definition, then the
Required Holders and the Corporation shall appoint
a recognized investment banking firm of national
reputation, reasonably acceptable to the Required
Holders and the Corporation. If the Corporation
and the Required Holders cannot agree on the
appointment of a mutually acceptable investment
banking firm, or if the firm so appointed declines
or fails to serve, then the Required Holders and
the Corporation shall each choose one such
investment banking firm and the respective firms
so chosen shall appoint another recognized
investment banking firm of national reputation.
The investment banking firm so selected shall
appraise the value of the Corporation (which shall
be in the form of a written report signed by such
investment banking firm), and such appraised value
of the Corporation determined as herein provided
shall be final and conclusive and binding on the
Corporation and the Holders. If the appraised
value of the Corporation as determined by such
investment banking firm is equal to or less than
that determined by the Board of Directors of the
Corporation in accordance with clause (X) of this
definition, then all fees and expenses of such
investment banking firm shall be paid by the
Required Holders requesting such appraisal. If
the appraised value of the Corporation as
determined by such investment banking firm is
greater than that determined by the Board of
Directors in accordance with clause (X) of this
definition, then all fees and expenses of such
investment banking firm shall be paid by the
Corporation.
(3) "Fully Diluted Shares" means, as of any
date of determination, the number of shares of Common
Stock of the Corporation equal to the sum of (i) the
number of shares of Common Stock outstanding on such
date of determination, plus (ii) the number of shares
issuable upon conversion of the Series E Stock as of
such date of determination, plus (iii) the number of
shares of Common Stock that would be issued in respect
of all Option Securities of the Corporation outstanding
and immediately exercisable as of such date of
determination if such Option Securities were to be
converted into shares of Common Stock in accordance
with the following formula:
X = Y(A-B)
A
where: X = the number of shares to be issued to the
holders of such Option Securities;
Y = the number of shares for which such Option
Securities are exercisable;
A = the Fair Market Value per Share determined on
the basis of the then outstanding Common
Stock and assuming that all Option Securities
outstanding are converted to Common Stock as
of the date of determination: and
B = the exercise price for such Option
Securities.
(4) "Required Holders" means the Holders
holding at least 66-2/3% of the Series E Stock
outstanding.
(5) "Stock" means any capital stock of the
Corporation.
2D. Conversion Date. Conversion shall be deemed to
have been made as of the date of surrender of certificates for
the shares of Series E Stock to be converted, and the giving of
written notice as prescribed in Part 2A, and the person entitled
to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder of such Common
Stock on such date. The Corporation shall not be required to
deliver certificates for shares of its Common Stock while the
stock transfer books for such stock or for the Series E Stock are
duly closed for any purpose, but certificates for shares of
Common Stock shall be issued and delivered as soon as practicable
after the opening of such books.
2E. Converted Shares and Common Stock Held for
Conversion. Any shares of Series E Stock which at any time have
been converted shall be canceled and may not be reissued. The
Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, for the
purpose of issuance upon conversion of shares of Series E Stock
then outstanding and shall take all action necessary so that
shares of Common Stock so issued will be validly issued, fully
paid and nonassessable.
2F. Taxes. The Corporation will pay any and all
stamp or similar taxes that may be payable in respect of the
issuance or delivery of shares of Common Stock on conversion of
shares of Series E Stock. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of shares of
Common Stock in a name other than that in which the shares of
Series E Stock so converted were registered, and no such issuance
or delivery shall be made unless and until the person requesting
such issuance has paid to the Corporation the amount of any such
tax or has established to the satisfaction of the Corporation
that such tax has been paid.
Part 3. Dividends.
If the Corporation pays a dividend or makes a distribution
to the holders of its Common Stock of any securities (other than
capital stock for which an adjustment in the Conversion Rate is
made pursuant to part 2C) or property (including cash or
securities of other companies) of the Corporation, or any rights,
options or warrants to subscribe for or purchase securities or
property (including securities of other companies) of the
Corporation, then, simultaneously with the payment of such
dividend or the making of such distribution the Corporation will
pay or distribute to the holders of record of the Series E Stock
an amount of property (including, without limitation, cash)
and/or securities (including, without limitation, securities of
other companies) of the Corporation as would have been received
by such holders had they exercised their conversion rights and
converted such shares of Series E Stock into Common Stock
immediately prior to the record date used for determining
stockholders of the Corporation entitled to receive such dividend
or distribution. The dividend payable on each share of Series E
Stock outstanding on the record date for determining those
persons entitled to receive a dividend on Common Stock (or on the
date the dividend is paid if no record date is set), shall be
equal to the product of the dividend per share of Common Stock
multiplied by the Conversion Rate in effect on such record date
(or on the date the dividend is paid if no record date is set)
after giving taking into account all adjustments to such
Conversion Rates required to be made under Part 2, above, as of
such record date (or on the date the dividend is paid if no
record date is set). No dividends shall be paid on the Series E
Stock unless all dividends on the Senior Securities have been
paid or reserved in accordance with the terms thereof.
Part 4. Voting Rights.
Each share of Series E Stock shall have no voting rights
with respect to any matter submitted to the stockholders of the
Corporation, except to the extent required by the Nevada Revised
Statutes and except the right to approve by majority vote of the
holders of the Series E Stock, (i) any amendment, modification or
repeal of the articles of incorporation of the Corporation if the
powers, preferences or special rights of the Series E Stock would
be adversely affected, and (ii) the imposition of any restriction
on the Series E Stock, other than restrictions arising under the
articles of incorporation as in effect at June 1, 1996; provided,
that no voting right attributable to the Series E Stock shall
impose, or be construed to impose, any limitation on the power of
the Corporation to create, authorize or issue, without the vote
or approval of the Series E Stock, shares of any class or series
of Preferred Stock with rights, powers, privileges and
preferences superior or equal to the Series E Stock.
Part 5. Definitions.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New
York, are authorized by law to close.
"Common Stock" means the Common Stock, $0.01 par value per
share, of the Corporation and any capital stock of any class of
the Corporation hereafter authorized which is not limited to a
fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in
the distribution or assets upon any liquidation, dissolution, or
winding up of the Corporation.
"Junior Securities" means any of the Corporation's equity
securities other than Senior Securities and the Series E Stock.
"Liquidation Value" of any Series E Stock as of any
particular date will be equal to $0.02 per share.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture,
an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Senior Securities" means the Corporation's Series A
Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C 8% Convertible Preferred Stock, Series D 8%
Convertible Preferred Stock, and any other class or series of
Preferred Stock hereafter created, authorized, and issued with
rights, powers, privileges and preferences superior or equal to
the Series E Stock.
* * *
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be executed by Gary S. Goldstein, its President,
and attested to by Barry S. Roseman, its Secretary, this ______
day of May, 1996.
AFGL INTERNATIONAL, INC.
By: /s/
Gary S. Goldstein, President
ATTEST
By: /s/
Barry S. Roseman, Secretary
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss
COUNTY OF NEW YORK )
I, Gary S. Goldstein, hereby certify that I am the duly
elected and qualified President of AFGL INTERNATIONAL, INC., that
the foregoing instrument if the act and deed of the Corporation
and the fact stated therein are true.
/S/
Gary S. Goldstein, President
Subscribed and sworn to before me the undersigned, a Notary
Public in and for said county and state, this 29th, day of May,
1996.
/s/
Notary Public
CREDIT AGREEMENT
Dated as of May 31, 1996
by and among
AFGL INTERNATIONAL, INC.
as Borrower,
VARIOUS LENDERS
and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION,
as Agent for the Lenders
ARTICLE 1. DEFINITIONS 1
SECTION 1.1. Defined Terms 1
SECTION 1.2. Use of Defined Terms 26
SECTION 1.3. Cross-References 27
SECTION 1.4. Accounting and Financial Determinations 27
ARTICLE 2. COMMITMENTS 27
SECTION 2.1. Term Loan and Revolving Loan Commitment 27
SECTION 2.1.1. Term Loan. 27
SECTION 2.1.2. Revolving Loan Commitment 27
SECTION 2.1.3. Limitations on Revolving Credit Commitment 27
SECTION 2.2. Changes in Advance Rations; Establishment of
Reserves 27
SECTION 2.2.2 Establishment of Reserves 27
SECTION 2.2.1. Advance Ratios 28
SECTION 2.3. Commitment Fee 28
SECTION 2.4. Increased Costs; Capital Adequacy 28
ARTICLE 3. LOANS AND NOTES 30
SECTION 3.1. Borrowing Procedure 30
SECTION 3.2. Notes 30
SECTION 3.3. Principal Payments 31
SECTION 3.3.1. Repayments and Prepayments 31
SECTION 3.3.2. Application 33
SECTION 3.3.3. Revolving Loans on Borrower's Behalf 33
SECTION 3.3.4. Reduction of Revolving Loan Commitment 33
SECTION 3.4. Interest 34
SECTION 3.4.1. Term Loan Rate 34
SECTION 3.4.2. Revolving Loan Rate 34
SECTION 3.4.3. Continuation and Conversion Elections 34
SECTION 3.4.4. Post-Default Rates 35
SECTION 3.4.5. Payment Dates 35
SECTION 3.4.6. Rate Determinations 36
SECTION 3.4.7. Limitation on Types of Loans 36
SECTION 3.4.8. Illegality 36
SECTION 3.4.9. Treatment of Affected Loans 36
SECTION 3.4.10.Compensation 37
SECTION 3.5. Taxes 37
SECTION 3.6. Payments, Interest Rate Computations, Other
Computations, etc. 39
SECTION 3.7. Proration of Payments 39
SECTION 3.8. Setoff 40
SECTION 3.9. Use of Proceeds 40
ARTICLE 4. CONDITIONS TO LOANS 41
SECTION 4.1. Initial Loan 41
SECTION 4.1.1. Resolutions, etc. 41
SECTION 4.1.2. Notes 42
SECTION 4.1.3. Subsidiary Guaranty 42
SECTION 4.1.4. No Contest, etc. 42
SECTION 4.1.5. Certificate as to Completed Conditions,
Warranties, No
Default, etc. 42
SECTION 4.1.6. Opinions of Counsel 43
SECTION 4.1.7. Closing Fees, Expenses, etc. 43
SECTION 4.1.8. Security Documents and Perfection 43
SECTION 4.1.9. Employment Agreements; Compensation 44
SECTION 4.1.10. Pension and Welfare Liabilities 44
SECTION 4.1.11. Insurance 44
SECTION 4.1.12. Key Man Insurance 45
SECTION 4.1.13. Financial Information, etc. 45
SECTION 4.1.14. Solvency, etc. 45
SECTION 4.1.15. Acquisition 45
SECTION 4.1.16Additional Equity 44
SECTION 4.1.17 Releases of Liens on Assets . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .44
SECTION 4.1.18 Review of the Borrower's Operations . . . . .
. . . . . . . . . . . . . . . . 44
SECTION 4.1 19 Material Contracts . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.1.20. Letter to Accountants . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .45
SECTION 4.1.21. Other Documents, Certificates, Etc 47
SECTION 4.2 All Loans. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.2.1. Compliance with Warranties, No Default, etc.47
SECTION 4.2.2. Borrowing Request, etc. 47
SECTION 4.2.3. Satisfactory Legal Form 48
SECTION 4.2.4. Margin Regulations 48
SECTION 4.2.5. Adverse Change 48
SECTION 4.2.6. Change in Law 48
ARTICLE 5. WARRANTIES, ETC. 48
SECTION 5.1. Organization, Power, Authority, etc. 49
SECTION 5.2. Due Authorization 49
SECTION 5.3. Validity, etc. 49
SECTION 5.4. Financial Information; Solvency 49
SECTION 5.5. Material Adverse Change 50
SECTION 5.6. Absence of Default 51
SECTION 5.7. Litigation, Legislation, etc. 51
SECTION 5.8. Regulations G, T, U and X 51
SECTION 5.9. Government Regulation 51
SECTION 5.10. Taxes 51
SECTION 5.11. Pension and Welfare Plans 52
SECTION 5.12. Labor Controversies 53
SECTION 5.13. Ownership of Properties; Collateral 54
SECTION 5.14. Intellectual Property 54
SECTION 5.15. Accuracy of Information 54
SECTION 5.16. Insurance 55
SECTION 5.17. Certain Indebtedness 55
SECTION 5.18. Environmental Matters 55
SECTION 5.19. No Burdensome Agreements 55
SECTION 5.20. Consents 56
SECTION 5.21. Contracts 56
SECTION 5.22. Employment Agreements 56
SECTION 5.23. Condition of Property 56
SECTION 5.24. Subsidiaries 56
SECTION 5.25. Acquisition Agreement 56
SECTION 5.26. Trade Relations 57
ARTICLE 6. COVENANTS 57
SECTION 6.1. Affirmative Covenants. 57
SECTION 6.1.1. Financial Information, etc. 57
SECTION 6.1.2. Maintenance of Corporate Existence, etc. 59
SECTION 6.1.3. Foreign Qualification 59
SECTION 6.1.4. Payment of Taxes, etc. 59
SECTION 6.1.5. Insurance 59
SECTION 6.1.6. Notice of Default, Litigation, etc. 60
SECTION 6.1.7. Books and Records 62
SECTION 6.1.8. Maintenance of Properties, Etc. 62
SECTION 6.1.9. Maintenance of Licenses and Permits 62
SECTION 6.1.10. Employee Plans 62
SECTION 6.1.11. Environmental Management. 62
SECTION 6.1.12. Compliance with Laws 62
SECTION 6.1.13. Interest Rate Protection 63
SECTION 6.1.14. Real Estate 63
SECTION 6.1.15. Underwriting Offering. 63
SECTION 6.1.16. Whitney Group. 63
SECTION 6.2. Negative Covenants. 63
SECTION 6.2.1. Business Activities 63
SECTION 6.2.2. Indebtedness 64
SECTION 6.2.3. Liens 65
SECTION 6.2.4. Financial Condition 66
SECTION 6.2.5. Capital 68
SECTION 6.2.6. Lease 68
SECTION 6.2.8. Restricted Payments, etc 69
SECTION 6.2.9. Take or Pay Contracts; Sale/Leasebacks 70
SECTION 6.2.10. Consolidation, Merger, Subsidiaries, etc. 70
SECTION 6.2.11. Asset Dispositions, etc 70
SECTION 6.2.12. Modification of Organic Documents, 70
SECTION 6.2.13. Transactions with Affiliates 71
SECTION 6.2.14. Inconsistent Agreements 71
SECTION 6.2.15. Change in Accounting Method 71
SECTION 6.2.16. Change in Fiscal Year End. 71
SECTION 6.2.17. Compliance with ERISA 71
SECTION 6.2.18.Limitation on Restrictions on Subsidiary Dividends 71
SECTION 6.2.19. Whitney Group 71
ARTICLE 7. EVENTS OF DEFAULT 72
SECTION 7.1. Events of Default 72
SECTION 7.1.1. Non-Payment of Obligations 72
SECTION 7.1.2. Non-Performance of Certain Covenants 72
SECTION 7.1.3. Defaults Under Other Loan Documents;
Non-Performance of
Other Obligations 72
SECTION 7.1.4. Bankruptcy, Insolvency, etc 72
SECTION 7.1.5. Breach of Warranty 73
SECTION 7.1.6. Default on Other Indebtedness, etc. 73
SECTION 7.1.7. Failure of Valid, Perfected Security Interest
74
SECTION 7.1.8. Employee Plans 74
SECTION 7.1.9. Judgments 74
SECTION 7.1.10. Cessation of Business; Dissolution. 75
SECTION 7.2. Action if Bankruptcy 75
SECTION 7.3. Action if Other Event of Default 75
ARTICLE 8. THE AGENT 75
SECTION 8.1. Actions 75
SECTION 8.2. Funding Reliance, etc. 76
SECTION 8.3. Exculpation 77
SECTION 8.4. Successor 77
SECTION 8.5. Loans by the Agent 77
SECTION 8.6. Credit Decisions 77
SECTION 8.7. Copies, etc. 78
ARTICLE 9. MISCELLANEOUS 78
SECTION 9.1. Waivers, Amendments, etc. 78
SECTION 9.2. Notices 79
SECTION 9.3. Costs and Expenses 80
SECTION 9.4. Indemnification 81
SECTION 9.5. Survival 83
SECTION 9.6. Severability 83
SECTION 9.7. Headings 83
SECTION 9.8. Counterparts, Effectiveness, etc. 83
SECTION 9.9. Governing Law; Entire Agreement 83
SECTION 9.10. Successors and Assigns 84
SECTION 9.11. Sale and Transfers, Participations, etc. 85
SECTION 9.12. Other Transactions 87
SECTION 9.13. Confidentiality 87
SECTION 9.14. Change in Accounting Principles 88
SECTION 9.15. Waiver of Jury Trial, Etc. 88
SECTION 9.16. Limitation of Liability 88
SECTION 9.17. Usury Savings Clause 89
SCHEDULES AND EXHIBITS
Schedule 1 - Disclosure Schedule
Exhibit A - Form of Borrowing Request
Exhibit B - Form of Borrowing Base Certificate
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Continuation/Conversion Notice
Exhibit E-1 - Form of Revolving Note
Exhibit E-2 - Form of Term Note
Exhibit F - Form of Transfer Supplement
Exhibit G - Form of Acknowledgment of Interest Rate Contract
Counterparty
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 31, 1996, by and
among AFGL INTERNATIONAL, INC., a Nevada corporation, various
lenders as are, or may from time to time become, parties hereto,
and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a
Delaware corporation, as Agent for the Lenders.
W I T N E S S E T H:
RECITALS.
A. The Borrower desires to obtain from the Lenders (i) a
Term Loan in the principal amount of Nine Million Dollars
($9,000,000), and (ii) a Revolving Loan Commitment in an
aggregate amount of up to Six Million Dollars ($6,000,000);
B. The Lenders are willing, on the terms and conditions
set forth herein to make the Term Loan and to extend the
Revolving Loan Commitment; and
C. The Term Loan and the Revolving Loans will be used in
the manner described in Section 3.9 below;
NOW, THEREFORE, for good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.1 Defined Terms. The following terms (whether
or not underscored) when used in this Agreement, including its
preamble and recitals, shall, except where the context otherwise
requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):
"Account" means any "account" (as such term is defined
in Section 9-106 of the UCC) of the Borrower or its Eligible
Subsidiaries arising from the sale or lease of goods or providing
of services in the ordinary course of business.
"Account Debtor" means any Person who is or may become
obligated to the Borrower or its Eligible Subsidiaries under,
with respect to, or on account of, an Account.
"Acquisition" means the acquisition by the Borrower of
the "Companies Stock" (as such term is defined in the Acquisition
Agreement) in exchange for the payment of the "Preliminary
Purchase Price" and the "Additional Amount" (as such terms are
defined in the Acquisition Agreement) pursuant to the terms and
conditions of the Acquisition Agreement.
"Acquisition Agreement" means that certain Stock
Purchase Agreement, dated as of April 10, 1996, between the
Borrower, Irene Cohen, CSA, CTS, and the Sellers, as amended,
modified or supplemented to the date hereof.
"Affiliate" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or under
common control with such Person (excluding any trustee under, or
any committee with responsibility for administering, any Plan).
A Person shall be deemed to be "controlled by" any other Person
if such other Person possesses, directly or indirectly, power (a)
to vote 5% or more of the securities having ordinary voting power
for the election of directors of such Person, or (b) to direct or
cause the direction of the management or policies of such Person
whether by contract or otherwise; provided that no Lender shall
be deemed to constitute an Affiliate of the Borrower.
"AFGL" means AFGL, Inc., a Delaware corporation which
is a wholly-owned Subsidiary of the Borrower.
"Agent" means ING as agent for the Lenders pursuant
hereto, or such other Person as shall have subsequently been
appointed as the successor agent pursuant to Section 8.4.
"Agreement" means, on any date, this Credit Agreement
as originally in effect on the Closing Date and as thereafter
from time to time amended, supplemented, amended and restated,
extended or otherwise modified and in effect.
"Applicable Lending Office" means, with respect to any
Lender, the branch or office of such Lender at which Loans of a
certain type are maintained.
"Approved Acquisition Expenditures" means, in
connection with any purchase or other acquisition of all or
substantially all of the assets or stock of any Person (or of any
operating division or unit thereof), the net consideration paid
in the form of a Cash Equivalent Investment in connection with
such purchase or acquisition; provided, that nothing contained in
this definition shall in any event be deemed a consent to any
purchase or acquisition which is otherwise prohibited under the
terms of this Agreement or the other Loan Documents unless such
purchase or acquisition is consented to in writing by the
Required Lenders.
"Authorized Officer" means, relative to any Loan Party
those officers of such Loan Party whose signatures, incumbency
and authority shall have been certified to the Agent and the
Lenders pursuant to Section 4.1.1.
"Base Rate Loans" means Loans, or portions thereof,
interest rates on which are determined on the basis of the ING
Alternate Base Rate.
"Borrower" means AFGL International, Inc., a Nevada
corporation.
"Borrowing" means the Loans or portions thereof of the
same type and, in the case of Eurodollar Loans, having the same
Interest Period, in each case made, converted or continued by
the Lenders on the same Business Day pursuant to the same
Borrowing Request or Continuation/Conversion Notice in accordance
with Sections 3.1 or 3.4.3.
"Borrowing Request" means a loan request and
certificate duly executed by an Authorized Officer of the
Borrower in the form of Exhibit A.
"Borrower Pledge Agreement" means the Stock and Notes
Pledge Agreement, dated as of the Closing Date, made by the
Borrower in favor of the Agent, for its benefit and the ratable
benefit of the Lenders as originally in effect on the Closing
Date and as thereafter from time to time amended, supplemented,
amended and restated, extended or otherwise modified and in
effect, pursuant to which the Borrower shall pledge to the Agent
as security for the Obligations all of the issued and outstanding
Stock of its direct Subsidiaries and all promissory notes, other
instruments and securities held by the Borrower (including
without limitation, the Subsidiary Notes).
"Borrower Trademark Assignment" means the Collateral
Assignment and Security Agreement (Trademarks), dated as of the
Closing Date, made by the Borrower in favor of the Agent, for its
benefit and the ratable benefit of the Lenders, as originally in
effect on the Closing Date and as thereafter from time to time
amended, supplemented, amended and restated, extended or
otherwise modified and in effect, as originally in effect on the
Closing Date and as thereafter from time to time amended,
supplemented, amended and restated, extended or otherwise
modified and in effect.
"Borrowing Base" means an amount equal to: (a) eighty-
five percent (85%) of Eligible Accounts, as the percentage set
forth in this clause (a) may be increased or decreased pursuant
to Section 2.2.1 hereof, minus (b) reserves established from time
to time pursuant to Section 2.2.2 hereof.
"Borrowing Base Certificate" means a certificate of the
chief executive, accounting or financial Authorized Officer of
the Borrower in the form of Exhibit B attached hereto.
"Business Day" means:
(a) any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be
closed in New York, New York; and
(b) relative to the making, continuing, prepaying or
repaying of any Eurodollar Loans, any day on which dealings in
Dollars are carried on in the London interbank market.
"Capitalized Lease Liabilities" means all monetary
obligations of the Borrower and its Subsidiaries under any
leasing or similar arrangement which, in accordance with GAAP,
are or would be classified as capitalized leases.
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation issued or guaranteed by the
United States of America or any agency or instrumentality thereof
and backed by the full faith and credit of the United States of
America, or issued by any state or political subdivision or
public instrumentality thereof, (i) which has a remaining
maturity at the time of purchase of not more than one (1) year or
which is subject to a repurchase agreement with any Lender or any
Eligible Lending Institution exercisable within one (1) year from
the time of purchase so long as such direct obligation remains in
the possession of the Borrower or in the possession of any Lender
and (ii) which, in the case of obligations of any state or
political subdivision or public instrumentality thereof, is rated
AA or better by Moody's Investors Service, Inc.;
(b) certificates of deposit, time deposits, demand
deposits and bankers' acceptances, having a remaining maturity at
the time of purchase of not more than one (1) year, issued by any
Lender or by any Eligible Lending Institution;
(c) corporate obligations rated Prime-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Corporation,
having a remaining maturity at the time of purchase of not more
than one (1) year; and
(d) shares of funds registered under the Investment
Company Act of 1940, as amended, having assets of at least
$100,000,000 which invest only in obligations described above and
which shares are rated by Moody's Investors Service, Inc. or
Standard & Poor's Corporation in one of the two highest rating
categories assigned by such agencies for obligations of such
nature.
"Cash Flow" means, for any period, an amount equal to
(without duplication) the consolidated Net Income of the Borrower
and its Subsidiaries, plus depreciation, amortization of
intangible assets and other non-cash charges of the Borrower and
its Subsidiaries, minus non-cash credits and revenues, plus
decreases in the Borrower's and its Subsidiaries' working capital
(excluding changes in cash, Cash Equivalent Investments and
current maturities of Indebtedness), minus increases in the
Borrower's and its Subsidiaries' working capital (excluding
changes in cash, Cash Equivalent Investments and current
maturities of Indebtedness).
"Change in Control" means (i) the failure of Gary S.
Goldstein to own at least 85% of the Stock of the Borrower which
he owns on the Closing Date, provided, however, that any Stock of
the Borrower sold or transferred to the Borrower in satisfaction
of the Goldstein Note shall not be considered for the purposes of
this clause (i), or (ii) the failure of either (A) Gary S.
Goldstein to be the Chief Executive Officer and President of the
Borrower and to be actively involved in the management of the
Borrower and its Subsidiaries or (B) any two of the following
individuals to be actively involved in the management of the
Borrower and its Subsidiaries at any time prior to the third
anniversary of the Closing Date or, thereafter, at least one of
the following individuals to be actively involved in the
management of the Borrower and its Subsidiaries at any time after
the Closing Date: (1) Irene Cohen, (2) Michael List, and (3) Ron
Wendlinger, (iii) the acquisition by any Person or group of
Persons of beneficial ownership of more than 20% of the
outstanding Stock of the Borrower (within the meaning of Section
13(d) or 14(d) of the Securities and Exchange Act of 1934, as
amended, and the applicable rules and regulations thereunder);
provided, however, that this clause (iii) shall not apply to an
underwriter(s) who acquires Stock of the Borrower in connection
with a public offering of Stock of the Borrower which is being
underwritten by such underwriter(s), or (iv) during any period of
12 consecutive months (whether commencing before or after the
Closing Date), the failure of individuals who on the first day of
such period were directors of the Borrower (together with any
replacement or additional directors who were nominated or elected
by a majority of directors then in office) to constitute a
majority of the Board of Directors of the Borrower.
"Charges" means all federal, state, county, city,
municipal, local, foreign or other governmental (including,
without limitation, PBGC) (a) taxes at the time due and payable
and (b) levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) the Collateral, (ii) the
Obligations, (iii) the Borrower's and its Subsidiaries'
employees, payroll, income or gross receipts, (iv) the Borrower's
and its Subsidiaries' ownership or use of their assets, or (v)
any other aspect of the Borrower's and its Subsidiaries'
business.
"Citigate Shares" means the 64,000 shares of stock of
Citigate Communications Group Limited, a limited liability
company in England and Wales owned by AFGL.
"Closing Date" the date of the funding of the Term Loan
and the initial Borrowing of the Revolving Loans.
"Closing Date Pro Forma Balance Sheet" means the pro
forma balance sheet of the Borrower as of the Closing Date,
prepared by the Borrower based on the financial statements
described in clauses (a)(i) and (ii) of Section 5.4 and after
giving effect to the consummation of the transactions
contemplated by this Agreement to occur on the Closing Date,
including the Acquisition and the making of the Term Loan and the
initial Borrowing of the Revolving Loans.
"Collateral" means all property and interests in
property and proceeds thereof now owned or hereafter acquired by
the Borrower or any Subsidiary in or upon which a Lien is granted
to the Agent, for its benefit and the ratable benefit of the
Lenders, under any of the Loan Documents.
"Commitment" means, collectively, the Lenders'
Revolving Loan Commitments and Term Loan Commitments.
"Commitment Letter" means the Commitment Letter dated
April 26, 1996 between the Borrower and ING.
"Commonly Controlled Entity" means, with respect to any
Person, an entity or trade or business, whether or not
incorporated, which is from time to time a member of a controlled
group or a group under common control with such Person within the
meaning of Sections 414(b), 414(c), 414(m) or 414(o) of the IRC
or Section 4001(a)(14) of ERISA. Unless otherwise indicated in
this Agreement, Commonly Controlled Entity shall refer to a
Commonly Controlled Entity with respect to the Borrower.
"Compliance Certificate" means a certificate duly
executed by the chief executive, operating, accounting or
financial Authorized Officer of the Borrower in the form of
Exhibit C, together with such changes as the Required Lenders may
from time to time reasonably request through the Agent for
purposes of monitoring the Borrower's compliance herewith.
"Consolidated Capital Expenditures" means, for any
period, without duplication, the sum of (a) the gross dollar
amount of additions during such period to property, plant,
equipment and other fixed assets of the Borrower and its
Subsidiaries, including those additions made in the ordinary
course of business, but excluding routine maintenance and
repairs, plus (b) the aggregate amount of Capitalized Lease
Liabilities incurred during such period by the Borrower and its
Subsidiaries.
"Continuation/Conversion Notice" means a notice of
continuation or conversion and certificate duly executed by the
chief executive, accounting or financial Authorized Officer of
the Borrower in the form of Exhibit D attached hereto.
"Contract" means any agreement or agreements pursuant
to or under which an Account Debtor shall be obligated to pay for
services rendered or merchandise sold to any Person from time to
time.
"Contractual Obligation" means, relative to any Person,
any provision of any security issued by such Person or of any
Instrument or undertaking to which such Person is a party or by
which it or any of its property is bound.
"CSA" means Corporate Staffing Alternatives, Inc., a
New York corporation which upon consummation of the Acquisition
Agreement will be a wholly-owned Subsidiary of HCSS.
"CTS" means Certified Technical Staffing, Inc., a New
York corporation which upon consummation of the Acquisition
Agreement will be a wholly-owned Subsidiary of HCSS.
"Current Ratio" means, at any date, the ratio at such
date of (a) current assets at such date, to (b) current
liabilities excluding current maturities of the Obligations at
such date, determined on a consolidated basis for the Borrower
and its Subsidiaries in accordance with GAAP.
"Default" means any Event of Default or any condition
or event which, after notice or lapse of time or both, would
constitute an Event of Default.
"Disclosure Schedule" means the Disclosure Schedule
attached hereto as Schedule 1, as it may be amended, supplemented
or otherwise modified from time to time by the Borrower with the
consent of the Required Lenders as provided in Section 4.3.2.
"Dollar" and the sign "$" mean lawful money of the
United States.
"EBITDA" means, for any period, an amount equal to Net
Income plus (to the extent deducted in determining Net Income)
interest expense, provisions for income taxes, depreciation,
amortization of intangible assets and other non-cash charges,
minus (to the extent included in determining Net Income) non-cash
credits and revenues, in each case for the Borrower and its
Subsidiaries on a consolidated basis.
"Eligible Accounts" means the net outstanding balance,
less all finance charges, late fees and other fees which are
unearned, of all Accounts of the Borrower and its Eligible
Subsidiaries, provided that no Account shall be deemed eligible
if:
(a) any representation or warranty contained in this
Agreement, the Security Agreement or any of the other Loan
Documents applicable either to Accounts in general or to any such
specific Account has been breached as of any date made in any
material respect with respect to such Account;
(b) fifty percent (50%) or more of the outstanding
Accounts from the Account Debtor are ineligible;
(c) the Account Debtor has (i) become insolvent or
generally failed to pay, or admitted in writing its inability to
pay, debts as they become due, (ii) applied for, consented to, or
acquiesced in, the appointment of a trustee, receiver,
sequestrator or other custodian for such Account Debtor or any
property thereof or made a general assignment for the benefit of
creditors, (iii) in the absence of such application, consent or
acquiescence, permitted or suffered to exist the appointment of a
trustee, receiver, sequestrator or other custodian for such
Account Debtor or for a substantial part of its property, or (iv)
permitted or suffered to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law or any
dissolution, winding up or liquidation proceeding in respect of
such Account Debtor;
(d) such Account is billed on other than standard
terms of payment;
(e) as of any date, such Account has remained unpaid
for a period exceeding 90 days after the due date of the invoice
issued with respect thereto;
(f) the sale represented by such Account is to an
Account Debtor outside the United States, unless the payment of
such Account is backed by a letter of credit denominated in
Dollars issued or confirmed by a United States bank or a foreign
bank with an office located in the United States, in each case
acceptable to the Agent and on terms acceptable to the Agent, and
the Agent has received an assignment of the Borrower's or its
Eligible Subsidiary's rights under such letter of credit or
acceptance or has been irrevocably designated the payee of such
letter of credit or acceptance;
(g) the Account Debtor is an Affiliate or employee of
the Borrower or any Subsidiary;
(h) the Account is subject to any set-off by the
Account Debtor, in which event such Account will be deemed
ineligible to the extent of such set-off;
(i) the Account is denominated in other than Dollars
or is payable outside the United States;
(j) based on the customary credit decisions of the
Agent, collection of such Account is insecure for any reason or
there is a reasonable probability that such Account may not be
paid provided that no such Account shall be excluded unless the
Agent shall have given to the Borrower not less than ten (10)
days prior written notice;
(k) the Account is subject to a material claim or
dispute by the Account Debtor;
(l) the Account is subject to any Lien whatsoever,
other than Liens in favor of the Agent, for its benefit and the
ratable benefit of the Lenders;
(m) the Account is not evidenced by an invoice or
other writing in form reasonably acceptable to the Agent;
(n) the Account is evidenced by chattel paper or an
instrument unless such chattel paper or instrument is pledged to
the Agent as security pursuant to the Borrower Pledge Agreement
or the Subsidiary Pledge Agreement;
(o) the Account or Accounts represent, individually or
when aggregated with all other outstanding Accounts of the same
Account Debtor, (i) more than fifteen percent (15%) of the net
outstanding balance of all Eligible Accounts of the Borrower and
the Eligible Subsidiaries (on a consolidated basis) then
outstanding for all Account Debtors other than Merrill Lynch &
Co. and Affiliates or (ii) more than twenty percent (20%) of the
net outstanding balance of all Eligible Accounts of the Borrower
and the Eligible Subsidiaries (on a consolidated basis) then
outstanding for Merrill Lynch & Co. and Affiliates as Account
Debtor;
(p) the Account or Accounts exceed any credit limit
established by the Borrower or its Eligible Subsidiary (which
limit shall be reasonably satisfactory to the Agent) for the
Account Debtor based on the Borrower's customary credit
considerations, in which case such Account or Accounts will be
deemed ineligible to the extent of such excess;
(q) the Borrower or its Eligible Subsidiary, in order
to be entitled to collect such Account (or, if such Account is
evidenced by multiple invoices, the amount of such Account
evidenced by any such invoice), is required to perform any
additional service for, or perform or incur any additional
obligation to, the Account Debtor in respect of such Account (or
amount so invoiced);
(r) the Account is an account of the United States
government or any agency or instrumentality of the United States,
unless the Borrower or its Subsidiary has complied with the
requirements of the Federal Assignment of Claims Act (31 U.S.C.
3727), or the Account is an account of any state government or
agency thereof unless the Borrower or its Eligible Subsidiary has
complied with any state assignment of claims or similar laws
relative to the assignment of such Account to and the right to
receive payment thereof by, the Agent, for its benefit and the
ratable benefit of the Lenders;
(s) the Borrower or its Eligible Subsidiary, as the
case may be, has not submitted all necessary documentation or
supplied all necessary information to the Account debtor for
payment of such Account or has not fulfilled all other
obligations in respect thereof, including verification of the
eligibility of the Account for payment by such Account Debtor;
(t) the Account or the Contract related thereto
contravenes in any material respect any laws, rules or
regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to usury, consumer
protection, truth-in-lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection
practices and privacy) or any party related to such Contract is
in violation of any such law, rule or regulation in any material
respect;
(u) the Account Debtor is located in the State of
Minnesota or any other state imposing conditions on the right of
a foreign (out-of-state) creditor to collect accounts receivable
from Accounts Debtors located in such state, and the Borrower or
the Eligible Subsidiary has not satisfied such conditions for the
then current year;
(v) the Account has not been adjusted to reflect
reimbursement policies of the Account Debtor with respect thereto
including, without limitation, any capitation arrangement, fee
schedule, discount formula, cost-based reimbursement, or other
adjustment or limitation to the usual charges; and
(w) the related Contract is not, or was not at the
time of the services giving rise to the Account, in full force
and effect, such Contract does not constitute the legal, valid
and binding obligation of the Account Debtor enforceable against
such Account Debtor in accordance with its terms, or such account
was not created in accordance with the requirements of the
Contract or applicable Requirements of Law, including, without
limitation, compliance with any restrictions on fees or charges.
The determination by the Agent that any Account shall be deemed
ineligible by virtue of its being described by one of such
categories shall not be deemed to indicate that such Account may
not also be deemed ineligible by virtue of being described by any
other such category or to preclude the Agent from reclassifying
such Account into such other category, should the Account cease
to be described by the first such category.
"Eligible Lending Institution" means a financial
institution having a branch or office in the United States and
having capital and surplus and undivided profits aggregating at
least $100,000,000 and rated Prime-1 or better by Moody's
Investors Service, Inc. or A-1 or better by Standard & Poor's
Corporation.
"Eligible Subsidiaries" means, collectively, (a) AFGL,
(b) Furash, (c) Whitney Partners, (d) HCSS, (e) Irene Cohen, (f)
CSA, (g) CTS, and (h) Headway Personnel.
"Eligible Subsidiary" means any of the Eligible
Subsidiaries.
"Environment" means soil, surface waters, ground
waters, land, streams, sediments, surface or subsurface strata
and ambient air.
"Environmental Laws" means all federal, state, local
and foreign laws or regulations, codes, common law, consent
agreements, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder relating to pollution
or protection of the Environment, natural resource or
occupational health and safety.
"Environmental Liabilities and Costs" means all
liabilities, obligations, responsibilities, remedial actions,
losses, damages, punitive damages, consequential damages, treble
damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, expert and consulting fees
and costs of investigation and feasibility studies), fines,
penalties, settlement costs, sanctions and interest incurred as a
result of any claim or demand, by any Person, whether based in
contract, tort, implied or express warranty, strict liability,
criminal or civil statute, any Environmental Law, permit, order,
variance or agreement with a Governmental Authority or other
Person, arising from or related to the administration of any
Environmental Law or arising from environmental, health or safety
conditions or a release or threatened release resulting from the
past, present or future operations of the Borrower or its
Subsidiaries or affecting any of their properties, or any release
or threatened release for which the Borrower or any of its
Subsidiaries is otherwise responsible under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute of similar
import, together with the regulation thereunder, in each case as
in effect from time to time. References to sections of ERISA
also refer to any successor sections.
"ERISA Insolvency" or "ERISA Insolvent" means, at any
particular time, a Multiemployer Pension Plan is insolvent within
the meaning of Section 4245 of ERISA.
"Eurodollar Base Rate" means, with respect to any
Borrowing of Eurodollar Loans for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) which appears on Telerate Page 3750 for Dollar
deposits comparable to the amount of such Borrowing in the London
interbank market as of 11:00 a.m. London time (or as soon
thereafter as practicable) on the date two (2) Business Days
prior to the first day of such Interest Period having a term
comparable to such Interest Period. If such Telerate Page is
unavailable, the "Eurodollar Base Rate" shall mean with respect
to any Borrowing of Eurodollar Loans for any Interest Period
therefor, the arithmetic average (rounded upwards, if necessary,
to the nearest 1/16 of 1%) of the rates per annum which appear on
the Reuters Screen LIBO Page, or if such Reuters Screen LIBO Page
is unavailable, the "Eurodollar Base Rate" shall mean with
respect to any Borrowing of Eurodollar Loans for any Interest
Period therefor, the arithmetic average (rounded upwards, if
necessary, to the nearest 1/16 of 1%) of the rates per annum for
Dollar deposits comparable to the amount of such Borrowing
offered to each of the Reference Lenders in the London interbank
market as of 11:00 a.m. London time (or as soon thereafter as
practicable) on the date two (2) Business Days prior to the first
day of such Interest Period of Dollar deposits having a term
comparable to such Interest Period.
"Eurodollar Loans" means Loans or portions thereof
interest rates on which are determined on the basis of the
Eurodollar Rate.
"Eurodollar Rate" means, with respect to any Borrowing
of Eurodollar Loans for any Interest Period therefor, the rate
per annum (rounded upward, if necessary, to the nearest 1/16 of
1%) determined by the Agent to be equal to (i) the Eurodollar
Base Rate for such Borrowing for such Interest Period divided by
(ii) one (1) minus the Reserve Requirement. The Eurodollar Rate
for any Interest Period will be determined initially by the Agent
on the basis of the Reserve Requirement in effect on the date two
(2) Business Days prior to the commencement of such Interest
Period and, from time to time thereafter during such Interest
Period, such Eurodollar Rate shall be adjusted automatically on
and as of the effective date of any change in the Reserve
Requirement during such Interest Period.
"Event of Default" means any of the events set forth in
Section 7.1.
"Excess Cash Flow" means, for any Fiscal Year, the
excess of : (a) Cash Flow for such Fiscal Year minus (b) the sum
of (i) the lesser of the amount of Consolidated Capital
Expenditures permitted during such Fiscal Year pursuant to
Section 6.2.5 and actual Consolidated Capital Expenditures during
such Fiscal Year, plus (ii) repayments of the Term Loan during
such Fiscal Year pursuant to clause (c) of Section 3.3.1, minus
(c) Approved Acquisition Expenditures.
"Facility Fee Letter" means the letter agreement, dated
as of the Closing Date, between ING and the Borrower.
"Fair Saleable Value Balance Sheet" means, with respect
to any Person, a hypothetical balance sheet of such Person,
prepared by such Person based on the Closing Date Pro Forma
Balance Sheet, setting forth (a) the assets of such Person
(restated at the fair saleable value thereof based upon such
evidence of the fair saleable value thereof as such Person shall
reasonably deem pertinent), (b) the liabilities of such Person
(including all liabilities and obligations of such Person, fixed
or contingent, direct or indirect, disputed or undisputed, and
whether or not required to be reflected on a balance sheet
prepared in accordance with GAAP), and (c) the excess of such
assets over such liabilities. The amount of attributed
contingent liabilities shall be discounted to reflect the
likelihood that such liabilities shall become payable.
"Federal Funds Rate" means, for any period, a
fluctuating interest rate per annum equal for each day during
such period to:
(a) the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York;
or
(b) if such rate is not so published for any day which
is a Business Day, the arithmetic average of the quotations for
such transactions received by the Agent, in its sole discretion,
either from (i) three federal funds brokers of recognized
standing selected by the Agent in its sole discretion or (ii) the
Reference Lenders.
"Financing Statements" means the financing statements
under the Uniform Commercial Codes of the applicable
jurisdictions, filed with respect to the Security Documents
pursuant to clause (c) of Section 4.1.8.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means, subject to Sections 6.2.16 and
9.14 (b), each twelve-month accounting period ending December 31.
References to a Fiscal Year with a number corresponding to any
calendar year (e.g., the "1996 Fiscal Year") refer to the Fiscal
Year ending on December 31 in such calendar year.
"Fixed Charge Coverage Ratio" means, for any period,
the ratio of (a) EBITDA for such period to (b) Fixed Charges
during such period.
"Fixed Charges" means, for any period, the sum of (a)
Interest Expense during such period, plus (b) scheduled
repayments of Indebtedness (including, without limitation,
scheduled payments of principal in respect of Capitalized Lease
Liabilities).
"Foreign Lender" means any Lender organized under the
laws of a jurisdiction outside the United States.
"F.R.S. Board" means the Board of Governors of the
Federal Reserve System (or any successor).
"Furash" means Furash & Company, Inc., a Maryland
corporation which is a wholly-owned Subsidiary of the Borrower.
"GAAP" means generally accepted accounting principles
in effect from time to time in the United States.
"Goldstein Note" means that certain promissory note
dated May 31, 1996 made by Gary S. Goldstein payable to the order
of the Borrower in the original principal amount of $1,065,722.
"Governmental Authority" means any nation or
government, any state or other political subdivision thereof and
any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"HCSS" means Headway Corporate Staffing Services, Inc.,
a Delaware corporation which is a wholly owned Subsidiary of the
Borrower.
"Headway Personnel" means Headway Personnel, Inc., a
Delaware corporation which is a wholly-owned Subsidiary of HCSS.
"herein", "hereof", "hereto", "hereunder" and similar
terms contained in this Agreement or any other Loan Document
refer to this Agreement or such other Loan Document, as the case
may be, as a whole and not to any particular Section, clause or
provision of this Agreement or such other Loan Document.
"including" means including without limiting the
generality of any description preceding such term.
"Indebtedness" of any Person means, without
duplication:
(a) all obligations of such Person for borrowed money
(including all notes payable and drafts accepted representing
extensions of credit) and all obligations of such Person
evidenced by bonds, debentures, notes or other similar
instruments on which interest charges are customarily paid;
(b) all obligations, contingent or otherwise, relative
to the face amount of all letters of credit, whether or not
drawn, and banker's acceptances issued for the account of such
Person;
(c) all Capitalized Lease Liabilities of such Person
(to the extent required by GAAP to be included on the balance
sheet of such Person);
(d) whether or not so included as liabilities in
accordance with GAAP (i) all obligations of such Person to pay
the deferred purchase price of property or services (excluding
trade accounts payable for other than borrowed money arising in
the ordinary course of business) and indebtedness secured by a
Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse,
and (ii) all obligations of such Person in respect of, and
obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise assure a creditor against loss in respect
of, Indebtedness of another Person;
(e) all net obligations of such Person under Interest
Rate Contracts; and
(f) all obligations of such Person to redeem, purchase
or otherwise retire or extinguish any of its Stock at a fixed or
determinable date (whether by operation of a sinking fund or
otherwise), at another's option or upon the occurrence of a
condition not solely within the control of such Person (e.g.,
redemption from future earnings).
"Indemnified Liabilities" means any and all actions,
causes of action, suits, losses, costs, liabilities, damages and
expenses incurred by or asserted or awarded against any Lender
Party and against which the Borrower has indemnified the Lender
Parties as provided in Section 9.4.
"ING" means Internationale Nederlanden (U.S.) Capital
Corporation, a Delaware corporation.
"ING Alternate Base Rate" means a fluctuating rate of
interest per annum equal to the higher of:
(a) the arithmetic average of rates of interest
announced by each of the Reference Lenders from time to time at
such Reference Lender's principal New York City office as its
prime (or base) rate for U.S. domestic commercial loans; and
(b) the Federal Funds Rate from time to time in effect
plus 1/2 of 1% (0.50%).
Changes in the rate of interest on the Base Rate Loans shall take
effect on the date of each change in the ING Alternate Base Rate.
The Agent shall give notice promptly to the Borrower and the
Lenders of changes in the ING Alternate Base Rate.
"Instrument" means any contract, agreement, letter of
credit, indenture, mortgage, deed, certificate of title, document
or writing (whether by formal agreement, letter or otherwise)
under which any obligation is evidenced, assumed or undertaken,
any Lien (or right or interest therein) is granted or perfected,
or any property (or right or interest therein) is conveyed.
"Intellectual Property" means, collectively, (a)
patents, patent rights and patent applications, copyrights and
copyright applications, trademarks, trademark rights, trade
names, trade name rights, service marks, service mark rights,
applications for registration of trademarks, trade names and
service marks, fictitious names registrations and trademark,
trade name and servicemark registrations, including, without
limitation, the names Whitney Group, Viva, On-Line and all
derivations thereof, and (b) patent licenses, trademark licenses,
copyright licenses and other licenses to use any of the items
described in clause (a), or any other items necessary to conduct
or operate the business of the Borrower and its Subsidiaries.
"Interest Coverage Ratio" means, for any period, the
ratio of (a) EBITDA for such period to (b) Interest Expense
during such period.
"Interest Expense" means, for any period, the sum of
the Borrower's consolidated interest expense accrued during such
period in respect of all Indebtedness of the Borrower and its
Subsidiaries; provided, however, that the effect of original
issue discount, if any, which is attributable to Indebtedness in
connection with the issuance of warrants shall not be taken into
account when calculating Interest Expense.
"Interest Period" means, relative to any Eurodollar
Loans comprising part of the same Borrowing, the period beginning
on (and including) the date on which such Eurodollar Loans are
made or continued as, or converted into, Eurodollar Loans
pursuant to Section 3.1 or Section 3.4.3 and ending on (but
excluding) the date which numerically corresponds to such date
one, two, three or six months thereafter (or, if such month has
no numerically corresponding date, on the last Business Day of
such month), in either case as the Borrower may select in its
relevant notice pursuant to Section 3.1 or Section 3.4.3;
provided, however, that:
(a) the Borrower shall not be permitted to select
Interest Periods to be in effect at any one time which have
expiration dates occurring on more than three (3) dates with
respect to the Term Loan and two (2) dates with respect to the
Revolving Loans;
(b) if such Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall end
on the next following Business Day (unless such next following
Business Day is the first Business Day of a calendar month, in
which case such Interest Period shall end on the Business Day
next preceding such numerically corresponding date);
(c) in the case of Interest Periods for Revolving
Loans, no such Interest Period may end later than the Stated
Maturity Date for Revolving Loans; and
(d) in the case of Interest Periods for the Term Loan,
no such Interest Period may end later than (i) the Stated
Maturity Date of the Term Loan, or (ii) the date of any principal
repayment with respect to the Term Loan as set forth in clause
(c) of Section 3.3.1, if on such date the Borrower otherwise
would be required to repay any portion of any Borrowing prior to
the end of the Interest Period relative to such Borrowing.
"Interest Rate Contract" means any interest rate cap
agreement, interest rate collar agreement, interest rate swap
agreement or other agreement or arrangement designed to protect
against fluctuations in interest rates.
"Interest Rate Contract Counterparty" means any
counterparty to an Interest Rate Contract which the Borrower is
required to enter into pursuant to Section 6.1.13.
"Internal Revenue Service" means the Internal Revenue
Service of the United States of America.
"Investment" means, relative to any Person:
(a) any loan or advance made by such Person to any
other Person (excluding commission, travel and similar advances
to officers, employees and consultants made in the ordinary
course of business);
(b) any ownership or similar interest held by such
Person in any other Person; and
(c) the purchase of any debt or equity securities or
instruments issued by any other Person (including, without
limitation, Stock, notes, debentures, drafts and acceptances,
trust certificates, partnership interests or units or membership
interests in limited liability companies).
The amount of any Investment of the nature referred to in clause
(a) or (b) shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and
without adjustment by reason of the financial condition of such
other Person) and shall, if made by the transfer or exchange of
property other than cash, be deemed to have been made in an
original principal or capital amount equal to the fair market
value of such property.
"IRC" means the Internal Revenue Code of 1986, as
amended, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from
time to time. References to sections of the IRC also refer to
any successor sections.
"Irene Cohen" means Irene Cohen Temps, Inc., a New York
corporation which upon consummation of the Acquisition will be a
wholly-owned Subsidiary of HCSS.
"Lender" means any of the various lenders as are, or
may from time to time become, parties to this Agreement.
"Lender Parties" means, collectively, the Agent and
each Lender, and each of their respective successors and assigns,
and each of the respective officers, directors, employees,
attorneys and agents of the Agent and each Lender and of each of
their respective successors and assigns, indemnified by the
Borrower as provided in Section 9.4.
"Leverage Ratio" means, for any period, the ratio of
(a) the aggregate outstanding principal amount of Indebtedness of
the Borrower and its Subsidiaries as of the last day of such
period to (b) EBITDA for such period; provided, however that the
effect of original issue discount, if any, which is attributable
to Indebtedness in connection with the issuance of warrants shall
not be taken into account when calculating the Leverage Ratio.
"Lien" means any mortgage, pledge, hypothecation,
assignment, charge, deposit arrangement, encumbrance, lien
(statutory or other), adverse claim or preference, priority or
other security agreement or preferential arrangement of any kind
or nature whatsoever (including any conditional sale or other
title retention agreement, any financing lease involving
substantially the same economic effect as any of the foregoing
and the filing of any financing statement under the UCC or
comparable law of any jurisdiction).
"Loan" means, as the context may require, the Term Loan
or the Revolving Loans.
"Loan Documents" means, collectively, this Agreement,
the Notes, each Security Document, each Borrowing Request, any
Interest Rate Contract entered into by the Borrower with a Lender
that has executed and delivered to the Agent an acknowledgment in
the form of Exhibit F, and each other Instrument executed and
delivered by the Borrower as of the date hereof or at any time
thereafter, in connection with the transactions contemplated by
this Agreement, in each case, as amended, modified or
supplemented from time to time.
"Loan Party" means any of the Borrower, its
Subsidiaries which is a party to any of the Loan Documents.
"Loss" means any loss, damage, destruction, theft, or
seizure of, or any other casualty with respect to, or any
condemnation of, any property or asset of any Person in an amount
in excess of $100,000 individually or $250,000 in the aggregate
for any Fiscal Year; and the "amount" of any Loss means (i) if
such asset or property is repaired or replaced, the greater of
(A) the cost to repair or replace the property or asset that was
the subject of such Loss and (B) the amount of insurance proceeds
or condemnation awards payable as a result of such Loss, and (ii)
if such asset or property is not repaired or replaced, the amount
of insurance proceeds or condemnation awards payable as a result
of such loss.
"Material Adverse Change" means a material adverse
change in (a) the condition (financial or otherwise), operations,
performance, business, properties or prospects of the Borrower
and its Subsidiaries taken as a whole; or (b) the rights and
remedies of the Lenders or the Agent under the Loan Documents; or
(c) the ability of the Borrower to repay the Obligations or of
the Borrower or any Subsidiary to perform their respective
obligations under the Loan Documents; or (d) the legality,
validity or enforceability of any Loan Document; or (e) the Liens
granted the Agent pursuant to the Security Documents.
"Maturity" means relative to any Loan or portion
thereof, the earlier of such Loan's Stated Maturity Date or such
other date when such Loan or portion thereof shall be or become
due and payable in accordance with the terms of this Agreement,
whether by required repayment, prepayment, declaration or
otherwise.
"Mortgage" means any mortgage, deed of trust, deed to
secure debt, leasehold mortgage, leasehold deed of trust or
leasehold deed to secure debt covering real property, as such
instruments are originally executed or supplemented, amended,
renewed, extended or otherwise modified from time to time.
"Multiemployer Pension Plan" means a Multiemployer Plan
which is subject to Subtitle E of Title IV of ERISA.
"Multiemployer Plan" means a Plan which is a
"multiemployer plan" within the meaning of Section 3(37) of
ERISA.
"Net Disposition Proceeds" means, with respect to any
disposition of the assets of the Borrower or any Subsidiary, the
excess of: (a) the gross cash proceeds received by the Borrower
or any Subsidiary from such disposition (including any cash
proceeds subsequently received in respect of notes and other non-
cash proceeds received by the Borrower or any of its Subsidiaries
from such disposition), minus (b) the sum of (i) all reasonable
out-of-pocket fees and expenses incurred in connection therewith,
plus (ii) all taxes paid or payable in connection with such sale.
"Net Income" means, as to any Person, for any period,
the net income (or loss) of such Person for such period,
determined in accordance with GAAP, but excluding extraordinary
gains or losses for such period.
"Net Indebtedness Proceeds" means, with respect to the
issuance or incurrence by the Borrower or any Subsidiary of any
Indebtedness, the excess of: (a) the gross cash proceeds
received by the Borrower or any Subsidiary from such
Indebtedness, minus (b) all reasonable out-of-pocket fees and
expenses incurred in connection therewith.
"Net Securities Proceeds" means, with respect to the
issuance or sale by the Borrower or any Subsidiary of any equity
securities (not including upon the exercise of existing stock
options or employee stock options or any dividend investment
plan), the excess of: (a) the gross cash proceeds received by the
Borrower or any Subsidiary from such issuance and sale minus (b)
all reasonable out-of-pocket fees and expenses incurred in
connection with such issuance and sale.
"Note" means, as the context may require, any Term Note
or any Revolving Note.
"Notes" means, collectively, the Term Notes and the
Revolving Notes.
"Obligations" means all payment and performance
obligations of the Loan Parties (monetary or otherwise) arising
under or in connection with this Agreement, the Notes and the
other Loan Documents.
"Organic Document" means, relative to any Person, its
articles or certificate of incorporation or organization or
certificate of limited partnership or organization, its bylaws,
partnership or operating agreement or other organizational
documents, and all stockholders agreements, voting trusts and
similar arrangements applicable to any of its Stock or
partnership interests or other ownership interests.
"Participant" means the banks or other entities that
purchase participating interests in any Loan, Note, Revolving
Loan Commitment or other interest hereunder, as provided in
clause (a) of Section 9.11.
"PBGC" means the Pension Benefit Guaranty Corporation
and any entity succeeding to any or all of its functions under
ERISA.
"Pension Plan" means any Plan which is subject to the
provisions of Title IV of ERISA, or to the provisions of Section
302 of ERISA or Section 412 of the IRC.
"Percentage" means, as the context requires, either (a)
the Revolving Percentage, (b) the Term Percentage or (c) both of
the above.
"Person" means any natural person, corporation,
partnership, limited liability company, firm, association,
government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Plan" shall mean, at a particular time, any employee
benefit plan (within the meaning of Section 3(3) of ERISA), which
is covered by ERISA and in respect of which the Borrower, a
Subsidiary or a Commonly Controlled Entity is (or, if such plan
were terminated at such time, would under Section 4069 of ERISA
be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Plan Reorganization" means with respect to any
Multiemployer Pension Plan, the condition that such plan is in
reorganization within the meaning of such term as used in Section
4241 of ERISA.
"Plan Reportable Event" means (i) a reportable event
described in Section 4043 of ERISA and regulations thereunder
(other than any reportable event described in Section 4043(b)(2)
or (7)), (ii) a withdrawal by a "substantial employer" (within
the meaning of Section 4001(a)(2) of ERISA) from a Single
Employer Plan to which more than one employer contributes, as
referred to in Section 4063(b) of ERISA, or (iii) a cessation of
operations at a facility causing more than twenty percent (20%)
of participants under a Single Employer Plan to be separated from
employment, as referred to in Section 4062(e) of ERISA.
"Post-Default Rate" means (a) in the case of each Loan,
the sum of the rate per annum otherwise applicable to such Loan
from time to time plus two percent (2%) per annum and (b) in the
case of all other Obligations, the sum of the highest rate per
annum then applicable to any Loan (other than by application of
the Post-Default Rate) plus two percent (2%) per annum.
"Pro Forma Balance Sheets" means the Closing Date Pro
Forma Balance Sheet.
"Projections" means the projected balance sheets and
statements of operations and changes in cash flows of the
Borrower (after giving effect to the Acquisition) for the Fiscal
Years 1996-2001 inclusive, dated May 31, 1996, prepared by the
Borrower on a quarterly basis for the 1996 Fiscal Year, and on an
annual basis for the 1997 - 2001 Fiscal Years, together with
supporting details and a statement of underlying assumptions,
which have been delivered to the Lenders prior to the Closing
Date.
"Purchase Money Indebtedness" means Indebtedness
incurred to finance part or all of (but not more than) the
purchase price of equipment in which neither the Borrower nor any
of its Subsidiaries had an interest at any time prior to such
purchase.
"Purchasing Lender" means any Person purchasing all or
any part of the rights and obligations under this Agreement and
the Notes of any Lender pursuant to a Transfer Supplement in
accordance with Section 9.11.
"Quarterly Payment Date" means the last day of each
March, June, September and December or, if such day is not a
Business Day, the immediately preceding Business Day.
"Reference Lenders" means, collectively, The Chase
Manhattan Bank, N.A. (or any successor thereto), Citibank, N.A.
and Morgan Guaranty Trust Company of New York.
"Register" means the register for the recordation of
the names and addresses of the Lenders and the Revolving Loan
Commitment of, and the principal amounts of the Loans owing to,
each Lender from time to time, as provided in clause (c) of
Section 9.11.
"Regulatory Approval" means each and every approval,
consent, filing and registration by or with any federal, state or
other regulatory authority (domestic or foreign) necessary to
authorize or permit the execution, delivery or performance of
this Agreement, the Notes or any other Loan Document, for the
granting of any security contemplated hereby or thereby, for the
validity or enforceability hereof or thereof, or for the
consummation of the transaction contemplated by the Loan
Documents, including, without limitation, the Acquisition.
"Regulatory Change" means, as to any or all of the
Lenders or the Agent, the adoption of or any change in
(including, without limitation, any change in the interpretation
of) any:
(a) United States federal or state law or foreign law
applicable to the Agent or such Lender; or
(b) regulation, interpretation, directive, guideline
or request (whether or not having the force of law) applicable to
the Agent or such Lender of any court or Governmental Authority
charged with the interpretation or administration of any law
referred to in clause (a) or of any central bank or fiscal,
monetary or other authority having jurisdiction over the Agent or
such Lender.
"Required Lenders" means, as the context may require at
any time, Lenders having, in the aggregate, 66-2/3% or more of
the Revolving Loan Commitment, the Revolving Loans and the Term
Loan.
"Requirements of Law" means, as to any Person, the
Organic Documents of such Person, and all federal, state and
local laws, rules, regulations, orders, decrees or other
determinations of an arbitrator, court or other Governmental
Authority, including, without limitation, all disclosure and
other requirements of ERISA, the requirements of Environmental
Laws and Environmental Permits, the requirements of OSHA, in each
case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is
subject.
"Reserve Requirement" means, relative to any Interest
Period for any Eurodollar Loans, from time to time during such
Interest Period, the reserve percentage (expressed as a decimal)
equal to the maximum aggregate reserve requirements (including
all basic, emergency, supplemental, marginal and other reserves
and taking into account any transitional adjustments or other
scheduled changes in reserve requirements) specified under
regulations issued from time to time by the F.R.S. Board and then
applicable to assets or liabilities consisting of or including
"Eurodollar Liabilities", as currently defined under Regulation D
of the F.R.S. Board, having a term approximately equal or
comparable to such Interest Period.
"Responsible Officer" means the chief executive
officer, the chief operating officer or the chief financial
officer of any Person.
"Revolving Loan" means, relative to any Lender, any
Loan made by such Lender to the Borrower pursuant to Section
2.1.2.
"Revolving Loan Availability" means, on any date, the
excess of (a) the Revolving Loan Commitment Amount minus (b) the
then aggregate principal amount of all outstanding Revolving
Loans.
"Revolving Loan Commitment" means the collective
commitments of the Lenders to make Revolving Loans pursuant to
Section 2.1.2 if the conditions set forth in Section 4.1 and 4.2
are met.
"Revolving Loan Commitment Amount" means $6,000,000.
"Revolving Loan Commitment Termination Date" means the
earliest of:
(a) the Stated Maturity Date for Revolving Loans;
(b) immediately and without further action upon the
occurrence of any Event of Default described in Section 7.1.4;
(c) immediately when any other Event of Default shall
have occurred and be continuing and either:
(i) the Revolving Loans shall be declared to be
due and payable pursuant to Section 7.3; or
(ii) in the absence of such declaration, the
Agent, acting at the direction of the Required Lenders,
shall give notice to the Borrower that the Revolving Loan
Commitment has been terminated; and
(d) immediately upon the occurrence of a Change in
Control.
"Revolving Note" means a promissory note of the
Borrower dated the date hereof and substantially in the form of
Exhibit E-1, and shall also refer to all other promissory notes
accepted from time to time in substitution therefor or renewal
thereof.
"Revolving Percentage" of any Lender means, at any
time, in respect of the Revolving Loan Commitment and the
Revolving Loans, the percentage set forth opposite such Lender's
signature hereto under the caption "Percentage," as the same may
be adjusted pursuant to Section 9.11.
"Secretary" means, with respect to any Person, the
secretary, assistant secretary, clerk, assistant clerk or
comparable officer of such Person.
"Security Agreement" means the Security Agreement,
dated as of the Closing Date, made by the Borrower and its
Subsidiaries in favor of the Agent, for its benefit and the
ratable benefit of the Lenders as originally in effect on the
Closing Date and as thereafter from time to time amended,
supplemented, amended and restated, extended or otherwise
modified and in effect.
"Security Documents" means, collectively, the Security
Agreement, the Borrower Pledge Agreement, the Borrower Trademark
Assignment, the Subsidiary Guaranty, the Subsidiary Pledge
Agreement, the Subsidiary Trademark Assignment, the assignment of
"key-man" life insurance described in clause (g) of Section
4.1.8, the assignment of the Interest Rate Contracts described in
Section 6.1.13, the assignment of rights described in clause (f)
of Section 4.1.8, each other Instrument at any time delivered in
connection with this Agreement to secure the Obligations.
"Sellers" means the "Stockholders" as such terms is
defined in the Acquisition Agreement.
"Single Employer Plan" means any Plan which is covered
by Title IV of ERISA, other than a Multiemployer Plan.
"Solvent" means, with respect to any Person on a
particular date, that on such date (i) the fair value of the
assets of such Person (both at fair valuation and at present fair
saleable value) is, on the date of determination, greater than
the total amount of liabilities of such Person (including all
liabilities and obligations of such Person, fixed or contingent,
direct or indirect, disputed or undisputed, and whether or not
required to be reflected on a balance sheet prepared in
accordance with GAAP), (ii) such Person is able to pay all
liabilities of such Person as they mature, and (iii) such Person
does not have unreasonably small capital with which to carry on
its business. The amount attributed to contingent liabilities
shall be discounted to reflect the likelihood that such
liabilities shall become payable.
"Stated Maturity Date" means, with respect to the Term
Loan and the Revolving Loans, June 30, 2001.
"Stock" means all shares of capital stock of or in a
corporation, whether voting or non-voting, and including, without
limitation, common stock and preferred stock.
"Subsidiary" of any corporation means any other
corporation greater than 50% of the outstanding shares of Stock
of which having ordinary voting power for the election of
directors is owned directly or indirectly by such corporation,
and, except as otherwise indicated herein, references to
Subsidiaries shall refer to Subsidiaries of the Borrower. For
purposes of this Agreement and the other Loan documents,
references to Subsidiaries of the Borrower shall include, at all
times, the Eligible Subsidiaries.
"Subsidiary Guaranty" means the Subsidiary Guaranty,
dated as of the Closing Date, made by each of the Borrower's
Subsidiaries in favor of the Agent and the Lenders as originally
in effect on the Closing Date and as thereafter from time to time
amended, supplemented, amended and restated, extended or
otherwise modified and in effect.
"Subsidiary Note" means a promissory note made by a
Subsidiary payable to the Borrower and meeting the requirements
of Section 6.2.7(e).
"Subsidiary Pledge Agreement" means the Stock and Notes
Pledge Agreement, dated as of the Closing Date, made by the
Subsidiaries in favor of the Agent, for its benefit and the
ratable benefit of the Lenders, as originally in effect on the
Closing Date and as thereafter from time to time amended,
supplemented, amended and restated, extended or otherwise
modified and in effect, pursuant to which each Subsidiary shall
pledge to the Agent all of the Stock held by such Subsidiary and
all promissory notes, other instruments and securities held by
such Subsidiary as security for the Obligations.
"Subsidiary Trademark Assignment" means the Collateral
Assignment and Security Agreement (Trademarks), dated as of the
Closing Date, made by the Subsidiaries in favor of the Agent, for
its benefit and the ratable benefit of the Lenders as originally
in effect on the Closing Date and as thereafter from time to time
amended, supplemented, amended and restated, extended or
otherwise modified and in effect.
"Taxes" means all taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent,
taxes imposed on or measured by its net income and franchise
taxes imposed on it.
"Term Loan" means, collectively, the Loans, in an
aggregate principal amount equal to $9,000,000 made to the
Borrower on the Closing Date by the Lenders pursuant to Section
2.1.1.
"Term Loan Commitment" means the collective commitments
of the Lenders to extend the Term Loan pursuant to Section 2.1.1.
"Term Note" means a promissory note of the Borrower
dated the date hereof and substantially in the form of Exhibit E-
2, and shall also refer to all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Term Percentage" of any Lender means, at any time, in
respect of the Term Loan, the percentage set forth opposite such
Lender's signature hereto under the caption "Percentage," as the
same may be adjusted pursuant to Section 9.11.
"Transfer Supplement" means a Commitment Transfer
Supplement, substantially in the form of Exhibit F, executed
pursuant to Section 9.11.
"type" means, relative to any Borrowing or Loan, the
portion thereof being maintained as a Base Rate Loan or a
Eurodollar Rate Loan.
"UCC" means the Uniform Commercial Code of any
applicable jurisdiction, as in effect from time to time.
"United States" or "U.S." means the United States of
America, its 50 States and the District of Columbia.
"Whitney Group" means Whitney Group (Europe) Limited, a
corporation organized under the laws of the United Kingdom which
is 76.42% owned by Whitney Partners.
"Whitney Partners" means Whitney Partners, Inc., a
Delaware corporation which is a wholly-owned Subsidiary of the
Borrower.
"written" or "in writing" means any form of written
communication or a communication by means of telephonic facsimile
device.
SECTION 1.2. Use of Defined Terms. Unless otherwise
defined or the context otherwise requires, terms for which
meanings are provided in this Agreement shall have such meanings
when used in the Disclosure Schedule and each Note, Borrowing
Request, Compliance Certificate, Continuation/Conversion Notice,
notice and other communication delivered from time to time in
connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise
specified, references in this Agreement and in each other Loan
Document to any Article or Section are references to such Article
or Section of this Agreement or such other Loan Document, as the
case may be, and unless otherwise specified, references in any
Article, Section, or definition to any clause are references to
such clause of such Section, Article or definition.
SECTION 1.4. Accounting and Financial Determinations.
Unless otherwise specified, all accounting terms used herein or
in any other Loan Document shall be interpreted, all accounting
determinations and computations hereunder or thereunder shall be
made, and all financial statements required to be delivered
hereunder or thereunder shall be prepared in accordance with
GAAP.
ARTICLE 2.
COMMITMENTS
SECTION 2.1. Term Loan and Revolving Loan Commitment.
Subject to the terms and conditions of this Agreement, each
Lender severally and for itself alone agrees to make its Term
Percentage of the Term Loan described in Section 2.1.1 and to
provide its Revolving Percentage of the Revolving Loan Commitment
described in this Section 2.1.2.
SECTION 2.1.1. Term Loan. On the Closing Date, each
Lender will make a single term loan to the Borrower equal to its
Term Percentage of the Term Loan.
SECTION 2.1.2. Revolving Loan Commitment. Each Lender
will, from time to time on any Business Day occurring during the
period commencing on the Closing Date and continuing to (but not
including) the Revolving Loan Commitment Termination Date, make
Revolving Loans to the Borrower equal to its Revolving Percentage
of the aggregate amount of any Borrowing of Revolving Loans
requested by the Borrower to be made on such Business Day in
accordance with Section 3.1.
SECTION 2.1.3. Limitations on Revolving Credit
Commitment. No Lender shall be required to make any Revolving
Loan, if after giving effect thereto:
(a) the then aggregate outstanding principal amount of
all Revolving Loans would exceed the lesser of (i) the Revolving
Loan Commitment Amount or (ii) the Borrowing Base; or
(b) the then aggregate outstanding principal amount of
such Lender's Revolving Loans would exceed its Revolving
Percentage of the lesser of (i) the Revolving Loan Commitment
Amount or (ii) the Borrowing Base.
Subject to the terms hereof, the Borrower may from time to time
borrow, prepay and reborrow Revolving Loans, in all cases
pursuant to the Revolving Loan Commitment.
SECTION 2.2. Changes in Advance Ratios;
Establishment of Reserves.
SECTION 2.2.1. Advance Ratios. The Borrower
acknowledges that the advance ratio against Eligible Accounts
provided for in the definition of "Borrowing Base" in Section 1.1
have been established based upon the Agent's determination of the
loan value of the Borrower's Eligible Accounts as of the date of
this Agreement. Upon the occurrence and during the continuation
of an Event of Default, based on the Agent's customary credit
considerations, the Agent may decrease the advance ratios against
Eligible Accounts, and any such decrease shall become effective
immediately upon the Agent's giving notice thereof to the
Borrower.
SECTION 2.2.2. Establishment of Reserves. The Agent
shall have the right to establish, in such amounts, and with
respect to such matters, as the Agent, based on the Agent's
customary credit considerations, shall deem necessary or
appropriate, reserves with respect to (i) Charges and Liens; (ii)
Environmental Liabilities and Costs, (iii) sums as to which the
Agent and the Lenders are permitted to make Revolving Loans on
the Borrower's behalf under Section 3.3.3 of this Agreement; and
(iv) such other matters, events, conditions or contingencies as
to which the Agent, based on the Agent's customary credit
considerations, reasonably determines reserves should be
established from time to time hereunder.
SECTION 2.3. Commitment Fee. The Borrower agrees to
pay to the Agent, for the account of each Lender, a nonrefundable
fee for the period from the Closing Date to and including the
Revolving Loan Commitment Termination Date, equal to such
Lender's Revolving Percentage of one-half of one percent (0.50%)
per annum of the difference between (A) the Revolving Loan
Commitment Amount and (B) the average daily aggregate outstanding
principal amount of all Revolving Loans. The fee described in
this Section 2.3 shall be calculated on a daily basis and shall
be payable by the Borrower in arrears on each Quarterly Payment
Date and on the Revolving Loan Commitment Termination Date.
SECTION 2.4. Increased Costs; Capital Adequacy.
(a) The Borrower shall pay to each Lender from time to
time on demand such amounts as such Lender may determine to be
reasonably necessary to compensate it or its holding company for
any costs which such Lender determines are attributable to its
making or maintaining Loans, or maintaining Commitments hereunder
or its obligation to make any such Loans hereunder, or any
reduction in any amount receivable by such Lender hereunder in
respect of any such Loans, Commitments or obligation, in each
case resulting from any Regulatory Change which: (i) changes the
basis of taxation of any amounts payable to such Lender under
this Agreement in respect of any of such Loans or Commitments
(other than taxes imposed on the overall net income of such
Lender or of its Applicable Lending Office); or (ii) imposes or
modifies any reserve, special deposit, deposit insurance or
assessment, minimum capital, capital ratio or similar
requirements relating to any extensions of credit or other assets
of, or any deposits with or other liabilities of, such Lender or
any holding company of such bank (including, without limitation,
a request or requirement which affects the manner in which any
Lender or the holding company of any thereof allocates capital
resources to commitments, including the Commitments and
obligations of such Lender hereunder). Each Lender will notify
the Borrower of any event occurring after the date of this
Agreement which will entitle such Lender to compensation pursuant
to this clause (a) as promptly as practicable after it obtains
knowledge thereof and determines to request such compensation.
(b) Without limiting the effect of the foregoing
provisions of this Section 2.4 (but without duplication), the
Borrower shall pay to each Lender from time to time upon demand
by such Lender such amounts as the Lender may determine to be
reasonably necessary to compensate such Lender for any costs
which it determines are attributable to the maintenance by it or
its holding company, pursuant to any law or regulation of any
jurisdiction or any interpretation, directive or request (whether
or not having the force of law) of any court or governmental or
monetary authority, whether in effect on the date of this
Agreement or thereafter, of capital in respect of its Loans its
obligation to make the Loans hereunder (such compensation to
include, without limitation, an amount equal to any reduction in
return on assets or equity of such Lender or its holding company
to a level below that which it could have achieved but for such
law, regulation, interpretation, directive or request). The
Lender will notify the Borrower with a copy to the Agent) if it
is entitled to compensation pursuant to this clause (b) as
promptly as practicable after it determines to request such
compensation.
(c) Each notice delivered by any Lender pursuant to
this Section 2.4 shall contain a statement of such Lender as to
any such additional amount or amounts (including calculations
thereof in reasonable detail) which shall, in the absence of
manifest error, be conclusive of the matters stated therein and
be binding upon the Borrower. In determining such amount, any
Lender may use any method of averaging and attribution that it in
good faith shall deem applicable.
(d) Without prejudice to the survival of any other
agreement of the Borrower hereunder or under any other Loan
Document, the agreements and obligations of the Borrower
contained in this Section 2.4 shall survive the payment in full
of principal, interest and other amounts payable hereunder and
under the other Loan Documents for a period of one year after the
date of the last payment.
(e) Notwithstanding anything in this Section 2.4 to
the contrary, to the extent that notice is given by any Lender to
the Borrower of any amount owing to such Lender under this
Section 2.4 more than 180 days after the occurrence of the event
giving rise to such obligation, such Lender shall not be entitled
to compensation under this Section 2.4 for any amounts incurred
or accruing 180 days prior to the giving of such notice to the
Borrower.
(f) Each Lender agrees that, upon the occurrence of
any event giving rise to a claim for any amount owing to such
Lender under this Section 2.4, it will, if requested by the
Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another Applicable
Lending Office, provided that such designation is made on terms
that such Lender suffers no economic, legal, regulatory or other
disadvantage, with the object of avoiding the consequence which
gave rise to the claim for any amount owing under this Section
2.4.
ARTICLE 3.
LOANS AND NOTES
SECTION 3.1. Borrowing Procedure. By delivering a
Borrowing Request to the Agent at the Agent's Atlanta Office on
or before 11:00 a.m., New York City time, on a Business Day, the
Borrower may (a) request, on not less than one (1) Business Day's
advance notice in the case of Base Rate Loans and not less than
three (3) Business Days' advance notice in the case of Eurodollar
Loans, that the Term Loan be made on the Closing Date; and (b)
from time to time request, on not less than one (1) nor more than
three (3) Business Days' notice, in the case of Base Rate Loans,
and not less than three (3) nor more than five (5) Business Days'
notice in the case of Eurodollar Loans, that a Borrowing of
Revolving Loans be made on the Business Day specified in such
Borrowing Request. Borrowings of Base Rate Loans shall be in a
minimum aggregate amount equal to $100,000 and in integral
multiples of $25,000 or, if less, the amount of the Revolving
Loan Availability immediately prior to such Borrowing.
Borrowings of Eurodollar Loans shall be in a minimum aggregate
amount of $250,000 and in integral multiples of $50,000. The
Term Loan shall be made on the Closing Date, and each Revolving
Loan shall be made on the Business Day specified in the Borrowing
Request therefor (including the initial Revolving Loans to be
made on the Closing Date), which Business Day shall be on or
after the Closing Date. On such Business Day, each Lender shall,
on or before 2:00 p.m., New York City time, deposit same day
funds with the Agent in an amount equal to such Lender's
Percentage of the requested Borrowing, such deposit to be made to
such account as the Agent shall specify from time to time by
notice to the Lenders. The proceeds of all Borrowings shall be
made available to the Borrower on the Business Day specified in
the Borrowing Request by wire transfer of such proceeds to such
transferees, or to such accounts of the Borrower, as the Borrower
shall have specified in the Borrowing Request therefor; provided,
however, that in each case the Agent shall be required to make
available to the Borrower the proceeds of any Borrowing only to
the extent received by it in same day funds from the Lenders. No
Lender's obligation to make any Loan shall be affected by any
other Lender's failure to make any Loan.
SECTION 3.2. Notes. All Loans made by each Lender
shall be evidenced:
(a) in the case of such Lender's portion of the Term
Loan, by a Term Note payable to the order of such Lender in a
principal amount equal to such Lender's Term Percentage of the
Term Loan; and
(b) in the case of such Lender's Revolving Loans, by a
Revolving Note payable to the order of such Lender in a principal
amount equal to such Lender's Revolving Percentage of the
Revolving Loan Commitment Amount.
The Borrower hereby irrevocably authorizes each Lender to make
(or cause to be made) appropriate notations on a grid schedule
attached to such Lender's Revolving Note (or on a continuation of
any such grid attached to any Revolving Note and made a part
thereof), which notations shall evidence, inter alia, the date
and outstanding principal amount of the Revolving Loans evidenced
thereby. The notations on any such grid (and on any such
continuation) indicating the outstanding principal amount of such
Lender's Revolving Loans shall be presumptive evidence of the
principal amount thereof owing and unpaid, but the failure to
record any such amount on any such grid (or on any such
continuation) shall not limit or otherwise affect the obligations
of the Borrower hereunder or under such Note to make payments of
principal of or interest on such Loans when due.
SECTION 3.3. Principal Payments. Repayments and
prepayments of principal of the Loans shall be made in accordance
with this Section 3.3.
SECTION 3.3.1. Repayments and Prepayments. The
Borrower will make payment in full of all unpaid principal of
each Loan at its Stated Maturity Date (or such earlier date as
such Loan may become or be declared due and payable pursuant to
Article 7). Prior thereto, the Borrower:
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding
principal amount of any Loans; provided, however, that (i) as to
partial prepayments of the Term Loan and Revolving Loans, all
such voluntary prepayments shall require at least two (2)
Business Days prior notice to the Agent, (ii) as to the Term Loan
and the Revolving Loans, all such voluntary prepayments shall be
in a minimum amount of $50,000 (subject to the Borrower's right
to prepay in full the entire unpaid principal amount of the Term
Loan or the Revolving Loans, as the case may be), and (iii) as to
the voluntary prepayment in full of the Term Loan and the
termination of the Revolving Loan Commitment, such prepayment
shall require at least five (5) Business Days prior written
notice to the Agent;
(b) shall, on any Business Day on which the aggregate
outstanding principal amount of all Revolving Loans exceeds the
lesser of (i) the Revolving Loan Commitment Amount or (ii) the
Borrowing Base, make a mandatory prepayment of the outstanding
principal amount of Revolving Loans in an amount equal to such
excess amount;
(c) shall, on each Quarterly Payment Date, commencing
on September 30, 1996, make a scheduled payment of a portion of
the outstanding principal amount of the Term Loan equal to the
amount shown below opposite each such Quarterly Payment Date:
Quarterly
Principal
Quarterly Payment Dates Occurring During the Period from:Payment
Closing Date through (and including) June 30, 1997 $250,000
July 1, 1997 through (and including) June 30, 1998 375,000
July 1, 1998 through (and including) June 30, 1999 450,000
July 1, 1999 through (and including) June 30, 2000 525,000
July 1, 2000 through (and including) June 30, 2001 650,000
(d) shall, concurrently with the receipt by the
Borrower or any Subsidiary of any Net Disposition Proceeds in
excess of $20,000 in the aggregate during any Fiscal Year, make a
mandatory prepayment of the Loans, in each case in an aggregate
amount equal to such Net Disposition Proceeds; provided, that
should Borrower or any Subsidiary receive Net Disposition
Proceeds in excess of $2,368,000 from the disposition of the
Citigate Shares, the mandatory prepayment of the Loans Borrower
shall be required to make under this clause (d) of Section 3.3.1
shall be limited to $2,368,000; provided, further, that this
clause (d) of Section 3.3.1 shall not in any event be deemed a
consent to any disposition by the Borrower or any Subsidiary
which is otherwise prohibited by the terms of this Agreement or
of any of the other Loan Documents;
(e) shall, concurrently with the receipt by the
Borrower or any Subsidiary of any Net Securities Proceeds in
excess of $2,000,000 in the aggregate during the term of this
Agreement, make a mandatory prepayment of the Loans, (x) if the
outstanding principal balance of the Term Loan is equal to or
greater than $4,500,000, in an aggregate amount equal to 50% of
such Net Securities Proceeds or (y) if the outstanding principal
balance of the Term Loan is less than $4,500,000, in an aggregate
amount equal to 25% of such Net Securities Proceeds; provided
that this clause (e) of Section 3.3.1 shall not in any event be
deemed a consent to any issuance of Stock or the incurrence of
Indebtedness by the Borrower or any Subsidiary which is otherwise
prohibited by the terms of this Agreement or of any of the other
Loan Documents;
(f) shall, concurrently with receipt by the Borrower
or any Subsidiary of any Net Indebtedness Proceeds in excess of
$50,000 in the aggregate during any Fiscal Year, make a mandatory
prepayment of the Loans, in an aggregate amount equal to such Net
Indebtedness Proceeds; provided that this clause (f) of Section
3.3.1 shall not in any event be deemed a consent to any issuance
of Indebtedness by the Borrower or any Subsidiary which is
otherwise prohibited by the terms of this Agreement or any of the
other Loan Documents;
(g) shall, concurrently with the delivery of the
financial information required under clause (a)(i) of Section
6.1.1 (but in no event later than the date such information is
required to be delivered), make a mandatory prepayment of a
portion of the outstanding principal amount of the Loans in an
amount equal to 70% of Excess Cash Flow for the Fiscal Year with
respect to which such financial information was delivered or is
required to be delivered;
(h) shall, within 180 days after receipt by the
Borrower or any Subsidiary or the Agent of any condemnation
awards with respect to any Loss, make a mandatory prepayment of
the Loans in an amount by which such condemnation awards exceed
the actual cost incurred to replace or restore the property or
asset which was the subject of such Loss as nearly as practicable
to conditions prior to such Loss;
(i) shall, within 180 days after receipt by the
Borrower or any Subsidiary or the Agent of any insurance proceeds
with respect to any Loss resulting from a casualty, make a
mandatory prepayment of the Loans in an amount by which such
insurance proceeds exceed the actual cost incurred by the
Borrower or such Subsidiary to repair or replace the property or
asset which was the subject of the Loss or deemed Loss giving
rise to such insurance proceeds;
(j) shall, within 180 days after receipt by the
Borrower or any Subsidiary or the Agent of any insurance proceeds
with respect to any Loss resulting from a liability, make a
mandatory prepayment of the Loans in an amount by which such
insurance proceeds exceed the amount of the liability to be
satisfied with such proceeds (to the extent such liability is so
satisfied);
(k) shall, concurrently with the receipt by the
Borrower of any proceeds of the life insurance policies described
in clause (b) of Section 6.1.5, make a mandatory prepayment of
the Loans in an amount equal to the amount of such insurance
proceeds;
(l) shall, concurrently with the receipt by the
Borrower of any amount payable by the Sellers to the Borrower
pursuant to or as a result of the breach by the Sellers of the
Acquisition Agreement, make a mandatory prepayment in an
aggregate amount equal to the amount so received; and
(m) shall prepay the entire outstanding principal
amount of the Loans together with accrued and unpaid interest and
all of the outstanding Obligations hereunder upon the occurrence
of a Change in Control.
SECTION 3.3.2. Application. Each prepayment or
repayment of principal required under clauses (d) through (l) of
Section 3.3.1 shall be applied (y) first, to the scheduled
installments due on the Term Loan under clause (c) of Section
3.3.1 on a pro rata basis and (z) second, to any Revolving Loans.
SECTION 3.3.3. Revolving Loans on Borrower's Behalf.
The Lenders are authorized to, and at their option may, make
Revolving Loans on behalf of the Borrower for payment of all
fees, expenses, charges, costs, principal and interest owed by
the Borrower to the Lenders or the Agent under this Agreement and
the other Loan Documents. Such Revolving Loans shall be made
when and as the Borrower fails promptly to pay same, and all such
Revolving Loans shall constitute Revolving Loans made to the
Borrower and shall be secured by all of the Collateral.
SECTION 3.3.4. Reduction of Revolving Loan Commitment.
The Revolving Loan Commitment shall be permanently reduced by the
amount of any prepayments required to be applied to any Revolving
Loans pursuant to Section 3.3.2 (such reduction to occur
regardless of whether any Revolving Loans are outstanding).
SECTION 3.4. Interest. Interest on the outstanding
principal amount of the Loans and other outstanding Obligations
shall accrue and be payable in accordance with this Section 3.4.
SECTION 3.4.1. Term Loan Rate. Subject to Section
3.4.4, the Term Loan or any portion thereof shall accrue interest
at the following rates per annum, at the election of the
Borrower, pursuant to an appropriately delivered Borrowing
Request or Continuation/Conversion Notice:
(a) during such periods as the Term Loan or portion
thereof is a Base Rate Loan, the ING Alternate Base Rate (as
in effect from time to time) plus 1.75%, and
(b) during such periods as the Term Loan or portion
thereof is a Eurodollar Loan, for each Interest Period
relating thereto, the Eurodollar Rate for such Interest
Period plus 3.25%.
SECTION 3.4.2. Revolving Loan Rate. Subject to Section
3.4.4, Borrowings of Revolving Loans shall accrue interest at the
following rates per annum, at the election of the Borrower
pursuant to an appropriately delivered Borrowing Request or
Continuation/Conversion Notice:
(a) during such periods as such Borrowing consists of
Base Rate Loans, the ING Alternate Base Rate (as in effect
from time to time) plus 1.25%, and
(b) during such periods as such Borrowing consists of
Eurodollar Loans, for each Interest Period relating thereto,
the Eurodollar Rate for such Interest Period plus 2.75%.
SECTION 3.4.3. Continuation and Conversion Elections.
By delivering a Continuation/Conversion Notice to the Agent on or
before 11:00 a.m., New York City time, on a Business Day, the
Borrower may from time to time irrevocably elect, on not less
than three (3) nor more than five (5) Business Days' notice, that
all or any portion in an aggregate minimum amount of $250,000 and
an integral multiple of $50,000 in excess thereof of Revolving
Loans or the Term Loan be, in the case of Base Rate Loans,
converted to Eurodollar Loans or continued as Eurodollar Loans;
provided, however, that:
(a) each such continuation or conversion shall be pro
rata among the applicable outstanding Term Percentages of the
Term Loan or Revolving Percentages of Revolving Loans, as the
case may be, of all Lenders; and
(b) no portion of the outstanding principal amount of
any Loan may be continued as, or converted into, a Eurodollar
Loan when any Default has occurred and is continuing.
The Agent shall give prompt telephonic notice to each Lender of
the interest rate determined pursuant to this Section 3.4.3 with
respect to such Loans. Absent delivery of a
Continuation/Conversion Notice with respect to any Eurodollar
Loan at least three (3) Business Days before the last day of the
then current Interest Period with respect thereto, such
Eurodollar Loan shall, on such last day, automatically convert to
a Base Rate Loan.
SECTION 3.4.4. Post-Default Rates. From and after the
occurrence of an Event of Default and during the continuance
thereof, the Borrower shall pay interest (after as well as before
judgment) on the outstanding principal amount of all Loans and
other Obligations at a rate per annum equal to the Post-Default
Rate applicable to such Loans and Obligations.
SECTION 3.4.5. Payment Dates. Accrued interest on any
Loans shall be payable, without duplication:
(a) on the Stated Maturity Date applicable to such
Loans;
(b) with respect to any portion of any Loan prepaid or
repaid pursuant to Section 3.3.1, on the date such prepayment or
repayment is due as provided in Section 3.3.1 and, in the case of
a voluntary prepayment, on the date set forth in any notice
required for such prepayment;
(c) with respect to Base Rate Loans, on each Quarterly
Payment Date, commencing with the first such day following the
Closing Date;
(d) with respect to Eurodollar Loans, on the last day
of each applicable Interest Period (and if such Interest Period
shall exceed three months, also on the numerically corresponding
day of the third calendar month after the commencement of such
Interest Period);
(e) with respect to any Base Rate Loans converted into
Eurodollar Loans on a day which is not a Quarterly Payment Date,
on the date of such conversion; and
(f) on the date of acceleration of such Loans pursuant
to Section 7.2 or 7.3.
Interest accruing at the Post-Default Rate and, to the extent
permitted by applicable law, interest on overdue amounts
(including overdue interest), shall be payable upon demand.
SECTION 3.4.6. Rate Determinations. All determinations
by the Agent of the rate of interest applicable to any Loan shall
be conclusive in the absence of manifest error.
SECTION 3.4.7. Limitation on Types of Loans. Anything
herein to the contrary notwithstanding, if on or prior to the
determination of any Eurodollar Rate for any Interest Period:
(a) the Agent determines in good faith, which
determination shall be conclusive, that quotations of interest
rates for the relevant deposits referred to in the definition of
"Eurodollar Rate" are not being provided in the relevant amounts
or for the relevant maturities for purposes of determining rates
of interest for Eurodollar Loans as provided herein; or
(b) the Required Lenders determine in good faith,
which determination shall be conclusive, and notify the Agent
that the relevant rates of interest referred to in the definition
of "Eurodollar Rate" upon the basis of which the rate of interest
for Eurodollar Loans for such Interest Period is to be determined
are not likely to cover adequately the cost to such Lenders of
making or maintaining Eurodollar Loans for such Interest Period;
then the Agent shall give the Borrower and each Lender prompt
notice thereof, and so long as such condition remains in effect,
the Lenders shall be under no obligation to make additional
Eurodollar Loans, to continue Eurodollar Loans or to convert Base
Rate Loans into Eurodollar Loans, and the Borrower shall, on the
last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Loans or such
Loans shall be converted into Base Rate Loans in accordance with
Section 3.4.9 hereof.
SECTION 3.4.8. Illegality. Notwithstanding any other
provision of this Agreement, in the event that it becomes
unlawful for any Lender or its Applicable Lending Office to honor
its obligation to make or maintain Eurodollar Loans hereunder,
then such Lender shall promptly notify the Borrower thereof (with
a copy to the Agent) and such Lender's obligation to make or
continue, or to convert Base Rate Loans into, Eurodollar Loans
shall be suspended until such time as such Lender may again make
and maintain Eurodollar Loans (in which case the provisions of
Section 3.4.9 hereof shall be applicable).
SECTION 3.4.9. Treatment of Affected Loans. If the
obligation of any Lender to make Eurodollar Loans or continue, or
to convert Base Rate Loans into, Eurodollar Loans shall be
suspended pursuant to Sections 3.4.7 or 3.4.8 hereof, such
Lender's Eurodollar Loans shall be automatically converted into
Base Rate Loans on the last day(s) of the then current Interest
Period(s) for Eurodollar Loans (or, in the case of a conversion
required by Sections 3.4.7 or 3.4.8 hereof, on such earlier date
as such Lender may specify to the Borrower with a copy to the
Agent) and, unless and until such Lender gives notice as provided
below that the circumstances specified in Sections 3.4.7 or 3.4.8
hereof which gave rise to such conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans
have been so converted, all payments and prepayments of principal
which would otherwise be applied to such Lender's Eurodollar
Loans shall be applied instead to its Base Rate Loans; and
(b) all Loans which would otherwise be made or
continued by such Lender as Eurodollar Loans shall be made or
continued instead as Base Rate Loans and all Base Rate Loans of
such Lender which would otherwise be converted into Eurodollar
Loans shall remain as Base Rate Loans.
Promptly after the circumstances specified in Sections 3.4.7 or
3.4.8 which gave rise to the conversion of such Lender's
Eurodollar Loans pursuant to this Section 3.4.9 no longer exist,
such Lender shall give the Agent and the Borrower notice thereof,
and the Borrower may thereafter request conversion of such Loans
to Eurodollar Loans, subject to the subsequent application of
Section 3.4.7 or 3.4.8.
SECTION 3.4.10. Compensation. The Borrower shall
pay to the Agent for the account of each Lender, upon the request
of such Lender through the Agent, such amount or amounts as shall
be sufficient (in the reasonable opinion of such Lender) to
compensate it for any loss, cost or expense which such Lender
determines is attributable to:
(a) any payment, prepayment or conversion of a
Eurodollar Loan made by such Lender for any reason (including,
without limitation, the acceleration of the Loans pursuant to
Article 7 hereof) on a date other than the last day of the
Interest Period for such Loan; or
(b) any failure by the Borrower for any reason
(including, without limitation, the failure of any of the
conditions precedent specified in Article 4 hereof to be
satisfied) to borrow a Eurodollar Loan from such Lender on the
date for such borrowing specified in the Borrowing Request given
pursuant to Section 3.1 hereof.
SECTION 3.5. Taxes.
(a) Any and all payments by the Borrower hereunder or
under the Notes or any other Loan Document shall be made, in
accordance with this Section 3.5, free and clear of and without
deduction for any and all present or future Taxes. If the
Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under any Note to any
Lender or the Agent, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under
this Section 3.5), such Lender or the Agent (as the case may be)
receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes or intangibles taxes
or any other excise or property taxes, transfer taxes, charges or
similar levies which arise from any payment made hereunder or
under the Notes or from the execution, delivery or registration
of, or otherwise with respect to this Agreement, the Notes, or
any other Loan Document.
(c) The Borrower will indemnify each Lender and the
Agent for the full amount of the taxes, charges and levies
described in clauses (a) and (b) of this Section 3.5 (including,
without limitation, any such taxes, charges and levies imposed by
any jurisdiction on amounts payable under this Section 3.5) paid
by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such taxes,
charges and levies were correctly or legally asserted. Payment
under this clause (c) shall be made within 30 days from the date
such Lender or the Agent (as the case may be) makes written
demand therefor.
(d) Within 30 days after the date of any payment of
Taxes, the Borrower will furnish to the Agent, at its address
referred to in Section 9.2, the original or a certified copy of
any receipt received by the Borrower evidencing payment thereof.
(e) On or prior to the Closing Date and on or prior to
the first Business Day of each calendar year thereafter, each
Foreign Lender shall provide the Agent and the Borrower with two
properly executed original Forms 4224 and 1001 (or any successor
form) prescribed by the Internal Revenue Service or other
documents satisfactory to the Borrower and the Agent, and
properly executed Internal Revenue Service Forms W-8 or W-9, as
the case may be, certifying (i) as to such Foreign Lenders's
status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to such
Foreign Lender hereunder and under the Notes or (ii) that all
payments to be made to such Foreign Lender hereunder and under
the Notes are subject to such taxes at a rate reduced to zero by
an applicable tax treaty. Each Foreign Lender agrees to provide
the Agent and the Borrower with new forms prescribed by the
Internal Revenue Service upon the expiration or obsolescence of
any previously delivered form, or after the occurrence of any
event requiring a change in the most recent forms delivered by it
to the Agent and the Borrower.
(f) In the event that the Agent or any Lender receives
a refund or credit that, in the sole determination of the Agent
or such Lender, is attributable to any taxes paid on its behalf
by the Borrower in accordance with this Section 3.5, the Agent or
such Lenders, as the case may be, shall pay an amount equal to
such refund or credit to the Borrower.
(g) Without prejudice to the survival of any other
agreement hereunder, the agreements and obligations contained in
this Section 3.5 shall survive the payment in full of principal
and interest hereunder and under the Notes.
SECTION 3.6. Payments, Interest Rate Computations,
Other Computations, etc. All payments by the Borrower pursuant to
this Agreement, the Notes or any other Loan Document, (a) in
respect of principal or interest on the Term Notes, shall be made
by the Borrower to the Agent for the account of the Lenders, pro
rata according to their respective unpaid principal amounts of
the Term Notes, and, (b) in respect of principal or interest on
the Revolving Notes, shall be made by the Borrower to the Agent
for the account of the Lenders, pro rata according to their
respective unpaid principal amounts of the Revolving Notes. The
payment of the commitment fee referred to in Section 2.4 shall be
made by the Borrower to the Agent for the account of the Lenders
entitled thereto pro rata according to their respective
Revolving Percentages. All other amounts payable to the Agent or
any Lender under this Agreement or any other Loan Document
(except under Section 2.4) shall be paid to the Agent for the
account of the Person entitled thereto. All such payments
required to be made to the Agent shall be made, without setoff,
deduction or counterclaim, not later than 2:00 p.m., New York
City time, on the date due, in immediately available funds, to
such account as the Agent shall specify from time to time by
notice to the Borrower. Funds received after that time shall be
deemed to have been received by the Agent on the next following
Business Day. The Agent shall promptly remit in the type of
funds received to each Lender notified to the Agent its share, if
any, of such payments received by the Agent for the account of
such Lender or holder. All interest and fees shall be computed
on the basis of the actual number of days (including the first
day but excluding the last day) occurring during the period for
which such interest or fee is payable over a year comprised of
360 days (365 days in the case of interest computed on the basis
of the ING Alternate Base Rate). Whenever any payment to be made
shall otherwise be due on a day which is not a Business Day, such
payment shall be made on the immediately preceding Business Day.
SECTION 3.7. Proration of Payments. If any Lender
shall obtain any payment or other recovery (whether voluntary,
involuntary, by application of setoff or otherwise) on account of
principal of or interest on any Loan or other Obligations in
excess of such Lender's or holder's pro rata share of payments
then or therewith obtained thereon by all Lenders, such Lender
which has received in excess of its pro rata share shall purchase
from the other Lenders such participations in such Notes or other
Obligations held by them as shall be necessary to cause such
purchaser to share the excess payment or other recovery ratably
with each of them; provided, however, that if all or any portion
of the excess payment or other recovery is thereafter recovered
from such purchasing holder, the purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but
without interest. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this
Section 3.7 may, to the fullest extent permitted by law, exercise
all its rights of payment (including pursuant to Section 3.8)
with respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section 3.7 applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the
Lenders under this Section 3.7 to share in the benefits of any
recovery on such secured claim.
SECTION 3.8. Setoff. In addition to, and not in
limitation of, any rights of any Lender under applicable law,
each Lender shall, upon the occurrence and during the continuance
of any Event of Default, have the right to appropriate and apply
to the payment of the Obligations owing to it (whether or not
then due), and (as security for such Obligations) the Borrower
hereby grants to each Lender, a continuing security interest in,
any and all balances, credits, deposits, accounts or moneys of
the Borrower then or thereafter maintained with such Lender;
provided, however, that any such appropriation and application
shall be subject to the provisions of Section 3.7.
SECTION 3.9. Use of Proceeds.
(a) The Borrower shall use the proceeds of the Term
Loan and the initial Revolving Loans on the Closing Date (i) to
pay a portion of the "Preliminary Purchase Price" (as such term
is defined in the Acquisition Agreement), (ii) to pay costs and
expenses arising in connection with the transactions contemplated
hereby which are set forth in Item 1 ("Transaction Costs") of the
Disclosure Schedule (subject to the Agent's approval of such
costs and expenses), (iii) to refinance existing Indebtedness set
forth on Item 4 ("Indebtedness to be Refinanced") of the
Disclosure Schedule and (iv) to make loans in an aggregate amount
not to exceed $700,000 to various employees of the Borrower and
its Subsidiaries, which loans will be used to finance the
employees' acquisition of the Borrower's Series A Preferred Stock
all as more specifically described in Item 2 ("Sources and Uses")
of the Disclosure Schedule.
(b) The Borrower shall use the proceeds of the
Revolving Loans made after the Closing Date for the on-going
working capital needs of the Borrower and its Subsidiaries.
(c) No part of the proceeds of any Loans shall be used
for any purpose which violates Regulations G, T, U or X of the
F.R.S. Board.
ARTICLE 4.
CONDITIONS TO LOANS
SECTION 4.1. Initial Loan. The obligations of the
Lenders to fund the Term Loan and the initial Revolving Loans on
the Closing Date shall be subject to the prior or concurrent
satisfaction of each of the conditions precedent set forth in
this Section 4.1.
SECTION 4.1.1. Resolutions, etc. The Agent shall have
received:
(a) a certificate, dated the Closing Date, of the
Secretary of each Loan Party as of the Closing Date as to:
(i) resolutions of its Board of Directors, then in
full force and effect authorizing the execution, delivery
and performance of the Loan Documents to which such Loan
Party is a party and the related transactions contemplated
thereby, and
(ii) the incumbency and signatures of those of its
officers authorized to act with respect to the Loan
Documents to which it is party, upon which certificate each
Lender may conclusively rely until it shall have received
further certificates of the Secretary of such Loan Party
canceling or amending such prior certificates;
(b) copies of the Organic Documents of each Loan Party
as of the Closing Date certified by, in the case of the charters,
the appropriate Governmental Authority of the State of such Loan
Party's incorporation and, in the case of its other Organic
Documents, such Loan Party's Secretary, which documents shall be
satisfactory to the Agent;
(c) a so-called "good standing" certificate with
respect to each Loan Party as of the Closing Date from the
appropriate Governmental Authority of the State of its
incorporation;
(d) evidence of qualification of each Loan Party as of
the Closing Date to do business in each other jurisdiction in
which the failure to so qualify could result in a Material
Adverse Change; and
(e) such other documents (certified if requested) as
the Agent or the Required Lenders may reasonably request, with
respect to this Agreement, the Notes, any other Loan Document,
the transactions contemplated hereby and thereby, or any Organic
Document, Contractual Obligation or Regulatory Approval.
SECTION 4.1.2. Notes. The Agent shall have received
for the account of each Lender, such Lender's Term Note and
Revolving Note, in each case duly executed and delivered pursuant
to Section 3.2.
SECTION 4.1.3. Subsidiary Guaranty. The Agent shall
have received for the account of each Lender the Subsidiary
Guaranty, duly executed and delivered by each Subsidiary of the
Borrower.
SECTION 4.1.4. No Contest, etc. No litigation,
arbitration, governmental investigation, injunction, proceeding
or inquiry shall be pending or, to the knowledge of the Borrower,
threatened which:
(a) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a
result of, the transactions contemplated by or in connection with
the Acquisition Agreement, this Agreement or any Loan Document;
or
(b) would, in the opinion of the Agent, be materially
adverse to any of the parties hereto with respect to the
transactions contemplated hereby;
No litigation set forth in Item 3 (Litigation) of the Disclosure
Schedule, in the reasonable opinion of the Agent, could result in
a Material Adverse Change or give rise to any liability on the
part of the Agent or any Lender in connection with this Agreement
or the other Loan Documents or the transactions contemplated
hereby or thereby.
SECTION 4.1.5. Certificate as to Completed Conditions,
Warranties, No Default, etc. The Agent shall have received a
certificate, dated the Closing Date, of the chief executive
officer of the Borrower, to the effect that:
(a) all conditions precedent set forth in this Section
4.1 have been satisfied;
(b) all representations and warranties set forth in
Article 5 are true and correct in all material respects;
(c) all representations and warranties set forth in
the Loan Documents are true and correct in all material respects;
and
(d) no Default or Event of Default has occurred and is
continuing.
SECTION 4.1.6. Opinions of Counsel. The Agent shall
have received opinion letters, dated the Closing Date and
addressed to the Agent and all Lenders, from Christy & Viener,
counsel to the Borrower and its Subsidiaries, in form and
substance satisfactory to the Agent, and covering such matters as
the Agent may request. Additionally, the Agent shall have
received opinion letters, dated the Closing Date and addressed to
the Agent and all Lenders from local counsel to the Borrower and
the Subsidiaries in the states of Delaware, Maryland and Nevada,
in form and substance satisfactory to the Agent and covering such
matters as the Agent may request.
SECTION 4.1.7. Closing Fees, Expenses, etc. The Agent
shall have received the facility fee, which was due and payable
pursuant to the terms of the Facility Fee Letter, and all costs
and expenses which have been invoiced and are payable upon the
initial Borrowing pursuant to Section 9.3.
SECTION 4.1.8. Security Documents and Perfection. The
Agent shall have received:
(a) The Security Agreement, duly executed by an
Authorized Officer of the Borrower and each Eligible Subsidiary
of the Borrower;
(b) The Borrower Trademark Assignment duly executed by
an Authorized Officer of the Borrower, and the Subsidiary
Trademark Assignment duly executed by an Authorized Officer of
each Subsidiary of the Borrower owning U.S. patents or
trademarks;
(c) Evidence of the execution and delivery of all
filings of the Financing Statements with respect to the Security
Agreement and other Security Documents; searches or other
evidence as to the absence of any perfected security interests or
Liens (except those previously disclosed to and consented to by
the Lenders); and evidence that all other actions (including all
actions necessary such that the Trademark Assignment are
acceptable for filing in the United States Patent and Trademark
Office and the payment of all documentary, intangibles, filing
and recording taxes and fees) with respect to the Liens created
by the Security Documents have been taken as are necessary or
appropriate to perfect such Liens;
(d) The Borrower Pledge Agreement, duly executed by an
Authorized Officer of the Borrower, and the Subsidiary Pledge
Agreement, duly executed by an Authorized Officer of each
Subsidiary.
(e) All (i) stock certificates and undated stock
powers duly executed in blank relating thereto with respect to
the pledged securities under the Borrower Pledge Agreement or the
Subsidiary Pledge Agreement, which pledged securities shall
consist of the Citigate Shares, all outstanding Stock of all
other Subsidiaries of the Borrower, and all stock of the Borrower
pledged to the Borrower by its employees, officers and directors,
and (ii) all promissory notes, including, without limitation, the
Goldstein Note, and other instruments owned by Borrower duly
endorsed in blank pledged under the Borrower Pledge Agreement or
the Subsidiary Pledge Agreement.
(f) A collateral assignment to the Agent, for its
benefit and the ratable benefit of the Lenders, of the Borrower's
rights under the Acquisition Agreement and all other documents
executed or delivered by the Sellers pursuant to the Acquisition
Agreement, duly consented to by the Sellers, which assignment
shall be in form and substance satisfactory to the Agent; and
(g) An assignment to the Agent, for its benefit and
the ratable benefit of the Lenders, of the insurance policies
described in Section 4.1.12 (with respect to which the insurer
shall have executed and delivered to the Agent a written
consent), which assignment shall be in form and substance
satisfactory to the Agent.
SECTION 4.1.9. Employment Agreements; Compensation.
The Agent shall have received, certified by the Borrower, copies
of all employment agreements to which the Borrower or any of its
Subsidiaries is a party and the Agent shall be satisfied in all
respects with the levels of compensation (including, without
limitation, fees, wages, salaries, bonuses, deferred payment
arrangements, stock options, incentive plans and pension or
employee benefit contributions) paid to key members of
management.
SECTION 4.1.10. Pension and Welfare Liabilities.
The Agent shall have received (i) the most recent actuarial
valuation report for each Single Employer Plan, if any, and a
copy of Schedule B to the Annual Report on Form 5500 of the
Internal Revenue Service for each such Single Employer Plan most
recently filed with the Internal Revenue Service, and (ii) a
report prepared by the Borrower in form and substance
satisfactory to the Agent detailing any liabilities of the
Borrower and each of its Subsidiaries, and of each Commonly
Controlled Entity of the Borrower for post-retirement benefits
under Plans which are welfare benefit plans.
SECTION 4.1.11. Insurance. The Agent shall have
received evidence satisfactory to it that the insurance
maintained by the Borrower and its Subsidiaries is issued by an
insurance company with a Best's rating of "A" or better and a
financial size category of not less than XII, is in amounts
satisfactory to the Agent and, in the case of insurance
maintained by the Borrower and its Subsidiaries, under policies
naming the Agent as loss payee (in the case of casualty insurance
policies) and as additional insured (in the case of liability
policies), and otherwise complying with the requirements of this
Agreement and the Security Documents.
SECTION 4.1.12. Key Man Insurance. The Borrower
shall have purchased "key-man" life insurance policies in the
total amount of $11,510,700.00 on the lives of Gary S. Goldstein,
Alicia C. Lazaro, Eugene Y. Shen, Russ Gerson, Ken Watanabe,
Ronald Wendlinger, Michael List and Irene Cohen.
SECTION 4.1.13. Financial Information, etc. The
Agent shall have received the historical financial statements
referred to in Section 5.4, the Closing Date Pro Forma Balance
Sheet, a Fair Saleable Value Balance Sheet for the Borrower as of
the Closing Date and the Projections.
SECTION 4.1.14. Solvency, etc. The Fair Saleable
Value Balance Sheet for the Borrower and each Subsidiary as of
the Closing Date shall show that the assets of the Borrower and
each Subsidiary are at least $149,000 greater than the
liabilities of the Borrower and each Subsidiary (including all
liabilities and obligations of the Borrower and each Subsidiary,
fixed or contingent, direct or indirect, disputed or undisputed,
and whether or not required to be reflected on a balance sheet
prepared in accordance with GAAP, except to the extent noted
thereon); and the Agent shall have received a certificate of the
chief operating officer of the Borrower and each Subsidiary dated
the Closing Date, stating that, after giving effect to the
consummation of the transactions contemplated by this Agreement
to occur on the Closing Date (including the Acquisition and the
making of the Term Loan and the initial Revolving Loans), the
Borrower and each Subsidiary is Solvent.
SECTION 4.1.15. Acquisition. The Acquisition
Agreement shall remain in full force and effect and shall not
have been amended, modified or supplemented without the Agent's
approval, all conditions precedent to the consummation by the
Borrower of the transactions contemplated by the Acquisition
Agreement shall have been fully satisfied or waived with the
consent of the Agent, the Borrower shall have delivered to the
Agent evidence satisfactory to the Agent that the Acquisition
shall be consummated simultaneously with the funding of the Term
Loan and the initial Revolving Loans substantially in accordance
with the terms of the Acquisition Agreement, and the Borrower
shall have delivered to the Agent each of the following:
(a) resolutions of the boards of directors and, to the
extent required, the stockholders of the Borrower, certified by
the Secretary of the Borrower, to be duly adopted and in full
force and effect on the Closing Date, authorizing the execution,
delivery and performance of the Acquisition Agreement;
(b) certified copies of all documents evidencing any
other necessary corporate action, consents and Regulatory
Approvals with respect to the consummation of the transactions
contemplated by the Acquisition Agreement;
(c) copies of all legal opinions delivered in
connection with the Acquisition together with an original of a
reliance letter in favor of the Agent and the Lenders from each
of the counsel delivering such opinions; and
(d) a certificate from the chief executive officer of
Borrower to the effect that attached thereto are true and correct
copies of the Acquisition Agreement and each of the material
documents, instruments and agreements executed and delivered
pursuant to the Acquisition Agreement and making such statements
of fact concerning the Acquisition and the other transactions
consummated pursuant to such agreements as the Agent shall
reasonably request.
SECTION 4.1.16. Additional Equity. The Agent shall
have received evidence that, since April 9, 1996, the Borrower
has received not less than $6,000,000 in cash proceeds from the
issuance of its Stock. Additionally, the Agent shall have
received copies, certified by the Borrower, evidencing such
additional stock and the Required Lenders shall be satisfied with
the terms and conditions of such documents.
SECTION 4.1.17. Releases of Liens on Assets. All
Indebtedness of the Borrower and any other Loan Party described
on Item 4 ("Indebtedness to be Refinanced") of the Disclosure
Schedule shall have been paid in full and all holders of such
Indebtedness shall have acknowledged such repayment, released the
Borrower and any other Loan Party from any liability in respect
of such Indebtedness, and released all Liens on the assets
securing such Indebtedness by executing and delivering to the
Agent UCC-3 termination statements and other Instruments as shall
be suitable or appropriate in connection therewith.
SECTION 4.1.18. Review of the Borrower's
Operations. The Agent or its representatives shall have
completed their review of the Borrower's management information
systems, accounting, financial reporting and cash management
systems as well as the legal structure of each Loan Party and the
nature of each Loan Party's asset composition and contingent
liabilities, and the Agent shall be satisfied in all respects
with the results of such review.
SECTION 4.1.19. Material Contracts. The Agent
shall have received a certificate from an Authorized Officer of
the Borrower to the effect that attached thereto are true and
correct copies of each of the items listed on Item 5 ("Material
Contracts") of the Disclosure Schedule, and the Agent shall be
satisfied in all respects with terms of such items.
SECTION 4.1.20. Letter to Accountants. The Agent
shall have received satisfactory evidence that the Borrower has
delivered a letter to its independent public accountants
authorizing such public accountants to discuss the Borrower's and
each other Loan Party's financial matters with the Agent and each
Lender or any of their respective representatives whether or not
a representative of the Borrower is present.
SECTION 4.1.21. Other Documents, Certificates, Etc.
The Agent shall have received such other documents, certificates,
opinions of counsel or other materials as it reasonably requests
from any Loan Party.
SECTION 4.2. All Loans. The obligations of the
Lenders to fund the Revolving Loans after Date shall be subject
to the prior or concurrent satisfaction of each of the conditions
precedent set forth in this Section 4.2.
SECTION 4.2.1. Compliance with Warranties, No Default,
etc. The representations and warranties set forth in Article 5
shall have been true and correct in all material respects as of
the date initially made. In addition, both before and after
giving effect to the making of any such Loan:
(a) such representations and warranties shall be
true and correct in all material respects with the same
effect as if then made (except to the extent expressly made
as of a specified date, in which case such representations
and warrants shall be true as of such specified date);
(b) all representations and warranties set forth
in the Security Documents shall be true and correct in all
material respects with the same effect as if then made
(except to the extent expressly made as of a specified date,
in which case such representations and warrants shall be
true as of such specified date);
(c) no material adverse development shall have
occurred in any litigation, arbitration or governmental
investigation, proceeding or inquiry disclosed pursuant to
Section 5.7 which renders such litigation, arbitration or
governmental investigation or inquiry or proceeding, in the
reasonable opinion of the Required Lenders, likely to be
adversely determined and, if adversely determined, could
result in a Material Adverse Change; and
(d) no Default or Event of Default shall have
occurred and be continuing.
SECTION 4.2.2. Borrowing Request, etc. The Agent shall
have received a duly completed Borrowing Request. The delivery
of any such Borrowing Request, and the acceptance by the Borrower
of the proceeds of any such Loan, shall constitute a
representation and warranty by the Borrower that on the date of
such request for a Loan, and before and after giving effect to
the making of such Loan and the application of any proceeds of
such Loan, all statements set forth in Section 4.2.1 are true and
correct. In the event that, in connection with the delivery of
any such Borrowing Request the Borrower is required to amend any
Item of the Disclosure Schedule in order that the statement set
forth in clause (a) or (b) of Section 4.2.1 shall be true and
correct, the Borrower shall deliver to the Agent at least three
(3) Business Days prior to the date of the Borrowing requested or
to be requested, a request that such Item of the Disclosure
Schedule be amended, and the Agent shall promptly forward such
request to the Lenders. To the extent that the Required Lenders
agree to such requested amendment or otherwise make any Loans
after receipt of such request, the representations and warranties
proposed to be amended by such amendment to the Disclosure
Schedule will be deemed amended for purposes of this Agreement.
SECTION 4.2.3. Satisfactory Legal Form. All documents
executed or submitted by or on behalf of the Borrower or any
Subsidiary shall be reasonably satisfactory in form and substance
to the Agent and its counsel, the Agent and its counsel shall
have received all information, and such counterpart originals or
such certified or other copies of such Instruments, as the Agent
or its counsel may request. All legal matters incident to the
transactions contemplated by this Agreement shall be satisfactory
to counsel to the Agent.
SECTION 4.2.4. Margin Regulations. The making of such
Loan and the use of the proceeds thereof shall not violate
Regulations G, T, U and X of the F.R.S. Board.
SECTION 4.2.5. Adverse Change. In the reasonable
judgment of the Required Lenders, no Material Adverse Change
shall have occurred since the Closing Date.
SECTION 4.2.6. Change in Law. On the date of such
Loan, no change shall have occurred in applicable law, or in
applicable regulations thereunder or in interpretations thereof
by any court or Governmental Authority which, in the opinion of
any Lender, would make it illegal for such Lender to make the
Loan required to be made on such date.
ARTICLE 5.
WARRANTIES, ETC.
In order to induce the Lenders and the Agent to enter
into this Agreement, to engage in the transactions contemplated
herein and in the other Loan Documents and to make the Loans, the
Borrower represents and warrants to the Agent and each Lender as
set forth in this Article 5.
SECTION 5.1. Organization, Power, Authority, etc.
Each of the Borrower and its Subsidiaries (i) is a corporation
validly organized and existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) is duly
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the failure to so qualify
could result in a Material Adverse Change, and (iii) has full
power and authority, and, except as set forth in Item 6
("Governmental Licenses") of the Disclosure Schedule, holds all
governmental licenses, permits, registrations and other
Regulatory Approvals required under all Requirements of Law, to
own and hold under lease its property and to conduct its business
as conducted prior to the Closing Date and as contemplated to be
conducted subsequent to the Closing Date. The Borrower has full
power and authority to enter into and perform its Obligations
under this Agreement, the Notes and each other Loan Document
executed or to be executed by it and to obtain Loans hereunder.
SECTION 5.2. Due Authorization. The execution and
delivery by each Loan Party of each Loan Document executed or to
be executed by it, and the incurrence and performance by such
Loan Party of the Obligations have been duly authorized by all
necessary corporate action, do not require any Regulatory
Approval (except those Regulatory Approvals already obtained), do
not and will not conflict with, result in any violation of, or
constitute any default under, any provision of any Organic
Document or Contractual Obligation of such Loan Party or any law
or governmental regulation or court decree or order, and will not
result in or require the creation or imposition of any such Lien
on such Loan Party's properties pursuant to the provisions of any
Contractual Obligation of such Loan Party.
SECTION 5.3. Validity, etc. Each of this Agreement,
the Notes and the other Loan Documents constitutes, the legal,
valid and binding obligation of the each Loan Party executing and
delivering such Loan Document, enforceable in accordance with its
terms subject to the effect of any applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors'
rights generally, and the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or at
law).
SECTION 5.4. Financial Information; Solvency.
(a) Except as disclosed in Item 7 ("Exceptions to
GAAP") of the Disclosure Schedule, all balance sheets, all
statements of operations, stockholders' equity and cash flows,
and all other financial information of the Borrower and its
Subsidiaries which have been furnished by or on behalf of the
Borrower and its Subsidiaries to the Agent and the Lenders for
the purposes of or in connection with this Agreement or any
transaction contemplated hereby, including:
(i) the consolidated audited balance sheets of the
Borrower as of December 31, 1994 and December 31, 1995, and
the related consolidated statements of income and cash flows
for each of the two (2) fiscal years of the Borrower ending
December 31, 1994 and December 31, 1995, together with the
opinion thereon of Mortenson and Associates, P.C.;
(ii) the unaudited consolidated balance sheets of the
Borrower as of March 31, 1996, and the related consolidated
statements of income for the fiscal quarter of the Borrower
ending March 31, 1996, together with the report of the chief
financial officer of the Borrower;
(iii) the consolidated reviewed balance sheets of
Irene Cohen as of December 31, 1994 and December 31, 1995,
and the related consolidated statements of income and cash
flows for each of the two (2) fiscal years of Irene Cohen
ending December 31, 1994 and December 31, 1995, together
with the opinion thereon of Rosenblatt, Slavet & Redezky,
C.P.A., P.C.;
(iv) the unaudited consolidated balance sheets of Irene
Cohen as of March 31, 1996 and the related consolidated
statements of income for the fiscal quarter of Irene Cohen
ending March 31, 1996, together with the report of the chief
financial officer of Irene Cohen;
(v) the Closing Date Pro Forma Balance Sheet;
(vi) the Projections;
have been prepared in accordance with GAAP consistently applied
(except to the extent items in the Closing Date Pro Forma Balance
Sheet, and the Projections are based upon estimates) throughout
the periods involved and present fairly in all material respects
the matters reflected therein subject, in the case of unaudited
statements, to changes resulting from normal year-end audit
adjustments and except as to the absence of footnotes. As of the
Closing Date, the Borrower nor any of its respective Subsidiaries
has material contingent liabilities or material liabilities for
taxes, long-term leases or unusual forward or long-term
commitments which are not reflected in the financial statements
described in clauses (i), (ii), (iii), (iv), and (v).
(b) After giving effect to the consummation of the
transactions contemplated by this Agreement and the other Loan
Documents to occur on the Closing Date (including the Acquisition
and the Loan and the initial Revolving Loans), the Borrower and
each Subsidiary is Solvent.
SECTION 5.5. Material Adverse Change. Since December
31, 1995, there has been no material adverse change in the
condition (financial or otherwise), operations, performance,
business, properties or prospects of the Borrower and its
Subsidiaries taken as a whole, or in any industry in which the
Borrower or any of its Subsidiaries is engaged in any material
respect.
SECTION 5.6. Absence of Default. Neither the
Borrower nor any Subsidiary is in default in the payment of (or
in the performance of any material obligation applicable to) any
Indebtedness, or is in material default under any regulation of
any Governmental Agency or court decree or order, or is in
default under any Requirements of Law which default could result
in a Material Adverse Change.
SECTION 5.7. Litigation, Legislation, etc. Except as
disclosed in Item 3 (Litigation) of the Disclosure Schedule,
there is no pending or, to the knowledge of the Borrower,
threatened litigation, arbitration or governmental investigation,
proceeding or inquiry which, if adversely determined, could
result in a Material Adverse Change; and none of the proceedings
set forth in such Item 3 seeks to amend, modify or enjoin the
transactions contemplated hereby or is likely to be adversely
determined. To the knowledge of the Borrower, there is no
legislation, governmental regulation or judicial decision that
could result in a Material Adverse Change.
SECTION 5.8. Regulations G, T, U and X. Neither the
Borrower nor any Subsidiary is engaged principally, or as one of
its important activities, in the business of extending credit for
the purpose of purchasing or carrying Margin Stock (as defined in
F.R.S. Board Regulation G or U) and, no assets of the Borrower or
any Subsidiary consist of Margin Stock. The Loans hereunder will
not be used for a purpose which violates, or would be
inconsistent with, F.R.S. Board Regulation G, T, U or X.
SECTION 5.9. Government Regulation. Neither the
Borrower nor any Subsidiary is an "investment company" within the
meaning of the Investment Holding Company Act of 1940, as
amended, or a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as
amended, or subject to regulation under the Federal Power Act,
the Interstate Commerce Act or any other federal or state law
limiting its ability to incur Indebtedness or to execute, deliver
or perform the Loan Documents to which it is party.
SECTION 5.10. Taxes. Each of the Borrower and its
present or past Subsidiaries has filed all tax returns and
reports required by law to have been filed by it and has paid all
taxes and Charges thereby shown to be owing, except any such
taxes or Charges which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
SECTION 5.11. Pension and Welfare Plans. (a) Except
as disclosed in Item 8 (Benefit Plans) of the Disclosure
Schedule, neither the Borrower nor any Subsidiary or Commonly
Controlled Entity has assumed any material liability under any
employee benefit plan, fund, program, arrangement, agreement or
commitment maintained by or on behalf of or contributed to by or
on behalf of any entity or trade or business which, together with
any of such corporations, is treated as a single employer under
Sections 414(b), (c), (m) or (o) of the IRC. Neither the
Borrower nor any Subsidiary or Commonly Controlled Entity shall
be subject (directly or indirectly) to any material liability,
tax or penalty whatsoever to any person whomsoever with respect
to any employee benefit plan, fund, program, arrangement,
agreement or commitment described in the immediately preceding
sentence.
(b) No Reportable Event which could result in a
Material Adverse Change has occurred during the six-year period
prior to the date on which this representation is made or deemed
made with respect to any Single Employer Plan. The Borrower,
each Commonly Controlled Entity, each Subsidiary, each Plan, and
each trust maintained pursuant to any such Plan have complied in
all material respects with the applicable provisions of ERISA,
the IRC, and any other applicable laws. Except as disclosed in
Item 8 (Benefit Plans) of the Disclosure Schedule, the present
value of all "benefit liabilities" (within the meaning of Section
4001(a)(16) of ERISA) under each Single Employer Plan maintained
by the Borrower, any Subsidiary or any Commonly Controlled Entity
(based on those assumptions that would be used in a termination
of each such Plan) did not, as of the last annual valuation date
for which an actuarial valuation report has been done, exceed the
value of the assets of such Plan as of such date. Except as
disclosed in such Item 8, neither the Borrower nor any Commonly
Controlled Entity or Subsidiary has incurred any liability to the
PBGC or to any other Person under Section 4062, 4063 or Section
4064 of ERISA on account of the termination of, or its withdrawal
from, a Single Employer Plan, and no Lien has been imposed on
the assets of the Borrower or any Commonly Controlled Entity or
Subsidiary under Section 4068 of ERISA. To the knowledge of the
Borrower and any Commonly Controlled Entities and Subsidiaries,
there does not exist any event or condition which would permit
the institution of proceedings to terminate any Single Employer
Plan pursuant to Section 4042 of ERISA. Except as disclosed in
Item 8 of the Disclosure Schedule, no "accumulated funding
deficiency" (as defined in Section 302 of ERISA or Section 412 of
IRC), whether or not waived, exists with respect to any Pension
Plan. The Borrower and each Commonly Controlled Entity and
Subsidiary have timely made in full each quarterly installment
payment to any Pension Plan required under Section 302(e) of
ERISA or Section 412(m) of the IRC and have also made full and
timely payment of any other costs or expenses related to such a
Plan. The Borrower and all Commonly Controlled Entities and
Subsidiaries have made full and timely payment of all
contributions to Multiemployer Plans required under ERISA, the
IRC or applicable collective bargaining agreements. Neither the
Borrower nor any Commonly Controlled Entity or Subsidiary has had
a complete or partial withdrawal from any Multiemployer Pension
Plan and the liability to which the Borrower or any Commonly
Controlled Entity or Subsidiary would become subject under ERISA
if the Borrower or any such Commonly Controlled Entity or
Subsidiary were to withdraw completely from all Multiemployer
Pension Plans as of the valuation date most closely preceding the
date hereof is not in excess of $100,000. No such Multiemployer
Pension Plan has been terminated or is in Plan Reorganization or
ERISA Insolvent, nor, to the knowledge of the Borrower and any
Commonly Controlled Entities and Subsidiaries, is any such
Multiemployer Pension Plan likely to be terminated or to become
in Plan Reorganization or ERISA Insolvent. To the knowledge of
the Borrower and any Commonly Controlled Entities and
Subsidiaries, no "accumulated funding deficiency" (as defined in
Section 302 of ERISA or Section 412 of the IRC), whether or not
waived, exists with respect to any Multiemployer Plan. The
present value (determined using assumptions which are reasonable
in respect of the benefits provided and the employees
participating) of the aggregate liability of the Borrower and
each Subsidiary and Commonly Controlled Entity for post-
retirement benefits to be provided to their current and former
employees under Plans which are welfare benefit plans (as defined
in Section 3(1) of ERISA) is not in excess of $100,000. No
written notice of liability has been received with respect to the
Borrower, any of its Subsidiaries, or any Plan for any
"prohibited transaction" (within the meaning of Section 4975 of
the IRC or Section 406 of ERISA), nor has any such prohibited
transaction resulting in material liability to the Borrower or
any of its Subsidiaries occurred. Neither the Borrower nor any
Subsidiary or Commonly Controlled Entity will, as a result of
consummating the transactions contemplated by this Agreement
(pursuant to the provisions of the Agreement, by operation of law
or otherwise) (i) have incurred or become liable for any tax
assessed by the Internal Revenue Service for any alleged
violations of Section 4975 of the IRC or any civil penalty
imposed by the Department of Labor for any alleged violations of
Section 406 of ERISA, (ii) have caused or permitted to occur any
"prohibited transaction" within the meaning of such Section 4975
of the IRC or Section 406 of ERISA with respect to any Plan for
which no exemption is available or (iii) have incurred any
liability to the PBGC (other than ordinary and usual PBGC premium
liability) or any liability for complete or partial withdrawal to
any Multiemployer Plan. Neither the Borrower nor any Subsidiary
is subject (directly or indirectly) to, and no facts exist which
could subject the Borrower or any Subsidiary (directly or
indirectly) to, any other liability, penalty, tax or lien
whatsoever, which could result in a Material Adverse Change and
which is directly or indirectly related to any Plan, including,
but not limited to, liability for any damages or penalties
arising under Title I or Title IV of ERISA, liability for any tax
or penalty resulting from a loss of deduction under Section 404
or 419 of the IRC, any tax or penalty under chapter 43 of the
IRC, or any taxes or penalties under any other applicable law,
but excluding any liability to make contributions or pay premiums
to or under an ongoing Plan before the last due date on which
such contributions or premiums could be paid or made without
penalty or to pay benefits when due in accordance with Plan
terms.
SECTION 5.12. Labor Controversies. Except as
disclosed in Item 9 (Labor Controversies) of the Disclosure
Schedule, there are no labor controversies pending or, to the
best knowledge of the Borrower, threatened, relating to the
Borrower or any Subsidiary. There is (i) no unfair labor
practice complaint pending against the Borrower, or any of its
Subsidiaries or, to the best knowledge of the Borrower,
threatened against any of them, before the National Labor
Relations Board, and no arbitration proceeding arising out of or
under any collective bargaining agreement or the Borrower's
internal grievance procedures is so pending against the Borrower
or any of its Subsidiaries or, to the best knowledge of the
Borrower, threatened against any of them, (ii) no strike, labor
dispute, slowdown or stoppage is pending against the Borrower or
any of its Subsidiaries or, to the best knowledge of the
Borrower, threatened against the Borrower or any of its
Subsidiaries and (iii) no union representation question existing
with respect to the employees of the Borrower or any of its
Subsidiaries. Each of the Borrower and its Subsidiaries is in
compliance in all material respects with all collective
bargaining agreements to which it is subject.
SECTION 5.13. Ownership of Properties; Collateral.
(a) Each of the Borrower and its Subsidiaries owns good title to
all of its material personal properties and assets of any nature
whatsoever, free and clear of all Liens except as permitted
pursuant to Section 6.2.3.
(b) The provisions of the Security Agreement are
effective to create in favor of the Agent for the benefit of the
Agent and the Lenders, a legal, valid and enforceable security
interest in all right, title and interest of the Loan Parties in
the Collateral described therein, and, upon the filing of the
Financing Statements and any required filing in the United States
Patent and Trademark Office pursuant to Section 4.1.8, the
Security Documents will create a fully perfected first Lien on,
and the security interest in, all right, title and interest of
the Loan Parties in all of the Collateral described therein, to
the extent that a security interest therein can be perfected by
such a filing, subject to no other Liens other than Liens
permitted by Section 6.2.3.
SECTION 5.14. Intellectual Property. Each of the
Borrower and its Subsidiaries owns or licenses all such
Intellectual Property, and has obtained assignments of all
licenses and other rights, as the Borrower considers necessary
for or as are otherwise material to the conduct of the business
of the Borrower and its Subsidiaries as now conducted without,
individually or in the aggregate, any infringement upon rights of
other Persons which could result in a Material Adverse Change.
All Intellectual Property owned or licensed from third Persons
described in this Section 5.14 is set forth in Item 10
(Intellectual Property) of the Disclosure Schedule.
SECTION 5.15. Accuracy of Information. All factual
information heretofore or contemporaneously furnished by or on
behalf of the Borrower in writing to the Agent or any Lender for
purposes of or in connection with this Agreement or any
transaction contemplated hereby is true and accurate in every
material respect on the date as of which such information is
dated or certified and as of the date of execution and delivery
of this Agreement by the Agent or such Lender and such
information is not incomplete by omitting to state any material
fact necessary to make such information not misleading. Neither
this Agreement nor any document or statement furnished to the
Agent or any of the Lenders by or on behalf of the Borrower
contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements
contained herein or therein not materially misleading. The Agent
and the Lenders recognize that the Projections are not to be
viewed as facts and that actual results during the period or
periods covered by the Projections may differ from the projected
or forecasted results.
SECTION 5.16. Insurance. All policies of insurance in
effect of any kind or nature owned by or issued to the Borrower
and its Subsidiaries, including policies of life, fire, theft,
product liability, public liability, property damage, other
casualty, employee fidelity, workers' compensation, property and
liability insurance, (a) are listed in Item 11 (Insurance) of the
Disclosure Schedule as of the Closing Date, (b) are, together
with all policies of employee health and welfare and title
insurance, in full force and effect, (c) comply in all respects
with the applicable requirements set forth herein and in the
Security Documents and (d) are of a nature and provide such
coverage as is customarily carried by companies engaged in
similar businesses and owning similar properties in the same
general areas in which the Borrower and its Subsidiaries operate.
Neither the Borrower nor any of its Subsidiaries provides any of
its insurance through self-insurance except as disclosed in Item
11 of the Disclosure Schedule.
SECTION 5.17. Certain Indebtedness. Item 12 (Existing
Indebtedness) of the Disclosure Schedule sets forth all
Indebtedness of the Borrower and its Subsidiaries as of the
Closing Date that is not to be refinanced on the Closing Date,
and which (a) is for borrowed money, or (b) is not incurred in
the ordinary course of the business of the Borrower or any
Subsidiary in a manner and to the extent consistent with past
practice, or (c) is material to the financial condition,
operations, businesses, properties or prospects of the Borrower
or any Subsidiary.
SECTION 5.18. Environmental Matters. Except as
disclosed in Item 13 (Environmental Matters) of the Disclosure
Schedule, the Borrower and each of its Subsidiaries are in
compliance in all material respects with all applicable
Environmental Laws, and to the best of the Borrower's knowledge,
there are no conditions or circumstances associated with the
currently or previously owned, operated, used or leased
properties or current or past operations of the Borrower or any
Subsidiary which may give rise to Environmental Liabilities and
Costs which could result in a Material Adverse Change or which
may give rise to any Environmental Lien.
SECTION 5.19. No Burdensome Agreements. Neither the
Borrower nor any Subsidiary is a party to or has assumed any
indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter or other
corporate restriction that could result in a Material Adverse
Change.
SECTION 5.20. Consents. Except as disclosed in Item
14 (Consents) of the Disclosure Schedule, the Borrower and its
Subsidiaries have all material permits and governmental consents
and Regulatory Approvals necessary under Requirements of Law or,
in the reasonable business judgment of the Borrower, deemed
advisable under Requirements of Law, in connection with the
transactions contemplated hereby (including the Acquisition and
the Loans) and the ongoing business and operations of the
Borrower and its Subsidiaries.
SECTION 5.21. Contracts. Set forth in Item 5
(Material Contracts) of the Disclosure Schedule is an accurate
and complete list of all material Contractual Obligations of the
Borrower and its Subsidiaries as of the Closing Date. Each such
material Contractual Obligation is in full force and effect in
accordance with the terms thereof. There are no material
defaults by the Borrower or any Subsidiary or, to the Borrower's
knowledge after due inquiry, any other default in existence under
any such material Contractual Obligations, in each case that
could result in a Material Adverse Change.
SECTION 5.22. Employment Agreements. Set forth in
Item 15 (Employment Contracts) of the Disclosure Schedule is a
complete and accurate list of each employment agreement to which
the Borrower or any Subsidiary is a party, or by which it is
bound.
SECTION 5.23. Condition of Property. All of the
assets and properties owned by, leased to or used by the Borrower
and its Subsidiaries material to the conduct of their business
are in adequate operating condition and repair, ordinary wear and
tear excepted, and are free and clear of known defects except for
defects which do not substantially interfere with the use thereof
in the conduct of normal operations.
SECTION 5.24. Subsidiaries. Item 16 of the Disclosure
Schedule sets forth all Subsidiaries of the Borrower as of the
Closing Date.
SECTION 5.25. Acquisition Agreement. The closing of
the transactions contemplated by the Acquisition Agreement shall
occur on the Closing Date simultaneously with the making of the
Term Loan and the initial Revolving Loans, and the Borrower has
not waived or in any way amended, without the prior written
consent of the Agent, any condition to the obligations to
consummate the Acquisition. A true and complete copy of the
Acquisition Agreement (including all exhibits, schedules and
amendments thereto) has been delivered to the Agent. The
Borrower is not in default under the Acquisition Agreement or
under any instrument or document to be delivered in connection
therewith. The representations and warranties made in the
Acquisition Agreement by the Borrower and, to the best knowledge
of the Borrower, the Sellers are true and correct in all material
respects on and as of the Closing Date as though made on and as
of such date.
SECTION 5.26. Trade Relations. There exists no actual
or, to the best of Borrower's knowledge, threatened termination,
cancellation or limitation of, or any modification or change in,
the business relationship of the Borrower with any material
customer or group of customers of the Borrower.
ARTICLE 6.
COVENANTS
SECTION 6.1. Affirmative Covenants. The Borrower
agrees with each Lender that until all Obligations (other than
Obligations that expressly survive the termination of this
Agreement pursuant to Section 9.5) have been paid and performed
in full and the Commitments have terminated, the Borrower will
perform the Obligations set forth in this Section 6.1.
SECTION 6.1.1. Financial Information, etc. The
Borrower will furnish, or will cause to be furnished, to each
Lender and to the Agent copies of its financial statements,
reports and information:
(a) (i) promptly when available and in any event
within ninety (90) days after the close of each Fiscal Year,
a consolidated and consolidating balance sheet at the close
of such Fiscal Year, and related consolidated and
consolidating statements of operations, retained earnings,
and cash flows for such Fiscal Year, of the Borrower and its
Subsidiaries (with comparable information at the close of
and for the prior Fiscal Year), certified (in the case of
consolidated statements) without qualification by Ernst &
Young, LLC or other independent public accountants
satisfactory to the Agent, together with a report containing
a description of projected business prospects (including
capital expenditures) and management's discussion and
analysis of the financial condition and results of operation
of the Borrower and its Subsidiaries;
(ii) promptly when available and in any event within
ninety (90) days after the close of each Fiscal Year, a
letter report of such independent public accountants at the
close of such Fiscal Year to the effect that it has reviewed
the provisions of this Agreement and the most recent
Compliance Certificate being furnished pursuant to clause
(a)(iii) of this Section 6.1.1 and that, in the course of
performing its duties it did not become aware of any Default
or Event of Default or any miscalculation in such Compliance
Certificate relating to the financial tests set forth in
Section 6.2.4 or relating to the calculation of Excess Cash
Flow, except as such may be disclosed in such statement; and
(iii) promptly when available and in any event within
ninety (90) days after the close of each Fiscal Year, a
Compliance Certificate calculated as of the computation date
at the close of such Fiscal Year; and
(b) promptly when available and in any event within
thirty (30) days after the close of each calendar month of each
Fiscal Year consolidated and consolidating balance sheets at the
close of such month, and consolidated and consolidating
statements of operations, retained earnings, and cash flows for
such month and for the period commencing at the close of the
previous Fiscal Year and ending with the close of such month, of
the Borrower and Subsidiaries (with comparable information at the
close of and for the corresponding month of the prior Fiscal Year
and for the corresponding portion of such prior Fiscal Year),
certified by the principal accounting or chief financial
Authorized Officer of the Borrower, together with a description
of projected business prospects (including capital expenditures)
and a brief report containing management's discussion and
analysis of the financial condition and results of operations of
the Borrower and its Subsidiaries (including a discussion and
analysis of any changes compared to prior results);
(c) within thirty (30) days after the close of each
Fiscal Quarter, a Compliance Certificate calculated as of the
close of such Fiscal Quarter;
(d) promptly upon receipt thereof, copies of all
detailed financial and management reports submitted to the
Borrower by its independent public accountants in connection with
each annual or interim audit made by such independent public
accountants of the books of the Borrower or any Subsidiary;
(e) within thirty (30) days prior to the end of each
Fiscal Year of the Borrower, (i) a business plan of the Borrower
and its Subsidiaries, in form, scope and detail satisfactory to
the Agent, and (ii) consolidated and consolidating operating
budgets for the twelve (12) months following the end of such
Fiscal Year, prepared on a quarterly basis, and for each Fiscal
Year thereafter through the 2001 Fiscal Year, prepared on an
annual basis, which budgets shall include estimated capital
expenditures and other costs to be incurred by the Borrower and
its Subsidiaries, on a consolidated and consolidating basis,
during the applicable Fiscal Year, in each case, with
accompanying detail, together with a report containing
management's discussion and analysis of the projected financial
condition and results of operations of the Borrower and its
Subsidiaries;
(f) promptly after approved by the Borrower's Board of
Directors, any updates or revisions to any business plan
described in clause (e) of this Section 6.1.1;
(g) promptly upon the sending or filing thereof,
copies of all reports that the Borrower sends to its security
holders generally, and copies of all reports and registration
statements that the Borrower or any of its Subsidiaries files
with the Securities and Exchange Commission or any national
securities exchange; and
(h) such other information with respect to the
financial condition, business, property, assets, revenues and
operations of the Borrower and any Subsidiary as the Agent or the
Required Lenders may from time to time reasonably request.
SECTION 6.1.2. Maintenance of Corporate Existence, etc.
Except as permitted by Section 6.2.10, the Borrower will cause to
be done at all times all things necessary to maintain and
preserve the corporate existence of the Borrower and each
Subsidiary.
SECTION 6.1.3. Foreign Qualification. The Borrower
will, and will cause each Subsidiary to, cause to be done at all
times all things necessary to be duly qualified to do business
and be in good standing as a foreign corporation in each
jurisdiction where the failure to so qualify could result in a
Material Adverse Change.
SECTION 6.1.4. Payment of Taxes, etc. The Borrower
will, and will cause each Subsidiary to, pay and discharge, as
the same become due and payable, (a) all Charges against it or on
any of its property, as well as claims of any kind which, if
unpaid, might become a Lien upon any one of its properties, and
(b) all lawful claims for labor, materials, supplies, services or
otherwise before any thereof become a default; provided, however,
that the foregoing shall not require the Borrower or any
Subsidiary to pay or discharge any such Charge or claim so long
as it shall be diligently contesting the validity thereof in good
faith by appropriate proceedings and shall have set aside on its
books adequate reserves in accordance with GAAP.
SECTION 6.1.5. Insurance. In addition to any insurance
required to be maintained pursuant to any other Loan Document,
the Borrower will, and (with respect to the insurance described
in clauses (a) and (b) below) will cause each Subsidiary to,
maintain or cause to be maintained:
(a) insurance with respect to its properties and
business against such casualties, contingencies and liabilities
(including, without limitation, business interruption insurance)
and of such types and in such amounts as are customary in the
industries in which the Borrower and Subsidiaries are engaged,
and will furnish to the Agent annual certification from the
respective insurers (or their authorized agents) of the extent of
all insurance maintained by the Borrower and its Subsidiaries in
accordance with this Section 6.1.5; and
(b) the "key-man" life insurance policies referred to
in Section 4.1.12, which policies shall at all times have a
minimum face value of not less than $11,510,700.00 in the
aggregate.
Each such policy shall be issued by an insurance company with a
Best's rating of "A" or better and a financial size category of
not less than XII shall be in effect on the Closing Date. The
premiums for each such policy shall be paid as such premiums
shall come due. All policies of casualty insurance shall contain
an endorsement, in the form submitted to the Borrower by the
Agent, showing loss payable to the Agent, for its benefit and the
ratable benefit of the Lenders, as their interests may appear.
All policies of liability insurance, including, without
limitation, all primary and umbrella liability policies
(including errors and omissions), shall name the Agent, for its
benefit and the ratable benefit of the Lenders, as additional
insured. All such insurance policies shall provide, or shall be
properly endorsed to provide, that the insurer shall give the
Agent not less than 10 days prior written notice of any
cancellation or non-renewal of any such policy. The Borrower
shall retain all the incidents of ownership of the insurance
maintained pursuant to this Section 6.1.5, but shall not borrow
upon or otherwise impair its right to receive the proceeds of
such insurance. So long as no Event of Default has occurred and
is continuing, the Borrower and its Subsidiaries shall have the
right to use the proceeds of casualty insurance to repair or
replace damaged or destroyed property, shall have the right to
use the proceeds of business interruption insurance for its
ongoing business needs and shall have the right to use the
proceeds of liability insurance to pay covered claims.
SECTION 6.1.6. Notice of Default, Litigation, etc.
Upon a Responsible Officer learning thereof, the Borrower will
give prompt written notice (with a description in reasonable
detail) to the Agent of:
(a) the occurrence of any Default;
(b) the occurrence of any litigation, arbitration or
governmental investigation or proceeding not previously disclosed
in writing by the Borrower to the Lenders which has been
instituted or, to the knowledge of the Borrower, is threatened
against, the Borrower or any Subsidiary or to which any of its
properties, assets or revenues is subject which, if adversely
determined, could result in a Material Adverse Change;
(c) any material development which shall occur in any
litigation, arbitration or governmental investigation or
proceeding previously disclosed by the Borrower to the Lenders
pursuant to Section 5.7 which renders such litigation,
arbitration or governmental investigation likely to be adversely
determined and, if adversely determined, could result in a
Material Adverse Change;
(d) the occurrence of any other circumstance which
could result in a Material Adverse Change;
(e) the occurrence of any Loss; and
(f) (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Single Employer Plan, or any
withdrawal from, or the termination, Plan Reorganization or ERISA
Insolvency of any Multiemployer Pension Plan, (ii) the
institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or
Subsidiary or any Multiemployer Pension Plan with respect to the
withdrawal from, or the termination, Plan Reorganization or ERISA
Insolvency of, any Single Employer Plan or Multiemployer Pension
Plan, or the receipt of notice by the Borrower or any Commonly
Controlled Entity or Subsidiary that the institution of any such
proceedings or the taking of any such action is under
consideration or anticipated, (iii) the institution of any
proceedings or other action by the Internal Revenue Service or
the Department of Labor with respect to the minimum funding
requirements of any Pension Plan, or the receipt of notice by the
Borrower or any Commonly Controlled Entity or Subsidiary that the
institution of any such proceedings or the taking of any such
action is under consideration or anticipated, (iv) the occurrence
or expected occurrence of any event which could result in the
incurrence of unpredictable contingent event benefits under
Section 302 of ERISA or Section 412 of the IRC with respect to
any Pension Plan, (v) any event or condition which could increase
the liability of the Borrower or any Commonly Controlled Entity
or Subsidiary with respect to post-retirement welfare benefits
under any Plan, or (vi) the occurrence of any other event or
condition with respect to any Plan which could subject the
Borrower or any Subsidiary (directly or indirectly) to any tax,
penalty or liability under Title I or Title IV of ERISA, Section
404 or 419 and Chapter 43 of the IRC, or any other applicable
laws, and in each case in clauses (i) through (vi) above, such
event or condition, together with all other events or conditions,
if any, could subject the Borrower or any Subsidiary (directly or
indirectly) to any tax, fine, penalty, or other liabilities in
amounts which in the aggregate could result in a Material Adverse
Change. The Borrower will deliver to each of the Lenders a true
and complete copy of each annual report (Form 5500) of each Plan
(other than a Multi-Employer Plan) required to be filed with the
Internal Revenue Service, promptly after the filing thereof ; and
(g) the condemnation or threat of condemnation with
respect to any property used or necessary in the conduct of the
businesses of the Borrower or any of its Subsidiaries.
SECTION 6.1.7. Books and Records. The Borrower will,
and will cause each Subsidiary to, keep books and records
reflecting all of its business affairs and transactions in
accordance with GAAP and, subject to any government security
limitations, permit the Agent and each Lender or any of their
respective representatives, during normal business hours, to
visit all of its offices, to discuss its financial matters with
its officers and independent public accountants and to examine
(and, at the expense of the Borrower, photocopy extracts from)
any of its books or other corporate records. The Borrower shall
pay any fees of its independent public accountants incurred in
connection with the Agent's or any Lender's exercise of its
rights pursuant to this Section 6.1.7; provided that unless an
Event of Default shall have occurred and be continuing, the
Borrower shall be required to pay any such fees only in respect
of the Agent's exercise of its rights pursuant to this Section
6.1.7 for one occasion during each Fiscal Year.
SECTION 6.1.8. Maintenance of Properties, Etc. The
Borrower will maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, all of its properties
(real and personal and including all intangible assets), except
obsolete properties, which are used or necessary in the conduct
of its business in good working order and condition, ordinary
wear and tear excepted.
SECTION 6.1.9. Maintenance of Licenses and Permits.
The Borrower will maintain and preserve, and will cause each of
its Subsidiaries to maintain and preserve, all Intellectual
Property, rights, permits, licenses, Regulatory Approvals and
privileges issued under or arising under any Requirements of Law
to the extent material to the conduct of the business of the
Borrower or any of its Subsidiaries.
SECTION 6.1.10. Employee Plans. The Borrower will
at all times comply in all material respects with the provisions
of ERISA and the IRC which are applicable to any of the Plans,
and cause each of its Subsidiaries so to do.
SECTION 6.1.11. Environmental Management. The
Borrower will, and will cause each Subsidiary to, adopt and
maintain prudent solid and hazardous waste management and
disposal practices, including at a minimum such practices as are
required or dictated from time to time by current and future
Environmental Laws and Environmental Permits.
SECTION 6.1.12. Compliance with Laws. The Borrower
will, and will cause each Subsidiary to, comply with all
applicable Requirements of Law; provided, however, that this
Section 6.1.12 shall not apply to any circumstance of
noncompliance that together with all other noncompliance could
not result in a Material Adverse Change.
SECTION 6.1.13. Interest Rate Protection. Within
90 days after the Closing, the Borrower shall obtain and
thereafter maintain in full force and effect, from ING or an
Eligible Lending Institution, one or more Interest Rate
Contracts, protecting the Borrower against increases in the
Eurodollar Rate for an aggregate notional amount equal to 50% of
the aggregate principal amount of the Term Loan for a term of
three (3) years. ING shall make available to the Borrower
various proposals for Interest Rate Contracts. Should the
Borrower obtain any proposal for Interest Rate Contracts from a
source other than ING, the Borrower agrees that ING shall have a
right to provide such Interest Rate Contracts on the same terms
as those set forth in such proposal. The Borrower will
collaterally assign such Interest Rate Contracts to the Agent,
for its benefit and the ratable benefit of the Lenders, pursuant
to documentation acceptable to the Agent.
SECTION 6.1.14. Real Estate. If the Borrower or
any Subsidiary shall acquire a fee or leasehold interest in real
estate which the Agent reasonably designates as material to the
Borrower or such Subsidiary at any time prior to the date on
which all Commitments have terminated and all Obligations under
this Agreement have been paid in full, the Borrower or such
Subsidiary will execute a Mortgage subject only to the Liens
described in clauses (c) and (g) of Section 6.2.3, in form and
substance satisfactory to the Agent, in favor of the Agent, for
its benefit and the ratable benefit of the Lenders, and shall use
its reasonable efforts to deliver to the Agent such title
insurance policies, surveys and landlords' estoppel agreements
with respect thereto as the Agent shall reasonably request.
SECTION 6.1.15. Underwriting Offering. The
Borrower shall use its best efforts to allow ING or one of its
Affiliates to manage and serve as underwriter, co-underwriter,
placement agent, co-placement agent or in a similar capacity, in
assisting the Borrower in any offering of equity securities or
debt securities.
SECTION 6.1.16. Whitney Group. Within ninety (90)
days of the Closing Date, the Borrower shall (i) cause Whitney
Partners to acquire the remaining 23.58% of the issued Stock of
Whitney Group not currently owned by Whitney Partners, (ii) enter
into a management contract with Whitney Group, (iii) assign such
management contract to the Agent, and (iv) cause Whitney Partners
to pledge 100% of the issued Stock of the Whitney Group to the
Agent as security for the Obligations.
SECTION 6.2. Negative Covenants. The Borrower
agrees with each Lender that until all Commitments have
terminated and all Obligations (other than Obligations that
expressly survive the termination of this Agreement pursuant to
Section 9.5) have been paid and performed in full, the Borrower
will perform the Obligations set forth in this Section 6.2.
SECTION 6.2.1. Business Activities. The Borrower will
not, and will not permit any Subsidiary to, engage in any
business activity, except those in the fields in which the
Borrower and its Subsidiaries are engaged on the Closing Date and
such activities as may be incidental or related thereto.
SECTION 6.2.2. Indebtedness. The Borrower will not,
and will not permit any Subsidiary to, create, incur, assume or
suffer to exist or otherwise become or be liable in respect of
any Indebtedness other than:
(a) Indebtedness in respect of the Loans and other
Obligations;
(b) Indebtedness in respect of the Interest Rate
Contracts required pursuant to Section 6.1.13 to the extent such
do not constitute Obligations;
(c) obligations that constitute Indebtedness solely by
virtue of being secured by Liens permitted under Section 6.2.3;
(d) Indebtedness in respect of liabilities resulting
from (i) endorsements of negotiable instruments in the ordinary
course of business; and (ii) surety bonds and other bonds issued
for the Borrower's account in the ordinary course of business;
(e) Indebtedness of the Borrower and its Subsidiaries
existing on the Closing Date and set forth in Item 12 (Existing
Indebtedness) of the Disclosure Schedule.
(f) Indebtedness of any Subsidiary owing to the
Borrower, provided that such Indebtedness is evidenced by a
demand promissory note that is pledged to the Agent, for its
benefit and the benefit of the Lenders, as security for the
Obligations pursuant to the Pledge Agreement;
(g) Capitalized Lease Liabilities provided that (i)
the aggregate amount thereof which in accordance with GAAP is
attributable to principal, together with the aggregate
outstanding principal amount of all Purchase Money Indebtedness
of the Borrower and its Subsidiaries, does not exceed $500,000 at
any one time outstanding, (ii) payments under each capitalized
lease giving rise to such Capitalized Lease Liabilities shall be
made in equal periodic installments, (iii) the original term of
each capitalized lease giving rise to such Capitalized Lease
Liabilities shall not be less than the useful life of the item of
property for which such Capitalized Lease Liabilities are
incurred and (iv) the Consolidated Capital Expenditures financed
by such Capitalized Lease Liabilities are not prohibited under
Section 6.2.5;
(h) Purchase Money Indebtedness provided that (i) the
amount of such Indebtedness, together with the amount of any
outstanding Capitalized Lease Liabilities of the Borrower and its
Subsidiaries that in accordance with GAAP are attributable to
principal, does not exceed $500,000 at any one time outstanding,
(ii) such Indebtedness provides for the payment of principal in
equal periodic installments, (iii) each issue of such Purchase
Money Indebtedness shall have an original maturity date that is
not earlier than the useful life of the item of property for
which such Purchase Money Indebtedness is incurred, and (iv) the
Consolidated Capital Expenditures financed by such Purchase Money
Indebtedness are not prohibited under Section 6.2.5;
(i) extensions, refinancings, replacements and
renewals of any of the foregoing Indebtedness described in
clauses (e) and (h) of this Section 6.2.2, provided that the
principal amount thereof is not increased, such extension,
refinancing, replacement or renewal does not impose more
burdensome terms upon the Borrower or its Subsidiaries, as the
case may be, than the Indebtedness being extended, refinanced,
replaced or renewed.
SECTION 6.2.3. Liens. The Borrower will not, and will
not permit any Subsidiary to, create, incur, assume or suffer to
exist any Lien upon any of its property, revenues or assets,
whether now owned or hereafter acquired, except:
(a) Liens in favor of the Agent or the Lenders granted
pursuant to any Loan Document;
(b) Liens identified in Item 17 ("Permitted Liens") of
the Disclosure Schedule;
(c) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter
payable with penalty or being contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
(d) Liens of carriers, warehousemen, mechanics, and
materialmen incurred in the ordinary course of business for sums
not overdue or being contested in good faith by appropriate
proceedings (which proceedings have the effect of preventing the
forfeiture or sale of the asset subject to such Lien) and for
which adequate reserves shall have been set aside on its books;
(e) Liens (other than Liens arising under ERISA or
Section 412(n) of the Code) incurred in the ordinary course of
business in connection with workmen's compensation, unemployment
insurance or other forms of governmental insurance or benefits,
or to secure performance of tenders, statutory obligations,
leases and contracts (other than for borrowed money) entered into
in the ordinary course of business or to secure obligations on
surety or appeal bonds;
(f) judgment Liens with respect to judgments to the
extent such judgments do not constitute an Event of Default
described in Section 7.1.9;
(g) easements (including, without limitation,
reciprocal easement agreements and utility agreements), rights-of-
way, covenants, consents, reservations, encroachments, variations
and other restrictions, charges or encumbrances (whether or not
recorded) affecting the use of property, which do not materially
detract from the value of such property or impair the use
thereof;
(h) Liens upon any equipment acquired by the Borrower
or any of its Subsidiaries after the Closing Date to secure
Indebtedness permitted under clause (h) of Section 6.2.2 or
arising by virtue of a capital lease permitted under clause (g)
of Section 6.2.2;
(i) Leases and subleases granted to others in the
ordinary course of business not interfering in any material
respect with any business of the Borrower or any of its
Subsidiaries;
(j) Liens which constitute rights of set-off of a
customary nature or bankers' liens with respect to amounts on
deposit, whether arising by operation of law or by contract, in
connection with arrangements entered into with banks in the
ordinary course of business;
(k) Liens consisting of precautionary UCC-1 filings in
respect of operating leases to the extent permitted under Section
6.2.6; and
(l) extensions, renewals or replacements of any Lien
referred to in clause (b) of this Section 6.2.3, provided that
the principal amount of the obligation secured thereby is not
increased and that any such extension, renewal or replacement is
limited to the property originally encumbered thereby.
SECTION 6.2.4. Financial Condition. From and after the
Closing Date, the Borrower hereby covenants and agrees as set
forth below:
(a) Fixed Charge Coverage Ratio. The Borrower will
not permit its Fixed Charge Coverage Ratio with respect to the
twelve-month period ending on the last day of any Fiscal Quarter
to be less than the ratio set forth opposite such Fiscal Quarter
(for each Fiscal Quarter ending prior to June 30, 1997, such
ratio to be calculated as provided in clause (g) of this Section
6.2.4):
Fiscal Quarter Ending: Ratio
September, 1996 1.25:1.0
December, 1996 1.25:1.0
March, 1997 1.50:1.0
June, 1997 1.75:1.0
September, 1997 1.75:1.0
December, 1997 1.75:1.0
March, 1998 1.75:1.0
June, 1998 1.75:1.0
September, 1998 1.75:1.0
December, 1998 and for each
Fiscal Quarter thereafter 2.00:1.0
(b) Leverage Ratio. the Borrower will not permit its
Leverage Ratio with respect to the twelve-month period ending on
the last day of any Fiscal Quarter to be less than the ratio set
forth opposite such Fiscal Quarter (for each Fiscal Quarter
ending prior to June 30, 1997, to be calculated as provided in
clause (g) of this Section 6.2.4):
Fiscal Quarter Ending: Ratio
September, 1996 11.5:1.0
December, 1996 8.0:1.0
March, 1997
6.0:1.0
June, 1997
5.0:1.0
September, 1997
4.0:1.0
December, 1997 4.0:1.0
March, 1998
3.5:1.0
June, 1998
3.5:1.0
September, 1998
3.0:1.0
December, 1998 3.0:1.0
March, 1999 and for each
Fiscal Quarter thereafter 2.5:1.0
(c) Interest Coverage Ratio. the Borrower will not
permit its Interest Coverage Ratio with respect to the twelve-
month period ending on the last day of any Fiscal Quarter to be
less than the ratio set forth below opposite such Fiscal Quarter
(for each Fiscal Quarter ending prior to June 30, 1997, such
ratio to be calculated as provided in clause (g) of this Section
6.2.4):
Fiscal Quarter Ending: Ratio
June, 1996 2.40:1.0
September, 1996 2.40:1.0
December, 1996 2.40:1.0
March, 1997 2.75:1.0
June, 1997 3.00:1.0
September, 1997 3.00:1.0
December, 1997 3.25:1.0
March, 1998 3.25:1.0
June, 1998 and for each Fiscal Quarter thereafter 3.50:1.0
(d) Net Worth. The Borrower will not permit its net
worth determined in accordance with GAAP as of the last day of
any Fiscal Quarter to be less than the amount set forth opposite
such Fiscal Quarter:
Fiscal Quarter Ending: Amount
June, 1996 $10,5
00,000
September, 1996 10,750,000
December, 1996 11,000,000
March, 1997 11,250,000
June, 1997 11,500,000
September, 1997 11,750,000
December, 1997 12,000,000
March, 1998 12,500,000
June, 1998 13,000,000
September, 1998 13,500,000
December, 1998 14,000,000
March, 1999 14,500,000
June, 1999 and for each Fiscal Quarter thereafter 15,000,000
(e) EBITDA. The Borrower will not permit EBITDA for
the twelve-month period ending on the last day of any Fiscal
Quarter to be less than the amount set forth opposite such Fiscal
Quarter (for each Fiscal Quarter ending prior June 30, 1997, such
amount to be calculated as provided in clause (g) of this Section
6.2.4):
Fiscal Quarter Ending: Amount
June, 1996 $ 290,000
September, 1996 1,320,000
December, 1996 1,820,000
March, 1997 3,720,000
June, 1997 5,330,000
September, 1997 5,550,000
December, 1997 5,675,000
March, 1998 5,775,000
June, 1998 5,975,000
September, 1998 6,025,000
December, 1998 6,100,000
March, 1999 6,200,000
June, 1999 6,300,000
September, 1999 6,400,000
December, 1999 6,500,000
March, 2000 6,600,000
June, 2000 6,700,000
September, 2000 6,800,000
December, 2000 6,900,000
March, 2001 7,000,000
June, 2001 7,100,000
(f) Current Ratio. The Borrower will not permit the
Current Ratio of the Borrower and its Subsidiaries on the last
day of any Fiscal Quarter to be less than 1.5:1.0.
(g) Calculations for Stub Periods. Notwithstanding
anything contained herein to the contrary, for any period ending
prior to June 30, 1997, calculation of all items relating to
income or expense (including, without limitation, EBITDA,
Interest Expense, repayments of the Term Loan pursuant to clause
(c) of Section 3.3.l and increases or decreases in working
capital) shall be made for the period commencing on the Closing
Date and ending on the date of determination.
SECTION 6.2.5. Capital Expenditures. The Borrower will
not, and will not permit any Subsidiary to make or commit to make
Consolidated Capital Expenditures, except that, during any Fiscal
Year, the Borrower and its Subsidiaries may make Consolidated
Capital Expenditures (including the amount of Capitalized Lease
Liabilities incurred during such Fiscal Year that in accordance
with GAAP is attributable to principal) which in the aggregate do
not exceed the amount set forth below opposite such Fiscal Year
(in the case of the 1996 Fiscal Year, for the period commencing
on the Closing Date and ending on December 31, 1996):
Fiscal Year: Amount
1996 $ 75,000
1997 $225,000
1998 $225,000
1999 $225,000
2000 $225,000
2001 $225,000
provided further, however, that expenditures from insurance
proceeds received upon the occurrence of a Loss which are made to
replace or repair damaged or destroyed assets will not be
included in the foregoing calculation. Notwithstanding the
foregoing provisions of Section 6.2.5, the Borrower may make
Consolidated Capital Expenditures for the period between January
1, 1996 and December 31, 1996 in connection with the relocation
of the offices of Irene Cohen not exceeding $400,000.
SECTION 6.2.6. Lease Obligations. The Borrower will
not, and will not permit any Subsidiary to, create or suffer to
exist any obligation for the payment of rent for any property
under any operating lease or agreement to lease having a term of
one year or more, except for (a) leases in existence on the
Closing Date and described in Item 18 (Leases) of the Disclosure
Schedule, and (b) any lease of real property entered into by the
Borrower or any Subsidiary after the Closing Date in the ordinary
course of business; provided, however, that no such lease shall
subject the Borrower or any Subsidiary to Environmental
Liabilities and Costs and that the aggregate amount of payments
due from the Borrower and its Subsidiaries for all leases
referred to in this Section 6.2.6 less any amounts received by
the Borrower and its Subsidiaries in connection with any sublease
of the property subject to any lease referred to in this Section
6.2.6 during any Fiscal Year set forth below is less than the
amount set forth below opposite such Fiscal Year (in the case of
the 1996 Fiscal Year, for the period commencing on the Closing
Date and ending on December 31, 1996):
Fiscal Year: Amount
1996 $1,100,000
1997 2,100,000
1998 2,100,000
1999 2,300,000
2000 2,400,000
2001 2,500,000
SECTION 6.2.7. Investments. The Borrower will not, and
will not permit any Subsidiary to, make, incur, assume or suffer
to exist any Investment in any other Person except:
(a) Cash Equivalent Investments;
(b) deposits for utilities, security deposits under
leases and similar prepaid expenses;
(c) accounts receivable arising in the ordinary course
of business;
(d) Investments existing on the Closing Date and
disclosed in Item 19 ("Existing Investments") of the Disclosure
Schedule.
(e) Investments made by the Borrower in its
Subsidiaries after the Closing Date to the extent such
Investments are evidenced by demand promissory notes in principal
amounts equal to the amount of such Investments, payable to the
Borrower and pledged by the Borrower in favor of the Agent
pursuant to the Borrower Pledge Agreement;
(f) Investments made by the Borrower in its
Subsidiaries after the Closing Date to the extent permitted under
subsection (b) of Section 6.2.10;
(g) Investments (including debt obligations) received
in connection with a bankruptcy or Plan Reorganization of
customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business, provided that if such
Investments are evidenced by promissory notes or other
instruments, and such instruments are pledged to the Agent, for
its benefit and the benefit of the Lenders;
(h) Investments arising under Interest Rate Contracts;
and
(i) Investments consisting of deposit accounts of the
Borrower and its Subsidiaries maintained in the ordinary course
of business.
SECTION 6.2.8. Restricted Payments, etc. The Borrower
will not declare, pay or make any dividend or distribution (in
cash, property or obligations) on any shares of any class of
Stock (now or hereafter outstanding) of the Borrower or on any
warrants, options or other rights in respect of any class of
Stock (now or hereafter outstanding) of the Borrower or apply, or
permit any Subsidiary to apply, any of its funds, property or
assets to the purchase, redemption, sinking fund or other
retirement of any shares of any class of Stock (now or hereafter
outstanding), of the Borrower or any Subsidiary, or make any
deposit for any of the foregoing; provided, however, that the
Borrower shall be permitted to declare and pay the following
dividends: (a) ordinary dividends on the Borrower's Series A
Preferred Stock in an amount not to exceed $56,000 in any single
Fiscal Year or during any consecutive 12 month period and (b)
stock dividends on the Borrower's Series C and Series D Preferred
Stock; provided, however, that the Borrower shall be permitted to
use the Net Securities Proceeds in excess of $3,000,000 received
by the Borrower from the issuance of its Series D Preferred
Stock, up to a maximum amount of $1,000,000, to repurchase
outstanding common stock of the Borrower.
SECTION 6.2.9. Take or Pay Contracts; Sale/Leasebacks.
(a) The Borrower will not, and will not permit
any Subsidiary to, enter into or be a party to any arrangement
for the purchase of materials, supplies, other property or
services if such arrangement by its express terms requires that
payment be made by the Borrower or such Subsidiary regardless of
whether or not such materials, supplies, other properties or
services are delivered or furnished to it.
(b) The Borrower will not enter into, or permit any
Subsidiary to enter into, any arrangement with any Person
providing for the leasing by the Borrower or one or more
Subsidiaries of any property or assets, which property or assets
has been or is to be sold or transferred by the Borrower or such
Subsidiary to such Person except as permitted by Section
6.2.2(g).
SECTION 6.2.10. Consolidation, Merger,
Subsidiaries, etc.
(a) The Borrower will not, and will not permit any
Subsidiary to, liquidate or dissolve, consolidate with, or merge
into or with, any Person, or purchase or otherwise acquire all or
substantially all of the assets or stock of any Person (or of
any operating division or unit thereof), except that any such
Subsidiary may liquidate or dissolve voluntarily into, and may
merge with and into, the Borrower or any other wholly-owned
Subsidiary (so long as the Borrower or such wholly-owned
Subsidiary is the surviving corporation).
(b) The Borrower will not, and will not permit any
Subsidiary to, create any Subsidiary or transfer any assets to
any Subsidiary.
SECTION 6.2.11. Asset Dispositions, etc. The
Borrower will not, and will not permit any Subsidiary to, sell,
transfer, lease or otherwise dispose of, or grant options,
warrants or other rights with respect to, any of its assets
(including accounts receivable and capital stock of Subsidiaries)
to any Person in excess of $20,000 in the aggregate during any
Fiscal Year, unless (a) such disposition is made in the ordinary
course of business and consists of inventories; or (b) such
disposition constitutes a disposition of obsolete or retired
assets no longer used in the business of the Borrower and its
Subsidiaries.
SECTION 6.2.12. Modification of Organic Documents,
etc. The Borrower will not consent to any amendment, supplement
or other modification of any of the terms or provisions contained
in, or applicable to, the charter or the by-laws of the Borrower.
SECTION 6.2.13. Transactions with Affiliates. The
Borrower will not, and will not permit any Subsidiary to, enter
into, or cause, suffer or permit to exist:
(a) any arrangement or contract with any of its
Affiliates (other than its Subsidiaries) of a nature customarily
entered into by Persons which are Affiliates of each other
(including management or similar contracts or arrangements
relating to the allocation of revenues, expenses or otherwise)
requiring any payments to be made by the Borrower or any
Subsidiaries to any such Affiliate, other than the transactions
provided for in the Loan Documents; and
(b) any other transaction, arrangement or contract
with any of its Affiliates which is on terms which are less
favorable than are obtainable from any Person which is not one of
its Affiliates.
SECTION 6.2.14. Inconsistent Agreements . The
Borrower will not, and will not permit any Subsidiary to, enter
into any material agreement containing any provision which would
be violated or breached in any material respect by any Loan or by
the performance by the Borrower or any Subsidiary of its
obligations hereunder or under any Loan Document.
SECTION 6.2.15. Change in Accounting Method. The
Borrower will not, and will not permit any Subsidiary to, make
any change in accounting treatment and reporting practices except
as required by GAAP.
SECTION 6.2.16. Change in Fiscal Year End. The
Borrower will not change its Fiscal Year end without the Required
Lenders' prior written consent, which consent will not be
unreasonably withheld but will not be given with respect to more
than one such change during the term of this Agreement.
SECTION 6.2.17. Compliance with ERISA. The
Borrower will not, and will not permit any Subsidiary to take, or
fail to take, any action with respect to a Plan, including
establishing, amending, or terminating or withdrawing from any
Plan, without first obtaining the Agent's written Approval, where
such action or failure to act could result in any liabilities
under the IRC, ERISA, or any other applicable law which
individually or in the aggregate could result in a Material
Adverse Change.
SECTION 6.2.18. Limitation on Restrictions on
Subsidiary Dividends. The Borrower will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary
to (a) pay dividends or make other distributions on its Stock or
other interests or participations in profits owned by the
Borrower or any Subsidiary of the Borrower or pay any
Indebtedness owed to the Borrower or any Subsidiary of the
Borrower, (b) make loans or advances to the Borrower or any
Subsidiary of the Borrower or (c) transfer any of its property or
assets to the Borrower or any Subsidiary of the Borrower, except
for such encumbrances and restrictions existing under or by
reason of this Agreement and the other Loan Documents.
SECTION 6.2.19. Whitney Group. The Borrower will
not, and will not permit any of its Subsidiaries to, make any
Investment in the Whitney Group, except for the acquisition of
the remaining Stock of the Whitney Group pursuant to Section
6.1.16 hereof.
ARTICLE 7.
EVENTS OF DEFAULT
SECTION 7.1. Events of Default. The term "Event of
Default" shall mean any of the events set forth in this Section
7.1.
SECTION 7.1.1. Non-Payment of Obligations. The
Borrower shall default:
(a) in the payment or prepayment when due of any
principal of any Loan;
(b) in the payment when due of the interest payable in
respect of any Loan, the commitment fee provided for in Section
2.4 hereof or any other Obligations and such default shall
continue unremedied for a period of five (5) days.
SECTION 7.1.2. Non-Performance of Certain Covenants.
The Borrower shall default in the due performance and observance
of any of its obligations under Section 6.1 and such default
shall continue unremedied for a period of ten (10) days after
notice thereof shall have been given to the Borrower by the Agent
(or if such default is not reasonably susceptible to cure within
10 days and so long as the Borrower promptly commences and
diligently pursues such cure, such longer period as is reasonably
needed to effect such cure, but in no event longer than 30 days
from the date notice is given), or shall default in the due
performance or observation of any of its obligations under
Section 6.2.
SECTION 7.1.3. Defaults Under Other Loan Documents; Non-
Performance of Other Obligations. Any "Event of Default" shall
occur under the other Loan Documents; or the Borrower or any
Subsidiary shall default in the due performance and observance of
any other obligation, covenant or agreement contained herein or
in any other Loan Document and such default shall continue
unremedied for a period of ten (10) days after notice thereof
shall have been given to the Borrower by the Agent (or if such
default is not reasonably susceptible to cure within 10 days and
so long as the Borrower promptly commences and diligently pursues
such cure, such longer period as is reasonably needed to effect
such cure, but in no event longer than 30 days from the date
notice is given).
SECTION 7.1.4. Bankruptcy, Insolvency, etc. The
Borrower or any Subsidiary shall:
(a) become insolvent or generally fail to pay, or
admit in writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other
custodian for the Borrower or any Subsidiary or any property of
any thereof, or make a general assignment for the benefit of
creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for the
Borrower or any Subsidiary or for a substantial part of the
property of any thereof, and such trustee, receiver, sequestrator
or other custodian shall not be discharged within sixty (60)
days;
(d) permit or suffer to exist the commencement of any
bankruptcy, Plan Reorganization, debt arrangement or other case
or proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of
the Borrower or any Subsidiary, and, if such case or proceeding
is not commenced by the Borrower or such Subsidiary, such case or
proceeding shall be consented to or acquiesced in by Borrower or
such Subsidiary or shall result in the entry of an order for
relief or shall remain for sixty (60) days undismissed; or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 7.1.5. Breach of Warranty. Any representation
or warranty of the Borrower or any Loan Party hereunder or in any
other Loan Document or in any other writing furnished by or on
behalf of the Borrower to the Agent or any Lender for the
purposes of or in connection with this Agreement or any such Loan
Document is or shall be incorrect when made in any material
respect.
SECTION 7.1.6. Default on Other Indebtedness, etc. (a)
Any Indebtedness of the Borrower or any Subsidiary in an
aggregate principal amount exceeding $100,000 (i) shall be duly
declared to be or shall become due and payable prior to the
stated maturity thereof, or (ii) shall not be paid as and when
the same becomes due and payable including any applicable grace
period; or (b) there shall occur and be continuing any event
under any Instrument relating to any Indebtedness of the Borrower
or any Subsidiary in an aggregate principal amount exceeding
$100,000, the effect of which is to cause such Indebtedness to
become due prior to its stated maturity or to permit the holder
or holders of such Indebtedness, or a trustee, agent or other
representative on behalf of such holder or holders, to cause such
Indebtedness to become due prior to its stated maturity or to
require (or permit the holder or holders to require) the Borrower
or any Subsidiary to redeem, repurchase or otherwise acquire or
retire such Indebtedness for value.
SECTION 7.1.7. Failure of Valid, Perfected Security
Interest. The security interest or Lien in the Collateral and
all proceeds thereof, securing the Obligations shall cease to be
valid or perfected at any time after the Closing Date (other than
as a result of (i) the Agent's failure to make any required
filing to the extent the necessity of such filing was disclosed
to the Agent in an opinion of counsel to the Borrower or in the
Perfection Certificate delivered by the Loan Parties or (ii) the
release of possession of any Instrument delivered to the Agent or
its agent or representative pursuant to any of the Security
Documents).
SECTION 7.1.8. Employee Plans. Any of the following
events shall occur with respect to any Plan: (i) any Person shall
engage in any "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the Code) involving any Plan, (ii)
any "accumulated funding deficiency" (as defined in Section 412
of the Code or Section 302 of ERISA) not disclosed in Item 8
("Benefit Plans") of the Disclosure Schedule, whether or not
waived, shall exist with respect to any Single Employer Plan,
(iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable
opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv)
a notice of intent to terminate any Single Employer Plan for
purposes of Title IV of ERISA is issued by the plan administrator
thereof without the prior written consent of the Required
Lenders, or the PBGC shall commence proceedings to terminate any
Single Employer Plan, (v) the Borrower or any Commonly Controlled
Entity or Subsidiary shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection
with a withdrawal from, or the ERISA Insolvency, Plan
Reorganization or termination of, a Multiemployer Plan, (vi) the
Borrower or any Commonly Controlled Entity or Subsidiary shall
fail to make any quarterly installment payment to a Pension Plan
required under Section 302(e) of ERISA or Section 412(m) of the
Code, (vii) the Borrower or any Commonly Controlled Entity or
Subsidiary shall fail to make any contribution to a Multiemployer
Plan which is required under ERISA, the Code or applicable
collective bargaining agreements, or (viii) any other event or
condition shall occur or exist with respect to a Plan; and in
each case in clauses (i) through (viii) above, such event or
condition, together with all other such events or conditions, if
any, could subject the Borrower or any Subsidiary (directly or
indirectly) to any tax, penalty or other liabilities under Title
I or Title IV of ERISA, Section 404 or 419 and Chapter 43 of the
IRC or any other applicable law which in the aggregate could
result in a Material Adverse Change.
SECTION 7.1.9. Judgments. A final judgment which, with
other such outstanding final judgments against the Borrower or
any of its Subsidiaries (in each case to the extent not covered
by insurance), exceeds an aggregate of $250,000, shall be entered
against the Borrower or any of its Subsidiaries and, within 30
days after entry thereof, such judgment shall not have been
discharged or execution thereof stayed pending appeal, or, within
30 days after the expiration of any such stay, such judgment
shall not have been discharged or stayed.
SECTION 7.1.10. Cessation of Business; Dissolution.
The entry of any order of a court enjoining, restraining or
otherwise preventing the Borrower or any Subsidiary from
conducting all or any material part of its business affairs; or
the cessation of business or dissolution of the Borrower.
SECTION 7.2. Action if Bankruptcy. If any Event of
Default described in subsection (d) of Section 7.1.4 shall
occur, the outstanding principal amount of all outstanding Loans
and all other Obligations shall automatically be and become
immediately due and payable and all Commitments shall
automatically be terminated, in either case without notice,
demand or presentment.
SECTION 7.3. Action if Other Event of Default. If
any Event of Default (other than any Event of Default described
in Section 7.1.4) shall occur for any reason, whether voluntary
or involuntary, and be continuing, the Agent may, and upon the
direction of the Required Lenders, shall upon notice or demand,
declare all or any portion of the outstanding principal amount of
the Loans to be due and payable and any or all other Obligations
to be due and payable and all Commitments to be terminated,
whereupon the full unpaid amount of such Loans and any and all
other Obligations which shall be so declared due and payable
shall be and become immediately due and payable and any and all
Commitments which shall be so declared terminated shall be and
become immediately terminated, in each case without further
notice, demand, or presentment, and to the extent any obligations
are paid by the Borrower, they shall constitute a prepayment
under this Agreement.
ARTICLE 8.
THE AGENT
SECTION 8.1. Actions. Each Lender and the holder of
each Note authorize the Agent to act on behalf of such Lender or
holder under this Agreement and any other Loan Document and, in
the absence of other written instructions from the Required
Lenders received from time to time by the Agent (with respect to
which the Agent agrees that it will, subject to the last two
sentences of this Section 8.1, comply, except as otherwise
advised by counsel), to exercise such powers hereunder and
thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof, together with such powers
as may be reasonably incidental thereto. Each Lender agrees
(which agreement shall survive any termination of this
Agreement) to indemnify the Agent, pro rata according to such
Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever which may at any time be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising out
of this Agreement, the Notes, or any other Loan Document,
including the reimbursement of the Agent for all out-of-pocket
expenses (including attorneys' fees) incurred by the Agent
hereunder or in connection herewith or in enforcing the
Obligations of the Borrower under this Agreement or any other
Loan Document, in all cases as to which the Agent is not
reimbursed by the Borrower; provided that no Lender shall be
liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements determined by a court of
competent jurisdiction in a final proceeding to have resulted
solely from the Agent's gross negligence or wilful misconduct.
The Agent shall not be required to take any action hereunder or
under any other Loan Document, or to prosecute or defend any suit
in respect of this Agreement or any other Loan Document, unless
it is indemnified to its satisfaction by the Lenders against
loss, costs, liability and expense. If any indemnity in favor of
the Agent shall become impaired, it may call for additional
indemnity and cease to do the acts indemnified against until such
additional indemnity is given.
SECTION 8.2. Funding Reliance, etc. Unless the Agent
shall have been notified by telephone, confirmed in writing, by
any Lender by 5:00 p.m., New York City time, on the day prior to
a Borrowing that such Lender will not make available the amount
which would constitute its Percentage of such Borrowing on the
date specified therefor, the Agent may assume that such Lender
has made such amount available to the Agent and, in reliance upon
such assumption, make available to the Borrower a corresponding
amount; provided, however, that the Agent shall have no
obligation to do so. If such amount is made available by such
Lender to the Agent on a date after the date of such Borrowing,
such Lender shall pay to the Agent on demand interest on such
amount at the Federal Funds Rate for the number of days from and
including the date of such Borrowing to the date on which such
amount becomes immediately available to the Agent, together with
such other compensatory amounts as may be required to be paid by
such Lender to the Agent pursuant to the Rules for Interbank
Compensation of the Council on International Banking or the
Clearinghouse Compensation Committee, as the case may be, as in
effect from time to time. A statement of the Agent submitted to
any Lender with respect to any amounts owing under this Section
8.2 shall be conclusive, in the absence of manifest error. If
such amount is not in fact made available to the Agent by such
Lender within three Business Days after the date of such
Borrowing, the Agent shall be entitled to recover such amount,
with interest thereon at the rate per annum then applicable to
the Loans comprising such Borrowing, within five Business Days
after demand, from the Borrower. Nothing herein shall be
construed to release any Lender from its obligation to make Loans
subject to the terms and conditions set forth in this Agreement.
SECTION 8.3. Exculpation. Neither the Agent nor any
of its directors, officers, employees or agents shall be liable
to any Lender for any action taken or omitted to be taken by it
under this Agreement, the Notes, or any Loan Document, or in
connection herewith or therewith, except for its own wilful
misconduct or gross negligence. The Agent shall not be
responsible to any Lender for any recitals, statements,
representations or warranties herein or in any certificate or
other document delivered in connection herewith or for the
authorization, execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, or sufficiency of any
of the Loan Documents, the financial condition of the Borrower or
any Subsidiary or the condition or value of any of the
Collateral, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or
conditions of any of the Loan Documents, the financial condition
of the Borrower or any Subsidiary or the existence or possible
existence of any Default. The Agent shall be entitled to rely
upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement or writing which it
believes to be genuine and to have been presented by a proper
Person.
SECTION 8.4. Successor. The Agent may resign as such
at any time upon at least thirty (30) days' prior notice to the
Borrower and all Lenders, such resignation not to be effective
until a successor Agent is in place. If the Agent at any time
shall resign, the Required Lenders may appoint another Lender as
a successor Agent which shall thereupon become the Agent
hereunder. If no successor Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving notice of
resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be one of the
Lenders or another financial institution which shall (i) be
reasonably acceptable to the Borrower, (ii) be organized under
the laws of the United States and (iii) have a combined capital
and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such
successor Agent shall be entitled to receive from the retiring
Agent such documents of transfer and assignment as such successor
Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under this Agreement and the
other Loan Documents.
SECTION 8.5. Loans by the Agent. The Agent shall
have the same rights and powers with respect to (a) the Loans
made by it or any of its Affiliates and (b) the Notes held by it
or any of its Affiliates, as any Lender and may exercise the same
as if it were not the Agent.
SECTION 8.6. Credit Decisions. Each Lender
acknowledges that it has, independently of the Agent and each
other Lender, and based on such financial information and such
other documents, information and investigations as it has deemed
appropriate, made its own credit decision to extend its
Commitments, to make the Loans. Each Lender also acknowledges
that it will, independently of the Agent and each other Lender,
and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time
to time any rights and privileges available to it under this
Agreement or any other Loan Document.
SECTION 8.7. Copies, etc. The Agent shall give
prompt notice to each Lender of each notice or request required
or permitted to be given to the Agent by the Borrower pursuant to
the terms of this Agreement. The Agent will distribute to each
Lender each Instrument received for its account and copies of all
other communications received by the Agent from the Borrower for
distribution to the Lenders by the Agent in accordance with the
terms of this Agreement. Notwithstanding anything herein
contained to the contrary, all notices to and communications with
the Borrower under this Agreement and the other Loan Documents
shall be effected by the Lenders through the Agent.
ARTICLE 9.
MISCELLANEOUS
SECTION 9.1. Waivers, Amendments, etc. (a) The
provisions of this Agreement and of each Loan Document may from
time to time be amended, modified or waived, if such amendment,
modification or waiver is in writing and, (x) in the case of an
amendment or modification, is consented to by the Borrower and
the Required Lenders and (y) in the case of a waiver of any
obligation of the Borrower or compliance with any prohibition
contained in this Agreement or any other Loan Document, is
consented to by the Required Lenders; provided, however, that no
such amendment, modification or waiver:
(i) which would modify any requirement hereunder that
any particular action be taken by all the Lenders or by the
Required Lenders shall be effective unless consented to by
each Lender;
(ii) which would modify this Section 9.1, change the
definition of "Required Lenders," increase the Revolving
Loan Commitment Amount or change any Percentage for any
Lender, reduce any fees payable to the Lenders described in
Article 2 and Article 3, extend the Revolving Loan
Commitment Termination Date or subject any Lender to any
additional obligations shall be made without the consent of
each Lender;
(iii) which would extend the due date for, or
reduce the amount of, any payment or prepayment of principal
of or interest on any Loan (or reduce the principal amount
of or rate of interest on any Loan) shall be made without
the consent of the holder of the Note evidencing such Loan;
or
(iv) which would affect adversely the interests,
rights, compensation or obligations of the Agent qua the
Agent shall be made without consent of the Agent.
(b) No failure or delay on the part of the Agent, any
Lender or the holder of any Note in exercising any power or right
under this Agreement or any other Loan Document shall operate as
a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice
to or demand on the Borrower in any case shall entitle it to any
notice or demand in similar or other circumstances. No waiver or
approval by the Agent, any Lender, or the holder of any Note
under this Agreement or any other Loan Document shall, except as
may be otherwise stated in such waiver or approval, be applicable
to subsequent transactions. No waiver or approval hereunder
shall require any similar or dissimilar waiver or Regulatory
Approval thereafter to be granted hereunder.
(c) Neither any Lender nor the Agent shall be under
any obligation to marshal any assets in favor of the Borrower or
any other party or against or in payment of any or all of the
Obligations. Recourse for security shall not be required at any
time. To the extent that the Borrower makes a payment or
payments to the Agent or the Lenders, or the Agent or the Lenders
enforce their security interests or exercise their rights of
setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently for
any reason invalidated, set aside or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and
remedies therefor, shall be revived and continued in full force
and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
SECTION 9.2. Notices. All notices hereunder shall be
in writing or by telecopy and shall be sufficiently given to the
Agent, the Lenders or the Borrower if addressed or delivered to
them at the following addresses:
If to the Agent: ING Capital
135 East 57th Street
New York, New York 10022
Attention: Chief Credit Officer
Telecopier No.: (212) 750-8935
with copies to: ING Capital
Atlanta Office
200 Galleria Parkway, N.W.
Suite 950
Atlanta, Georgia 30339
Attention: John N. Lanier
Telecopier No.: (770) 951-1005
and a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Walter W. Driver, Jr., Esq.
Telecopier No.: (404) 572-5100
If to any other Lender: At its address set forth beneath its
name on the signature pages hereof
If to the Borrower AFGL International, Inc.
850 Third Avenue
New York, New York 10022
Attention: Mr. Barry S. Roseman
Telecopier No.: (212) 508-3540
with a copy to: Christy & Viener
620 Fifth Avenue
New York, New York 10020
Attention: Richard B. Salomon, Esq.
Telecopier No.: (212) 632-5555
or at such other address as any party may designate to any other
party by written notice. All such notices and communications
shall be deemed to have been duly given: at the time delivered
by hand, if personally delivered; when received, if deposited in
the mail, postage prepaid; when transmission is verified, if
telecopied; and on the next Business Day, if timely delivered to
an air courier guaranteeing overnight delivery.
SECTION 9.3. Costs and Expenses. The Borrower agrees
to pay all reasonable out-of-pocket expenses of the Agent
(including reasonable fees and expenses of counsel to the Agent,
or of any consultants or other experts retained by the Agent) in
connection with (i) the negotiation, preparation, execution, and
delivery of this Agreement and each other Loan Document,
including schedules and exhibits, and any amendments, waivers,
consents, supplements, terminations, releases or other
modifications to this Agreement or any other Loan Document as may
from time to time hereafter be required whether or not the
transactions contemplated hereby are consummated, and (ii) the
consideration of legal questions relevant to this Agreement of
any other Loan Document. The Borrower also agrees to pay and
hold the Agent and the Lenders harmless from any stamp,
documentary, intangibles, transfer or similar taxes or charges,
and all recording or filing fees with respect to the Loan
Documents or any payments to be made thereunder and all title
insurance premiums, surveyors costs and valuation fees, and to
reimburse the Agent and each Lender upon demand for all
reasonable out-of-pocket expenses (including reasonable
attorneys' fees and expenses) incurred by the Agent or such
Lender in enforcing the Obligations of the Borrower or any
Subsidiary under this Agreement or any other Loan Document or
related Document or in connection with any restructuring or "work-
out" of any Obligations.
SECTION 9.4. Indemnification. In consideration of
the execution and delivery of this Agreement by the Agent and
each Lender, the making of the Term Loan and the extension of the
Revolving Loan Commitment, the Borrower hereby indemnifies,
exonerates and holds the Agent and each Lender, each of their
respective successors and assigns, each of the respective
officers, directors, employees, attorneys and agents of the Agent
and each Lender and each of their respective successors and
assigns (collectively, the "Lender Parties") free and harmless
from and against any and all actions, causes of action, suits,
losses, costs, liabilities (including, but not limited to,
Environmental Liabilities and Costs), damages and expenses
(irrespective of whether such Lender Party is a party to the
action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Lender Parties or any of them or
asserted or awarded against the Lender Parties or any of them as
a result of, or arising out of, or relating to:
(a) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of
any Loan, including, without limitation, the Acquisition;
(b) the use of any of the proceeds of the Loans by the
Borrower for any other purpose;
(c) the making of any claim by any investment banking
firm, broker or third party that it is entitled to compensation
from the Agent or any Lender in connection with this Agreement
(other than investment banking firms and brokers retained by the
Agent or any Lender);
(d) the entering into and performance of this
Agreement and any other Loan Document by any of the Lender
Parties (other than the breach by such Lender Party of this
Agreement or the failure to comply with any applicable law);
(e) any of the Loan Documents or any proposed
acquisition by the Borrower of all or any portion of the stock or
assets of any Person, whether or not the Agent or such Lender is
party thereto;
(f) the existence of any contaminant, in, under, on or
otherwise affecting any property owned, used, operated, or leased
by Borrower or any Subsidiary in the past, present, or future or
any surrounding areas affected by such property, regardless of
whether the existence of the contaminant is related to the past,
present, or future operations of the Borrower and its
Subsidiaries, or their predecessors in interest or any other
Person; any Environmental Liabilities and Costs related to any
property owned, used, operated, or leased by Borrower or any
Subsidiary in the past, present, or future; any Environmental
Liabilities and Costs related to the past, present, or future
operations of the Borrower or any Subsidiaries; any alleged
violations of any Environmental Law related to any property
owned, used, operated, or leased by Borrower or any Subsidiary in
the past, present, or future; any alleged violations of any
Environmental Law related to the past, present, or future
operations of the Borrower or any Subsidiaries; the performance
of any remedial action that is related to any property owned,
used, operated, or leased by Borrower or any Subsidiaries in the
past, present, or future; the performance of any remedial action
that is related to the past, present, or future operations of the
Borrower or any Subsidiaries; and the imposition of any Lien on
any property affected by this Agreement or any of the other Loan
Documents arising from any Environmental Liabilities or Costs;
(g) the breach in any material respect by Borrower of
any representation or warranty set forth in this Agreement or any
Loan Document;
(h) the failure of Borrower to comply in any material
respect with any term, condition, or covenant set forth in this
Agreement or any Loan Document; or
(i) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not the Agent or any
Lender (or any of their respective officers, directors, employees
or agents) is a party thereto;
except for any such Indemnified Liabilities arising for the
account of a particular Lender Party by reason of the relevant
Lender Party's material breach of any of its obligations under
this Agreement or any other Loan Document or by reason of the
relevant Loans Party's bad faith, gross negligence or wilful
misconduct, in each such case as determined by a final and
nonappealable decision of a court of competent jurisdiction. If
and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make
the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under
applicable law. The foregoing indemnity shall become effective
immediately upon the execution and delivery hereof and shall
remain operative and in full force and effect notwithstanding the
consummation of the transactions contemplated hereunder, the
repayment of any of the Loans made hereunder, the invalidity or
unenforceability of any term or provision of this Agreement or
any other Loan Document, or any investigation made by or on
behalf of any Lender or the Agent.
SECTION 9.5. Survival. The obligations of the
Borrower under Sections 2.4, 3.5, 9.3 and 9.4, and the
obligations of the Lenders under Section 8.1, shall in each case
survive any termination of this Agreement. The representations
and warranties made by the Borrower in this Agreement, the Notes
and in each other Loan Document shall survive the execution and
delivery of this Agreement, the Notes and each such other Loan
Document.
SECTION 9.6. Severability. Any provision of this
Agreement, the Notes or any other Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of
this Agreement, the Notes or such other Loan Document or
affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 9.7. Headings. The various headings of this
Agreement, the Notes and of each other Loan Document are inserted
for convenience only and shall not affect the meaning or
interpretation of this Agreement, the Notes or such other Loan
Document or any provisions hereof or thereof.
SECTION 9.8. Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and
all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when
counterparts hereof executed on behalf of the Borrower and each
Lender (or notice thereof satisfactory to the Agent) shall have
been received by the Agent and notice thereof shall have been
given by the Agent to the Borrower and each Lender.
SECTION 9.9. Governing Law; Entire Agreement. (a)
THIS AGREEMENT AND THE NOTES SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK. This Agreement, the Notes and the other Loan
Documents constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and supersede
any prior agreements, written or oral, with respect thereto
including the Commitment Letter.
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL
COURT SITTING IN NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
RELATED DOCUMENT, AND EACH HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE BORROWER
AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE WITH RESPECT TO
ANY SUCH ACTION OR PROCEEDING BROUGHT BY IT AGAINST THE AGENT OR
ANY LENDER. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING.
(c) The Borrower hereby irrevocably designates,
appoints and empowers CT Corporation System, whose present
address is 1633 Broadway, New York, New York 10019, as its
authorized agent to receive, for and on its behalf and its
property, service of process in the State of New York when and as
such legal actions or proceedings may be brought in the courts of
the State of New York or of the United States of America sitting
in New York, and such service of process shall be deemed complete
upon the date of delivery thereof to such agent whether or not
such agent gives notice thereof to the Borrower, or upon the
earliest of any other date permitted by applicable law. The
Borrower shall furnish the consent of CT Corporation System so to
act to the Agent on or prior to the Closing Date. It is
understood that a copy of said process served on such agent will
as soon as practicable be forwarded to the Borrower, at its
address set forth below, but its failure to receive such copy
shall not affect in any way the service of said process on said
agent as the agent of the Borrower. The Borrower irrevocably
consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the
mailing of the copies thereof by certified mail, return receipt
requested, postage prepaid, to it at its address set forth
herein, such service to become effective upon the earlier of (i)
the date 10 calendar days after such mailing or (ii) any earlier
date permitted by applicable law. The Borrower agrees that it
will at all times continuously maintain an agent to receive
service of process in the State of New York on behalf of itself
and its properties and in the event that, for any reason, the
agent named above or its successor shall no longer serve as its
agent to receive service of process in the State of New York on
its behalf, it shall promptly appoint a successor so to serve and
shall advise the Agent and the Lenders thereof (and shall furnish
to the Agent the consent of any successor agent so to act).
Nothing in this Section 9.9 shall affect the right of the Agent
or any Lender to bring proceedings against the Borrower in the
courts of any other jurisdiction or to serve process in any other
manner permitted by applicable law.
SECTION 9.10. Successors and Assigns. This Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns;
provided, however, that the Borrower may not assign or transfer
its rights or obligations hereunder without the prior written
consent of all Lenders; and the rights of sale, assignment and
transfer of the Lenders are subject to Section 9.11.
SECTION 9.11. Sale and Transfers, Participations, etc.
(a) Any Lender may at any time sell to one or more
Participants participating interests in any Loan owing to such
Lender, any Note held by such Lender, the Term Loan Commitment or
the Revolving Loan Commitment of such Lender, or any other
interest of such Lender under this Agreement. In the event of
any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under this Agreement shall
remain unchanged and such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder
of any such Note for all purposes under this Agreement and the
other Loan Documents, and the Borrower and the Agent shall
continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. The Borrower agrees that
if amounts outstanding under this Agreement and the Notes are due
or unpaid, or shall have been declared or shall have become due
and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this
Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Lender
under this Agreement or any Note, provided that such right of
setoff shall be subject to the approval of the Required Lenders
and to the obligations of such Participant to share with the
Lenders, and the Lenders agree to share with such Participant, as
provided in Section 3.8 as if the Participant were a Lender
hereunder and the Borrower shall have been notified of the name,
address and amount of such Participant's participating interest
in the Loans and the Commitments. The Borrower also agrees that
each Participant shall be entitled to the benefits of (i) Section
9.4 and (ii) Sections 2.4 and 3.7, with respect to its
participation in the Commitments and the Loans outstanding from
time to time; provided, that no Participant shall be entitled to
receive any greater amount pursuant to the Sections referred to
in clauses (i) and (ii) than the transferor Lender would have
been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such
Participant had no such transfer occurred.
(b) With the consent of the Agent and the consent of
the Borrower (which consent shall not be unreasonably withheld or
delayed), any Lender may at any time sell to any Purchasing
Lender all or any part in a minimum amount of $2,500,000, of its
rights and obligations under this Agreement and the Notes
pursuant to a Transfer Supplement, executed by such Purchasing
Lender, such transferor Lender, the Agent and the Borrower. Upon
(i) such execution of such Transfer Supplement, and (ii) delivery
of a fully executed copy thereof to the Borrower, such Purchasing
Lender shall for all purpose be a Lender party to this Agreement
and shall have all the rights and obligations of a Lender under
this Agreement, to the same extent as if it were an original
party hereto, with a Percentage of the Revolving Loan Commitment
Amount and the Term Loan set forth in such Transfer Supplement,
and no further consent or action by the Borrower, the Lenders or
the Agent shall be required. Such Transfer Supplement shall be
deemed to amend this Agreement to the extent, and only to the
extent, necessary to reflect the addition of such Purchasing
Lender and the resulting adjustment of Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this
Agreement and the Notes. Upon the consummation of any transfer
to a Purchasing Lender pursuant to this paragraph (b), the
transferor Lender, the Agent and the Borrower shall make
appropriate arrangements so that, if required, replacement Notes
are issued to such transferor Lender and new Notes to the
Purchasing Lender in the amount equal to their respective
Commitments and outstanding Loans, as appropriately adjusted
pursuant to such Transfer Supplement.
(c) The Agent shall maintain at its address referred
to herein a copy of each Transfer Supplement delivered to it and
the Register for the recordation of the names and addresses of
the Lenders and the Commitments of, and principal amount of the
Loans owing to, each Lender from time to time. The entries in
the Register shall be conclusive, in the absence of manifest
error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as the owner of the
Loans recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of a Transfer Supplement executed
by a transferor Lender, the Agent and a Purchasing Lender
together with payment by such Purchasing Lender to the Agent, for
the account of the Agent and not for the account of the Lenders,
of a registration and processing fee of $2,500, and the Notes
subject to such Transfer Supplement, the Agent shall (i) accept
such Transfer Supplement, (ii) record the information therein in
the Register and (iii) give prompt notice of such acceptance and
recordation to the Lenders and the Borrower.
(e) If, pursuant to this Section 9.11, any interest in
this Agreement or any Note is transferred to any Participant or
Purchasing Lender which is organized under the laws of any
jurisdiction other than the United States or any State thereof,
the transferor Lender shall cause such Participant or Purchasing
Lender, concurrently with the effectiveness of such transfer, (i)
to represent to the transferor Lender (for the benefit of the
transferor Lender, the Agent and the Borrower) that under
applicable law and treaties no taxes will be required to be
withheld by the Agent, the Borrower or the transferor Lender with
respect to any payments to be made to such Participant or
Purchasing Lender in respect of the Loans or Commitments, (ii) to
furnish to the transferor Lender, the Agent and the Borrower two
properly executed original Internal Revenue Service Forms 4224 or
1001 (or any successor forms) and properly executed Internal
Revenue Service Forms W-8 and W-9, as the case may be, (wherein
such Participant or Purchasing Lender claims entitlement to
complete exemption from the United States federal withholding tax
on all interest payments hereunder and all fees payable under
Section 2.4) and (iii) to agree (for the benefit of the
transferor Lender, the Agent and the Borrower) to provide the
transferor Lender, the Agent and the Borrower new Internal
Revenue Service Forms 4224 or 1001 upon the expiration or
obsolescence of any previously delivered form or after the
occurrence of any event requiring a change in the most recent
forms delivered by it to the Transferor Lender, the Agent and the
Borrower, and comparable statements in accordance with applicable
United States laws and regulations and amendments duly executed
and completed by such Participant or Purchasing Lender, and to
comply from time to time with all applicable United States laws
and regulations with regard to such withholding tax exemption.
(f) Notwithstanding anything to the contrary set forth
in this Section 9.11, (i) any Lender may sell to any of its
Affiliates all or any part of its rights and obligations under
this Agreement and the Notes (provided that no such Affiliate
shall be entitled to receive any greater amount pursuant to
Sections 2.4 or 3.7 than that which the transferor Lender would
have been entitled to receive in respect of the amount so
assigned by such transferor Lender to such Affiliate had no such
transfer occurred) and, upon the occurrence and during the
continuance of an Event of Default, any Lender may sell to any
Purchasing Lender all or any part of its rights and obligations
under this Agreement and the Notes, in either case
notwithstanding that the Borrower has not or does not consent to
such sale, provided such Lender has obtained the consent of the
Agent and otherwise meets the requirements of this Section 9.11
and (ii) any Lender may create a security interest in all or any
portion of its rights under this Agreement (including the Loans
owing to it and the notes held by it) in favor of the Federal
Reserve Bank in accordance with Regulation A of the F.R.S. Board.
SECTION 9.12. Other Transactions. Nothing contained
herein shall preclude the Agent or any other Lender from engaging
in any transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Borrower or any of
its Affiliates in which the Borrower or such Affiliate is not
restricted hereby from engaging with any other Person.
SECTION 9.13. Confidentiality. The Lenders and the
Agent shall hold all non-public, proprietary or confidential
information (which has been identified as such by the Borrower)
obtained pursuant to the requirements of this Agreement in
accordance with their customary procedures for handling
confidential information of this nature and in accordance with
safe and sound banking practices; however, the Lenders and the
Agent may make disclosure of any such information to its
examiners, Affiliates, outside auditors, counsel, consultants,
appraisers and other professional advisors in connection with
this Agreement or as required by any proposed syndicate member or
any proposed transferee or participant in connection with the
contemplated transfer of any Note or participation therein or as
required or requested by any Governmental Authority or
representative thereof or in connection with the enforcement
hereof or of any Loan Document or related document or pursuant to
legal process; provided, however, that any such proposed
syndicate member or proposed transferee or participant shall have
agreed in writing for the Borrower's benefit to be bound by the
terms of this Section 9.13. In no event shall any Lender or the
Agent be obligated or required to return any materials furnished
to it by the Borrower.
SECTION 9.14. Change in Accounting Principles. If
(a) any changes in accounting principles from those
used in the preparation of the financial statements referred to
in clause (a)(i) of Section 5.4 hereafter occur as a result of
the promulgation of rules, regulations, pronouncements or
opinions by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) result in a change in
the method of calculation of financial covenants, standards or
terms found in this Agreement; or
(b) there is any change in the Borrower's Fiscal Year
with the Required Lenders' prior written consent pursuant to
Section 6.2.16 hereof;
the parties hereto agree to enter into negotiations in order to
amend such financial covenants, standards or terms so as to
equitably reflect such changes with the desired result that the
evaluations of the Borrower's financial condition shall be the
same after such changes as if such changes had not been made.
SECTION 9.15. Waiver of Jury Trial, Etc. THE AGENT,
THE LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTES OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT,
SUCH LENDERS, OR THE BORROWER. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENT AND SUCH LENDERS ENTERING INTO THIS
AGREEMENT.
SECTION 9.16. Limitation of Liability. Neither the
Agent, the Lenders nor any Affiliate thereof shall have any
liability with respect to, and THE BORROWER HEREBY WAIVES,
RELEASES AND AGREES NOT TO SUE UPON, ANY CLAIM FOR ANY SPECIAL,
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES SUFFERED
BY THE BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY
RELATED TO THIS AGREEMENT, THE LOAN DOCUMENTS, THE TRANSACTIONS
CONTEMPLATED HEREIN, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH.
SECTION 9.17. Usury Savings Clause. Notwithstanding
anything to the contrary in this Agreement or any other Loan
Document, if at any time any rate of interest accruing on any
Obligation, when aggregated with all amounts payable by the
Borrower or any other Loan Party under any of the Loan Documents
that are deemed or construed to be interest accrued or accruing
on such Obligation under applicable law, exceeds the highest rate
of interest permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable to
such Lender with respect to such Obligation (each a "Maximum
Lawful Rate"), then in such event and so long as the Maximum
Lawful Rate would be so exceeded, such rate of interest shall be
reduced to the Maximum Lawful Rate; provided that if at any time
thereafter such rate of interest accruing on Obligations held by
such Lender is less than the Maximum Lawful Rate, the Borrower
shall continue to pay interest to such Lender at the Maximum
Lawful Rate until such time as the total interest received by
such Lender in respect of the Obligations held by it is equal to
the total interest which such Lender would have received had
interest on all Obligations held by such Lender (but for the
operation of this Section 9.17) accrued at the rate otherwise
applicable under this Agreement and the other Loan Documents.
Thereafter, interest payable to such Lender in respect of the
Obligations held by it shall accrue at the applicable rate set
forth in this Agreement or other Loan Documents unless and until
such rate again exceeds the Maximum Lawful Rate, in which event
this Section 9.17 shall again apply. In no event, shall the
total interest received by any Lender pursuant to the terms
hereof exceed the amount which such Lender could lawfully have
received had interest been calculated for the full term of this
Agreement at the Maximum Lawful Rate. In the event that the
Maximum Lawful Rate is calculated pursuant to this Section 9.17,
(a) if required by applicable law, 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, and (b) if permitted by applicable law, the
Borrower and such Lender shall (i) characterize any non-principal
payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effect thereof, and
(iii) amortize, prorate, allocate and spread in equal or unequal
parts the total amount of interest throughout the entire
contemplated term of the Loans so that interest for the entire
term of the Loans shall not exceed the Maximum Lawful Rate. In
the event that a court of competent jurisdiction, notwithstanding
the provisions of this Section 9.17 shall make a final
determination that any Lender has received interest in excess of
the Maximum Lawful Rate, such Lender shall, to the extent
permitted by applicable law, promptly apply such excess, first to
any interest due and outstanding under this Agreement and the
other Loan Documents, second to any principal due and payable
under this Agreement and the Notes, third to the remaining
principal amount of the Notes and fourth to other unpaid
Obligations held by such Lender, and thereafter shall refund any
excess to the Borrower or as a court of competent jurisdiction
may otherwise order.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
AFGL INTERNATIONAL, INC.
By:/s/
Gary S. Goldstein, President
Attest:/s/
Barry S. Roseman, Secretary
Percentage
100% - Revolving INTERNATIONALE NEDERLANDEN (U.S.)
100% - Term CAPITAL CORPORATION, as Agent and as
Lender
By:/s/
SCHEDULE 1
DISCLOSURE SCHEDULE
Item 1 (Transaction Costs)
Item 2 (Sources and Uses)
Item 3 (Litigation)
Item 4 (Indebtedness to be Refinanced)
Item 5 (Material Contracts)
Item 6 (Governmental Licenses)
Item 7 (Exceptions to GAAP)
Item 8 (Benefit Plans)
Item 9 (Labor Controversies)
Item 10 (Intellectual Property)
Item 11 (Insurance)
Item 12 (Existing Indebtedness)
Item 13 (Environmental Matters)
Item 14 (Consents)
Item 15 (Employment Contracts)
Item 16 (Subsidiaries)
Item 17 (Permitted Liens)
Item 18 (Leases)
Item 19 (Existing Investments)
REVOLVING NOTE
$6,000,000.00 May 31, 1996
FOR VALUE RECEIVED, the undersigned, AFGL INTERNATIONAL,
INC. (the "Borrower"), promises to pay to the order of
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
corporation (the "Lender"), at the times and in the manner
provided in the Credit Agreement referenced hereinafter, the
principal sum of SIX MILLION AND NO/100 DOLLARS ($6,000,000.00)
or, if less, the outstanding principal amount of all Revolving
Loans made by the Lender from time to time pursuant to that
certain Credit Agreement, dated as of May 31, 1996 (as amended,
restated, supplemented or otherwise modified from time to time,
the "Credit Agreement"; capitalized terms used herein and not
defined herein shall have the meaning ascribed to them in the
Credit Agreement), by and among the Borrower, the various lenders
(including the Lender) as are, or may from time to time become,
parties thereto, and Internationale Nederlanden (U.S.) Capital
Corporation, as Agent for the Lenders (the "Agent"). Notations
indicating Revolving Loans made by the Lender pursuant to the
Credit Agreement and all payments on account of the principal
thereof may be endorsed by the holder hereof on the grid Schedule
attached to this Note, as provided in the Credit Agreement.
The unpaid principal amount of this Note from time to time
shall bear interest as provided in Section 3.4 of the Credit
Agreement. All payments of principal of and interest on this
Note shall be payable in lawful currency of the United States of
America to the account designated by the Agent (and as to which
the Agent has notified the Borrower) in immediately available
funds in accordance with Section 3.6 of the Credit Agreement.
This Note is a Revolving Note referenced in, and evidences
Indebtedness incurred under, the Credit Agreement, to which
reference is made for a description of the security for this Note
and for a statement of the terms and conditions on which the
Borrower is permitted and required to make prepayments and
repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be or may
automatically become immediately due and payable.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and notice of any kind
with respect to this Note. All amounts owing hereunder are
payable by the Borrower without relief from any valuation or
appraisal laws.
AFGL INTERNATIONAL, INC.
By:/s/
Gary S. Goldstein, President
Attest:/s/
Barry S. Roseman, Secretary
[CORPORATE SEAL]
TERM NOTE
$9,000,000.00 May 31, 1996
FOR VALUE RECEIVED, the undersigned, AFGL INTERNATIONAL,
INC. (the "Borrower"), promises to pay to the order of
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
corporation (the "Lender"), at the times and in the manner
provided in the Credit Agreement referenced hereinafter, the
principal sum of NINE MILLION AND NO/100 DOLLARS ($9,000,000.00)
or, if less, the outstanding principal amount of the Term Loan
made by the Lender pursuant to that certain Credit Agreement,
dated as of May 31, 1996 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement";
capitalized terms used herein and not defined herein shall have
the meaning ascribed to them in the Credit Agreement),by and
among the Borrower, the various lenders (including the Lender) as
are, or may from time to time become, parties thereto, and
Internationale Nederlanden (U.S.) Capital Corporation, as Agent
for the Lenders (the "Agent") . Notations indicating the
principal amount of the Term Loan made by the Lender pursuant to
the Credit Agreement and all payments on account of the principal
thereof may be endorsed by the holder hereof on the grid Schedule
attached to this Note, as provided in the Credit Agreement.
The unpaid principal amount of this Note from time to time
shall bear interest as provided in Section 3.4 of the Credit
Agreement. All payments of principal of and interest on this
Note shall be payable in lawful currency of the United States of
America to the account designated by the Agent (and as to which
the Agent has notified the Borrower) in immediately available
funds in accordance with Section 3.6 of the Credit Agreement.
This Note is a Term Note referenced in, and evidences
Indebtedness incurred under, the Credit Agreement, to which
reference is made for a description of the security for this Note
and for a statement of the terms and conditions on which the
Borrower is permitted and required to make prepayments and
repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be or may
automatically become immediately due and payable.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and notice of any kind
with respect to this Note. All amounts owing hereunder are
payable by the Borrower without relief from any valuation or
appraisal laws.
AFGL INTERNATIONAL, INC.
By: /s/
Gary S. Goldstein, President
Attest: /s/
Barry S. Roseman, Secretary
[CORPORATE SEAL]
A - 32
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of
May 31, 1996, by and among AFGL INTERNATIONAL, INC., a Nevada
corporation (the "Borrower"), AFGL, INC., a Delaware corporation
("AFGL"), FURASH & COMPANY, INC., a Maryland corporation
("Furash"), WHITNEY PARTNERS, INC., a Delaware corporation
("Whitney Partners"), HEADWAY PERSONNEL, INC., a Delaware
corporation ("HPI"), HEADWAY CORPORATE STAFFING SERVICES, INC., a
Delaware corporation ("HCSS"), CORPORATE STAFFING ALTERNATIVES,
INC., a New York corporation ("CSA"), CERTIFIED TECHNICAL
STAFFING, INC., a New York corporation ("CTS"), and IRENE COHEN
TEMPS, INC., a New York corporation ("Irene Cohen"; AFGL, Furash,
Whitney Partners, HPI, HCSS, CSA, CTS and Irene Cohen, and
together with all other parties that may from time to time become
parties hereto, individually, as a "Subsidiary" and,
collectively, as the "Subsidiaries"), and INTERNATIONALE
NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation
("ING"), as Agent (in such capacity, the "Agent") for itself and
the other lenders (ING and such other lenders, collectively, the
"Lenders") as are, or may from time to time become, parties to
the Credit Agreement (as defined below).
W I T N E S S E T H:
RECITALS.
A. Pursuant to a Credit Agreement, dated as of even
date herewith (as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"), by and among
the Borrower, the Lenders and the Agent, the Lenders will extend
certain Loans to the Borrower, as more specifically described in
the Credit Agreement; and
B. Pursuant to a Subsidiary Guaranty, dated as of
even date herewith (together with all amendments and other
modifications, if any, from time to time hereafter made thereto,
the "Subsidiary Guaranty"), by the Subsidiaries in favor of the
Agent and the Lenders, the Subsidiaries have guaranteed, jointly
and severally, all of the Obligations of the Borrower under the
Credit Agreement, subject to the terms of the Subsidiary
Guaranty; and
C. In order to induce the Lenders and the Agent to
enter into the Credit Agreement, and as a condition to the making
of the Loans thereunder, each of the Borrower and the
Subsidiaries (collectively, the "Grantors") has agreed to grant a
continuing security interest in and to the "Collateral" (as
hereinafter defined) to secure the "Secured Obligations" (as
hereinafter defined);
NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. Terms defined in the Credit
Agreement and not otherwise defined herein, when used in this
Agreement including its preamble and Recitals, shall have the
respective meanings provided in the Credit Agreement. The
following additional terms (whether or not underscored), when
used in this Agreement, shall have the following meanings:
"Accounts" means all "accounts" (as defined in the
UCC), now or hereafter owned or acquired by a Person or in which
a Person now or hereafter has or acquires any rights, and, in any
event, shall mean and include, without limitation, (a) all
accounts receivable, contract rights, book debts, notes, drafts
and other obligations or indebtedness owing to such Person
arising from the sale or lease of goods or other property by it
or the performance of services by it (including, without
limitation, any such obligation which might be characterized as
an account, contract right or general intangible under the
Uniform Commercial Code in effect in any jurisdiction), (b) all
of such Person's rights in, to and under all purchase and sales
orders for goods, services or other property, and all of such
Person's rights to any goods, services or other property
represented by any of the foregoing (including returned or
repossessed goods and unpaid sellers' rights of rescission,
replevin, reclamation and rights to stoppage in transit), (c) all
monies due to or to become due to such Person under all contracts
for the sale, lease or exchange of goods or other property or the
performance of services by it (whether or not yet earned by
performance on the part of such Person) and (d) all collateral
security and guarantees of any kind given by such Person with
respect to any of the foregoing, in each case whether now in
existence or hereafter arising or acquired.
"Chattel Paper" means any "chattel paper" (as defined
in the UCC) now or hereafter owned or acquired by a Person or in
which a Person now or hereafter has or acquires any rights.
"Collateral" means, collectively, all of the Grantors':
(i) Accounts;
(ii) Inventory;
(iii) Chattel Paper;
(iv) Documents;
(v) Equipment;
(vi) Instruments;
(vii) General Intangibles;
(viii) All Collateral Accounts;
(ix) All other goods and personal property, whether
tangible or intangible;
(x) All books and records pertaining to any of
the Collateral (including, without limitation, customer lists,
credit files, computer programs, printouts and other computer
materials and records); and
(xi) All products and Proceeds of all or any of the
Collateral described in clauses (i) through (x) hereof.
"Collateral Account" means any cash collateral account
established by a Grantor for the benefit of, and under the
exclusive dominion and control of, the Agent, together with all
cash deposited therein from time to time and any investments made
with such cash.
"Documents" means all "documents" (as defined in the
UCC) or other receipts covering, evidencing or representing
goods, now or hereafter owned or acquired by a Person or in which
a Person now or hereafter has or acquires rights.
"Equipment" means all "equipment" (as defined in the
UCC), now or hereafter owned or acquired by a Person or in which
a Person now or hereafter has or acquires rights, and, in any
event, shall mean and include, without limitation, all machinery,
equipment, furnishings, fixtures, vehicles and computers and
other electronic data processing and other office equipment and
any and all additions, substitutions and replacements of any of
the foregoing, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
"General Intangibles" means all "general intangibles"
(as defined in the UCC), now or hereafter owned or acquired by a
Person or in which a Person now or hereafter has or acquires any
rights, and, in any event, shall mean and include, without
limitation, all obligations or indebtedness owing to a Person
(other than Accounts) from whatever source arising, including,
without limitation, rights to indemnification (including, without
limitation, rights to indemnification under the Acquisition
Agreement) and all other rights arising under the Acquisition
Agreement, and all rights, title and interest which a Person may
now or hereafter have in or under all contracts (in addition to
contracts described in the definition of Accounts), causes of
action, franchises, tax refund claims, customer lists,
Intellectual Property, license royalties, goodwill, trade
secrets, proprietary or confidential information, data bases,
business records, data, skill, expertise, experience, processes,
models, drawings, materials and records, permits and licenses,
warranties, manuals, software and all other intangible property
of every kind and nature.
"Instruments" means all "instruments" or "letters of
credit" (each as defined in the UCC), including, without
limitation, instruments and letters of credit evidencing,
representing, arising from or existing in respect of, relating
to, securing or otherwise supporting the payment of, any of the
Accounts, including (but not limited to) promissory notes,
drafts, bills of exchange and trade acceptances, now or hereafter
owned or acquired by a Person or in which a Person now or
hereafter has or acquires any rights.
"Intellectual Property" means, collectively, (a) all
systems software and applications software, including, but not
limited to, source code, object code, screen displays and
formats, program structure, sequence and organization, and
audiovisual elements, all formulas, processes, ideas and know-how
embodied in any of the foregoing, and all documentation and
program materials, user manuals, operations manuals, flowcharts,
programer's notes, outlines and specifications created in
connection with any of the foregoing, whether or not patentable
or copyrightable, (b) concepts, discoveries, improvements and
ideas, (c) Patents, patent rights and patent applications,
copyrights and copyright applications, Trademarks, including,
without limitation, the names Whitney Group, Viva and On-Line and
all derivations thereof, and (d) Patent Licenses, Trademark
Licenses, copyright licenses and other licenses to use any of the
items described in the foregoing clauses (a), (b), (c) and (d) or
any other items of a Person necessary for the conduct of its busi
ness.
"Inventory" means all "inventory" (as defined in the
UCC), now or hereafter owned or acquired by a Person or in which
a Person now or hereafter has or acquires any rights, wherever
located, and, in any event, shall mean and include, without
limitation, all raw materials, inventory and other materials and
supplies, work-in-process, finished goods, and any products made
or processed therefrom and all substances, if any, commingled
therewith or added thereto.
"Patent License" means any written agreement now or
hereafter in existence granting to any Grantor any right to
practice any invention on which a Patent is in existence.
"Patents" means all of the following: (i) 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, without limitation registrations, recordings and
applications in the United States Patent and Trademark Office or
in any similar office or agency of the Untied States, any State
thereof or any other country or any political subdivision
thereof, and (ii) all reissues, continuations, continuations-in-
part or extensions thereof.
"Perfection Certificate" means a certificate dated as
of even date herewith, setting forth the corporate names, chief
executive office or principal places of business in each State
and other current locations of the Grantors and such other
information as the Agent deems pertinent to the perfection of
security interests, completed and supplemented with the schedules
and attachments contemplated thereby to the satisfaction of the
Agent, and duly executed by the chief operating officer of each
of such Persons.
"Permitted Liens" means the Security Interests and the
Liens on the Collateral permitted to be created, to be assumed or
to exist pursuant to Section 6.2.3 of the Credit Agreement.
"Proceeds" means all proceeds of, and all other
profits, rentals or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other
disposition of, or realization upon, Collateral, including,
without limitation all claims of a Person against third parties
for loss of, damage to or destruction of, or for proceeds payable
under, or unearned premiums with respect to, policies of
insurance in respect of, any Collateral, and any condemnation or
requisition payments with respect to any Collateral and the fol
lowing types of property acquired with cash proceeds: Accounts,
Inventory, General Intangibles, Chattel Paper, Documents,
Instruments and Equipment.
"Secured Obligations" means all Obligations, including,
without limitation, (a) with respect to the Borrower, (i) all
principal of and interest (including, without limitation, any
interest which accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency
or reorganization of any Grantor) on the Loans under, any Note
issued pursuant to, and any other amount due from the Borrower
under, the Credit Agreement and the other Loan Documents, and
(ii) all other obligations (monetary or otherwise) to be
performed by the Borrower under the Credit Agreement or any other
Loan Document; (b) with respect to any Grantor that is a party to
the Subsidiary Guaranty, all amounts payable and all obligations
(monetary or otherwise) to be performed by such Grantor under the
Subsidiary Guaranty, including, without limitation, the
"Guaranteed Obligations" (as such term is defined in the
Subsidiary Guaranty); and (c) all renewals or extensions of any
of the foregoing.
"Security Interests" means the security interests
granted pursuant to Section 3, as well as all other security
interests created or assigned as additional security for the
Secured Obligations pursuant to the provisions of this Agreement,
the Credit Agreement or any other Security Documents.
"Trademark License" means any written agreement now or
hereafter in existence granting to a Person any right to use any
Trademark, including, without limitation, the agreements de
scribed in Schedule I to each of the Borrower Trademark
Assignment and the Subsidiary Trademark Assignment.
"Trademarks" means all of the following: (i) all
trademarks, trade names, corporate names, company names, business
names, fictitious business names, trade styles, service marks,
logos, other source or business identifiers, prints and labels on
which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, whether now existing or
hereafter adopted or acquired, all registrations and recordings
thereof, (ii) all applications in connection therewith,
including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision
thereof, including, without limitation, those described in
Schedule I to each of the Borrower Trademark Assignment and the
Subsidiary Trademark Assignment, and (iii) all reissues,
extensions or renewals thereof.
"UCC" means the Uniform Commercial Code as in effect on
the date hereof in the State of New York.
SECTION 2. Representations and Warranties. Each
Grantor represents and warrants as follows:
(a) Such Grantor has good and marketable title to all
of its interest in the Collateral, free and clear of any Liens
other than the Permitted Liens.
(b) Such Grantor has not performed any act or acts
that could prevent or hinder the Agent from enforcing any of the
terms of this Agreement. Other than financing statements or
other similar or equivalent documents or instruments with respect
to Permitted Liens, no financing statement, mortgage, security
agreement or similar or equivalent document or instrument
covering all or any part of the Collateral is on file or of
record in any jurisdiction. No Collateral is in the possession
of a Person (other than such Grantor) asserting any claim thereto
or security interest therein, except that the Agent or its
designee may have possession of Collateral as contemplated
hereby.
(c) All of the information set forth in the Perfection
Certificate is true and correct as of the date hereof.
(d) (i) When the UCC financing statements in
appropriate form are filed in
the offices specified in the Perfection Certificate, the
Security Interests shall constitute valid and perfected
security interests in the Collateral, prior to all other
Liens and rights of others therein except for the other
Permitted Liens, to the extent that a security interest
therein may be perfected by filing pursuant to the UCC.
(ii) When the Borrower Trademark Assignment and
the Subsidiary Trademark Assignment are filed with the
United States Patent and Trademark Office, the Security
Interests shall constitute valid and perfected security
interests in all right, title and interest of such Grantor
in all Trademarks of such Grantor, prior to all other Liens
and rights of others therein except for the other Permitted
Liens, to the extent that a security interest in such
Trademarks may be perfected by a filing in such office.
(e) The Inventory and Equipment are insured in
accordance with the requirements of the Credit Agreement.
SECTION 3. The Security Interests.
(a) In order to secure the full and punctual payment
and performance of its Secured Obligations in accordance with the
terms thereof, each Grantor hereby grants, pledges, assigns,
hypothecates, sets over and conveys to the Agent, for its benefit
and the ratable benefit of the Lenders, a continuing security
interest in and to all of the Collateral now or hereafter owned
or acquired by such Grantor or in which such Grantor now has or
hereafter has or acquires any rights, and wherever located.
(b) The Security Interests are granted as security
only and shall not subject the Agent or any Lender to, or
transfer to the Agent or any Lender, or in any way affect or
modify, any obligation or liability of any Grantor with respect
to any of the Collateral or any transaction in connection
therewith.
SECTION 4. Further Assurances; Covenants.
(a) General.
(i) No Grantor will change the location, or
establish a new location, of its chief executive office or
principal place of business in any state unless it shall
have (A) given the Agent thirty (30) days prior notice
thereof, (B) executed and delivered to the Agent all
financing statements and financing statement amendments
which the Agent may request in connection therewith and (C)
to the extent requested by the Agent, delivered an opinion
of counsel with respect thereto in accordance with Section
4(a)(viii). No Grantor shall change the locations, or
establish new locations, where it keeps or holds any
Collateral or any records relating thereto from the
applicable locations described in the Perfection
Certificate, unless such Grantor shall have (A) given the
Agent fifteen (15) days prior notice of such change of
location, (B) executed and delivered to the Agent all
financing statements and financing statement amendments
which the Agent may request in connection therewith, (C) to
the extent requested by the Agent, delivered an opinion of
counsel with respect thereto in accordance with Section
4(a)(viii) and (D) complied with any other requirement in
this Agreement or any other Loan Document relating to the
location of any Collateral. No Grantor shall in any event
change the location, or establish a new location, of any Col
lateral if such change would cause the Security Interests in
such Collateral to lapse or cease to be perfected first
priority Security Interests.
(ii) No Grantor will change its name,
identity or corporate structure in any manner unless it
shall have (A) given the Agent thirty (30) days prior notice
thereof, (B) executed and delivered to the Agent all
financing statements and financing statement amendments
which the Agent may request in connection therewith and (C)
to the extent requested by the Agent, delivered an opinion
of counsel with respect thereto in accordance with Section
4(a)(viii).
(iii) The Grantors will, from time to time, at
its expense, execute, deliver, file and record any
statement, assignment, instrument, document, agreement or
other paper and take any other action (including, without
limitation, any filings with the United States Patent and
Trademark Office, copyright or Patent filings and any
filings of financing or continuation statements under the
UCC) that from time to time may be necessary, or that the
Agent may request, in order to create, preserve, upgrade in
rank (to the extent required hereby), perfect, confirm or
validate the Security Interests or to enable the Agent and
the Lenders to obtain the full benefits of this Agreement,
or to enable the Agent to exercise and enforce any of its
rights, powers and remedies hereunder with respect to any of
the Collateral. To the extent permitted by law, each
Grantor hereby authorizes the Agent to execute and file
financing statements, financing statement amendments or
continuation statements without such Grantor's signature
appearing thereon. Each Grantor agrees that a carbon,
photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a
financing statement. The Grantors shall, jointly and
severally, pay all costs of, or incidental to, any recording
or filing of any financing statements, financing statement
amendments or continuation statements concerning the Col
lateral.
(iv) If any Collateral exceeding in value
$5,000 in the aggregate is at any time in the possession or
control of any warehouseman, bailee or any of the agents or
processors of any Grantor, such Grantor shall notify in
writing such warehouseman, bailee, agent or processor of the
Security Interests created hereby, shall obtain such
warehouseman's, bailee's, agent's or processor's agreement
in writing to hold all such Collateral for the Agent's
account subject to the Agent's instructions, and shall cause
such warehousemen, bailee, agent or processor to issue and
deliver to the Agent warehouse receipts, bills of lading or
any similar documents relating to such Collateral in the
Agent's name and in form and substance acceptable to the
Agent.
(v) Each Grantor will immediately
deliver and pledge each Instrument to the Agent,
appropriately endorsed to the Agent.
(vi) No Grantor will (A) sell, transfer,
lease, exchange, assign or otherwise dispose of, or grant
any option, warrant or other right with respect to, any
Collateral except that, subject to the rights of the Agent
and the Lenders hereunder if an Event of Default shall have
occurred and be continuing, the Grantors may dispose of
assets if such disposition is permitted by Section 6.2.11 of
the Credit Agreement, whereupon, in the case of such a
disposition, sale or exchange, the Security Interests
created hereby in such item (but not in any Proceeds arising
from such disposition, sale or exchange) shall cease im
mediately without any further action on the part of the
Agent; or (B) create, incur or suffer to exist any Lien with
respect to any Collateral, except for the Permitted Liens.
(vii) Each Grantor will, promptly upon
request, provide to the Agent all information and evidence
it may reasonably request concerning the Collateral, and in
particular the Accounts, to enable the Agent to enforce the
provisions of this Agreement.
(viii) Prior to each date on which any Grantor
proposes to take any action contemplated by Section 4(a)(i)
or Section 4(a)(ii), if requested by the Agent, such Grantor
shall, at its cost and expense, cause to be delivered to the
Agent and the Lenders an opinion of counsel, satisfactory to
the Agent, to the effect that all financing statements and
amendments or supplements thereto, continuation statements
and other documents required to be recorded or filed in
order to perfect and protect the Security Interests and
priority thereof against all creditors of and purchasers
from such Grantor have been filed in each filing office
necessary for such purposes and that all filing fees and
taxes, if any, payable in connection with such filings have
been paid in full.
(b) Accounts, Etc.
(i) Each Grantor shall use all
reasonable efforts consistent with prudent business practice
to cause to be collected from its Account Debtors, as and
when due, any and all amounts owing under or on account of
each Account (including, without limitation, Accounts which
are delinquent, such Accounts to be collected in accordance
with lawful collection procedures) and apply forthwith upon
receipt thereof all such amounts as are so collected to the
outstanding balance of such Account. The costs and expenses
(including, without limitation, attorney's fees) of
collection of Accounts incurred by the Grantors or the
Agent, shall be borne by the Grantors, jointly and
severally.
(ii) Upon the occurrence and during the
continuance of any Event of Default, upon request of the
Agent, each Grantor will promptly notify (and each Grantor
hereby authorizes the Agent so to notify) each Account
Debtor in respect of any Account or Instrument that such
Collateral has been assigned to the Agent hereunder, and
that any payments due or to become due in respect of such
Collateral are to be made directly to the Agent or its des
ignee.
(iii) Each Grantor will perform and comply
with all of its material obligations in respect of Accounts,
Instruments and General Intangibles.
(c) Equipment, Etc. The Grantors shall,
immediately upon the Agent's request, deliver to the Agent, for
the benefit of itself and the Lenders, any and all certificates
of title, and applications therefor, if any, of any Equipment now
or hereafter owned by the Grantors, and shall cause the Agent,
for its benefit and the benefit of the Lenders, to be named as
lienholder on any such certificate of title and applications.
The Grantors shall promptly inform the Agent of any material
additions to or deletions from the Equipment and shall not permit
any such items to become a fixture to real estate or an accession
to other personal property owned by a Person other than a
Grantor.
(d) Patents, Trademarks, Etc. The Grantors shall
notify the Agent promptly (i) of its acquisition after the
Closing Date of any copyright, patent, patent license, Trademark
or Trademark License being used in its business and (ii) if it
knows, or has reason to know, that any application or
registration relating to any patent or Trademark owned by or
licensed to the Grantors and being used in its business is
reasonably likely to become abandoned or dedicated, or of any
adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office or any court) regarding any Grantor's ownership
of any patent, copyright or Trademark being used in its business,
its right to register the same, or to keep and maintain the same.
In the event that any copyright, patent, patent license,
Trademark or Trademark License being used in its business is
infringed, misappropriated or diluted by a third party, the
Grantors shall notify the Agent promptly after they learn thereof
and shall, unless the Grantors shall reasonably determine that
any such action would be of immaterial economic value, promptly
sue for infringement, misappropriation or dilution and to recover
any and all damages for such infringement, misappropriation or
dilution, and take such other actions as the Grantors shall
reasonably deem appropriate under the circumstances to protect
such copyright, patent, patent license, Trademark or Trademark
License. If any Grantor, either itself or through any agent,
employee or licensee, shall file an application for the
registration of any copyright, patent or Trademark with the
United States Patent and Trademark Office or any similar office
or agency in any other country or political subdivision thereof,
it shall inform the Agent thereof not less than thirty (30) days
prior thereto, and, upon issuance of any such copyright, patent
or Trademark, such Grantor shall execute and deliver any and all
agreements, instruments, documents and papers the Agent may
request to evidence the Security Interests in such copyright,
patent or Trademark and the goodwill and general intangibles of
the Grantors relating thereto or represented thereby. The
Borrower hereby constitutes the Agent its attorney-in-fact to
execute and file all such writings for the foregoing purposes,
all acts of such attorney being hereby ratified and confirmed,
and such power, being coupled with an interest, shall be
irrevocable until the Commitments have terminated and the Secured
Obligations are paid in full and satisfied.
SECTION 5. Reporting and Recordkeeping. Each Grantor
covenants and agrees with the Agent and the Lenders that from and
after the date of this Agreement and until the Commitments have
terminated and the Secured Obligations have been fully satisfied:
(a) Maintenance of Records Generally. Such Grantor
will keep and maintain at its own cost and expense records of the
Collateral, complete in all material respects, including, without
limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings
with the Collateral. Such Grantor will mark its books and
records pertaining to the Collateral to evidence this Agreement
and the Security Interests. All Chattel Paper will be marked
with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest
of Internationale Nederlanden (U.S.) Capital Corporation, as
Agent". For the Agent's and the Lenders' further security, such
Grantor agrees that the Agent and the Lenders shall have a
security interest in all of such Grantor's books and records
pertaining to the Collateral and, upon the occurrence and during
the continuation of any Default or Event of Default, such Grantor
shall deliver and turn over full and complete copies of any such
books and records to the Agent or to its representatives at any
time on demand of the Agent. Subject to any government security
limitations, such Grantor shall permit the Agent and each Lender
or any of their respective representatives, during normal
business hours, to visit all of its offices, to discuss its
financial matters with its officers and independent public
accounts and to examine (and, at the expense of the Borrower,
photocopy extracts from) any of its books or other corporate
records.
(b) Special Provisions Regarding Maintenance of
Records and Reporting.
(i) Such Grantor shall keep complete and
accurate records of its Accounts. In addition to any
requirements set forth in the Credit Agreement at the
request of the Agent, such Grantor shall deliver to the
Agent a true copy of all documents, including, without
limitation, repayment histories, present status reports,
relating to the Accounts and such other matters and
information relating to the status of then existing Accounts
as the Agent shall reasonably request.
(ii) Such Grantor shall maintain itemized
records, accurate in all material respects, itemizing and
describing the kind, type, quality, quantity, location and
book value of its Inventory, and if requested by the Agent
shall furnish the Agent a current schedule containing the
foregoing.
(iii) Such Grantor will promptly upon, but in
no event later than five (5) Business Days after:
(A) such Grantor's learning thereof,
inform the Agent, in writing, of any material
delay in the Grantor's performance of any of its
material obligations to any Account Debtor and of
any assertion of any material claims, offsets or
counterclaims by any Account Debtor and of any
allowances, credits and/or other monies granted by
such Grantor to any Account Debtor, in each case
involving amounts in excess of $20,000 for any
single Account or Account Debtor or in excess of
$100,000 in the aggregate for all Accounts and
Account Debtors; and
(B) such Grantor's receipt or learning
thereof, furnish to and inform the Agent of all
material adverse information relating to the
financial condition of any Account Debtor with
respect to Accounts exceeding $20,000 individually
or $100,000 in the aggregate; and
(iv) Such Grantor will promptly notify the
Agent in writing if any Account, the face value of which
exceeds $100,000, arises out of a contract with the United
States of America, or any department, agency, subdivision or
instrumentality thereof, or of any state (or department,
agency, subdivision or instrumentality thereof) where such
state has a state assignment of claims act or other law
comparable to the Federal Assignment of Claims Act, and will
take any action required or requested by the Agent upon the
occurrence of an Event of Default to give notice of the
Agent's security interest in such Accounts under the provi
sions of the Federal Assignment of Claims Act or any compa
rable law or act enacted by any state or local governmental
authority.
(c) Further Identification of Collateral. Such
Grantor will furnish to the Agent, as often as the Agent
reasonably requests, statements and schedules further identifying
and describing the Collateral and such other reports in
connection with the Collateral as the Agent may reasonably
request, all in reasonable detail.
(d) Notices. In addition to the notices required by
Section 5(b) hereof, such Grantor will notify the Agent promptly,
in writing and in reasonable detail, (i) of any material Lien or
claim made or asserted against any of the Collateral, (ii) of any
material adverse change in the composition of the Collateral, and
(iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral
or on the validity, perfection or priority of the Security
Interests.
SECTION 6. General Authority. Each Grantor hereby
irrevocably appoints the Agent its true and lawful attorney, with
full power of substitution, in the name of such Grantor, the
Agent, the Lenders or otherwise, for the sole use and benefit of
the Agent and the Lenders, but at such Grantor's expense, to
exercise, at any time from time to time all or any of the
following powers:
(i) to file the financing statements,
financing statement amendments and continuation statements
referred to in Section 4(a)(iii),
(ii) to demand, sue for, collect,
receive and give acquittance for any and all monies due or
to become due with respect to any Collateral or by virtue
thereof,
(iii) to settle, compromise, compound,
prosecute or defend any action or proceeding with respect to
any Collateral,
(iv) to sell, transfer, assign or otherwise
deal in or with the Collateral or the proceeds or avails
thereof, as fully and effectually as if the Agent were the
absolute owner thereof, and
(v) to extend the time of payment of any or
all thereof and to make any allowance and other adjustments
with reference to the Collateral;
provided that the Agent shall not take any of the actions
described in this Section 6 except those described in clause (i)
above unless an Event of Default shall have occurred and be
continuing.
SECTION 7. Remedies upon Event of Default.
(a) If any Event of Default has occurred and is
continuing, the Agent may exercise on behalf of the Lenders
without further notice, all rights and remedies under this
Agreement, the Credit Agreement, the Subsidiary Guaranty or any
other Loan Document, all rights and remedies that are available
to a secured creditor under the UCC, and all rights and remedies
that are otherwise available at law or in equity, at any time, in
any order and in any combination, including without limitation,
the collection of any and all Secured Obligations, and, in
addition, the Agent may (i) withdraw all cash, if any, in the
Collateral Account and investments made with amounts on deposit
in the Collateral Account, and apply such monies, investments and
other cash, if any, then held by it as Collateral as specified in
Section 9 and (ii) sell the Collateral or any part thereof at
public or private sale, for cash, upon credit or for future
delivery, and upon such terms as the Agent shall deem
commercially reasonable. The Agent shall give each Grantor not
less than ten (10) days' prior written notice of the time and
place of any sale or other intended disposition of any of such
Grantor's Collateral, except any Collateral which is perishable
or threatens to decline speedily in value or is of a type custom
arily sold on a recognized market. The Grantors agree that any
such notice constitutes "reasonable notification" within the
meaning of Section 9-504(3) of the UCC (to the extent such
Section is applicable).
The Agent or any Lender may be the purchaser of any or all
of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market
or is of a type which is the subject of widely distributed
standard price quotations or if otherwise permitted under ap
plicable law, at any private sale) and thereafter hold the same,
absolutely, free from any right or claim of whatsoever kind. The
Grantors will execute and deliver such documents and take such
other action as the Agent deems necessary or advisable in order
that any such sale may be made in compliance with law. Upon any
such sale the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each
purchaser at any such sale shall hold the Collateral so sold to
it absolutely, free from any claim or right of any kind, in
cluding any equity or right of redemption of the Grantors. To
the extent permitted by law, each Grantor hereby specifically
waives all rights of redemption, stay or appraisal which it has
or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale shall (1) in case of a public sale,
state the time and place fixed for such sale, and (2) in the case
of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places
as the Agent may fix in the notice of such sale. At any such
sale the Collateral may be sold in one lot as an entirety or in
separate parcels, as the Agent may determine. The Agent shall
not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any
part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling
price is paid by the purchaser thereof, but the Agent shall not
incur any liability in case of the failure of such purchaser to
take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may again be sold upon like notice.
The Agent, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of
a court or courts of competent jurisdiction. The Grantors shall
remain liable, jointly and severally, for any deficiency.
(b) For the purpose of enforcing any and all rights
and remedies under this Agreement, the Agent may (i) require the
Grantors to, and the Grantors agree that they will, at their
expense and upon the request of the Agent, forthwith assemble all
or any part of the Collateral as directed by the Agent and make
it available at a place designated by the Agent which is, in the
Agent's opinion, convenient to the Agent and the Grantors,
whether at the premises of a Grantor or otherwise, (ii) to the
extent permitted by applicable law, enter, with or without
process of law and without breach of the peace, any premise where
any of the Collateral is or may be located and, without charge or
liability to the Agent, seize and remove such Collateral from
such premises, (iii) have access to and use the Grantors' books
and records, computers and software relating to the Collateral
and (iv) prior to the disposition of the Collateral, store or
transfer such Collateral without charge in or by means of any
storage or transportation facility owned or leased by the
Grantors, process, repair or recondition such Collateral or
otherwise prepare it for disposition in any manner and to the ex
tent the Agent deems appropriate and, in connection with such
preparation and disposition, use without charge any trademark,
trade name, copyright, Patent or technical process used by the
Grantors.
(c) Without limiting the generality of the foregoing,
if any Event of Default has occurred and is continuing:
(i) the Agent may license, or sublicense,
whether general, special or otherwise, and whether on an
exclusive or nonexclusive basis, any Patents or Trademarks
included in the Collateral throughout the world for such
term or terms, on such conditions and in such manner as the
Agent shall in its sole discretion determine, except to the
extent restricted by any license agreements to which such
Patents or Trademarks are subject, as in effect on the
Closing Date;
(ii) the Agent may (without assuming any
obligations or liability thereunder), at any time and from
time to time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and
remedies of the Grantors in, to and under any Patent
Licenses or Trademark Licenses and take or refrain from
taking any action under any thereof, and each Grantor hereby
releases the Agent and each of the Lenders from, and agrees
to hold the Agent and each of the Lenders free and harmless
from and against any claims arising out of, any lawful
action so taken or omitted to be taken with respect thereto;
and
(iii) upon request by the Agent, the Grantors
will execute and deliver to the Agent powers of attorney, in
form and substance satisfactory to the Agent, for the
implementation of any lease, assignment, license,
sublicense, grant of option, sale or other disposition of a
Patent or Trademark. In the event of any such disposition
pursuant to this Section, the Grantors shall supply their
know-how and expertise relating to the manufacture and sale
of the products bearing Trademarks or the products or
services made or rendered in connection with Patents, and
its customer lists and other records relating to such
Patents or Trademarks and to the distribution of said
products, to the Agent.
SECTION 8. Limitation on Duty of Agent in Respect of
Collateral. Beyond reasonable care in the custody thereof, the
Agent shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent or bailee
or any income thereon or as to the preservation of rights against
prior parties or any other rights pertaining thereto. The Agent
shall be deemed to have exercised reasonable care in the custody
of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own
property, and the Agent shall not be liable or responsible for
any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission
of any warehouseman, carrier, forwarding agency, consignee or
other agent or bailee selected by the Agent in good faith.
SECTION 9. Application of Proceeds. Upon the
occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any
part of the Collateral of any Grantor shall be applied by the
Agent, in the following order of priorities:
first, to payment of the out-of-pocket expenses of
such sale or other realization, including compensation
to agents and counsel for the Agent, and all
out-of-pocket expenses, liabilities and advances
incurred or made by the Agent in connection therewith,
and any other unreimbursed expenses for which the Agent
or any Lender is entitled to be reimbursed pursuant to
Section 9.3 of the Credit Agreement, or Section 12
hereof or any corresponding provision of any of the
other Loan Documents;
second, to the ratable payment of accrued but
unpaid interest (including post-petition interest) and
fees constituting Secured Obligations of such Grantor;
third, to the ratable payment of unpaid principal
of the Secured Obligations of such Grantor;
fourth, to the ratable payment of all other
Secured Obligations of such Grantor, until all such
Secured Obligations shall have been paid in full; and
finally, to such Grantor or its successors or
assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such
proceeds.
The Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof.
SECTION 10. Concerning the Agent. The provisions of
Article 8 of the Credit Agreement shall inure to the benefit of
the Agent in respect of this Agreement and shall be binding upon
the parties to the Credit Agreement in such respect. In
furtherance and not in derogation of the rights, privileges and
immunities of the Agent therein set forth:
(a) The Agent is authorized to take all such action as
is provided to be taken by it as Agent hereunder or otherwise
permitted under the Credit Agreement and all other action
reasonably incidental thereto. As to any matters not expressly
provided for herein, the Agent may request instructions from the
Lenders and shall act or refrain from acting in accordance with
written instructions from the Required Lenders or, in the absence
of such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for
the validity, perfection, priority or enforceability of the
Security Interests, whether impaired by operation of law or by
reason of any action or omission to act on its part. The Agent
shall have no duty to ascertain or inquire as to the performance
or observance of any of the terms of this Agreement by the
Grantors.
SECTION 11. Appointment of Co-Agents. At any time or
times, in order to comply with any legal requirement in any
jurisdiction, the Agent may appoint another bank or trust company
or one or more other Persons, either to act as co-agent or co-
agents, jointly with the Agent, or to act as separate agent or
agents on behalf of the Agent and the Lenders with such power and
authority as may be necessary for the effectual operation of the
provisions hereof and specified in the instrument of appointment
(which may, in the discretion of the Agent, include provisions
for the protection of such co-agent or separate agent similar to
the provisions of Section 11).
SECTION 12. Expenses. In the event that any Grantor
fails to comply with the provisions of the Credit Agreement, this
Agreement or any other Loan Document, such that the value of any
Collateral or the validity, perfection, rank or value of the
Security Interests are thereby diminished or potentially
diminished or put at risk, the Agent if requested by the Required
Lenders may, but shall not be required to, effect such compliance
on behalf of such Grantor, and the Grantors shall reimburse the
Agent, jointly and severally, for the costs thereof on demand.
All insurance expenses and all expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining and
shipping the Collateral, any and all excise, stamp, intangibles,
transfer, property, sales, and use taxes imposed by any state,
federal, or local authority or any other Governmental Authority
on any of the Collateral, or in respect of periodic appraisals
and inspections of the Collateral to the extent the same may be
reasonably requested by the Required Lenders from time to time,
or in respect of the sale or other disposition thereof, shall be
borne and paid by the Grantors; and if the Grantors fail promptly
to pay any portion thereof when due, the Agent or any Lender may,
at its option, but shall not be required to, pay the same and
charge the Grantors' accounts therefor, and the Grantors agree to
reimburse the Agent or such Lender therefor on demand. All sums
so paid or incurred by the Agent or any Lender for any of the
foregoing and any and all other sums for which the Grantors may
become liable hereunder and all costs and expenses (including
attorneys' fees, legal expenses and court costs) incurred by the
Agent or any Lender in enforcing or protecting the Security
Interests or any of their rights or remedies thereon shall be
payable by the Grantors, jointly and severally, on demand and
shall bear interest (after as well as before judgment) until paid
at the highest rate then in effect under the Credit Agreement
with respect to the Obligations.
SECTION 13. Termination of Security Interests; Release
of Collateral. Upon the performance of and repayment in full of
all Secured Obligations and the termination of the Commitments,
the Security Interests shall terminate and all rights to the
Collateral shall revert to the Grantors. At any time and from
time to time prior to such termination of the Security Interests,
the Agent may release any of the Collateral with the prior
written consent of the Required Lenders; provided, however, that
the Security Interest of the Agent in any Collateral constituting
an asset of which the Grantors may dispose under Section 6.2.11
of the Credit Agreement shall automatically terminate and be
released upon such disposition by the Grantors without the
necessity of any further action or consent by the Agent or any
Lender. Upon any such termination of the Security Interests or
release of Collateral, the Agent will, at the expense of the
Grantors, promptly execute and deliver to the Grantors such docu
ments as the Grantors shall reasonably request, including but not
limited to UCC-3 termination statements, to evidence the termi
nation of the Security Interests or the release of such
Collateral, as the case may be.
SECTION 14. Notices. All notices hereunder shall be
in writing or by telecopy and shall be sufficiently given to the
Agent, the Lenders or the Grantors if addressed or delivered to
them at, in the case of the Borrower, the Agent and the Lenders,
their respective addresses or telecopier numbers specified in
Section 9.2 of the Credit Agreement (in each case with copies
addressed as provided in Section 9.2 of the Credit Agreement),
and, in the case of the Subsidiaries, their respective addresses
or telecopier numbers specified in Section 15 of the Subsidiary
Guaranty (in each case with copies addressed as provided in
Section 15 of the Subsidiary Guaranty), or at such other address
as any party may designate to any other party by written notice.
All such notices and communications shall be deemed to have been
duly given: at the time delivered, if delivered by hand; when
received, if deposited in the mail, postage prepaid; when
transmission is verified, if sent via fax; and on the next
Business Day, if timely delivered by an air courier guaranteeing
overnight delivery.
SECTION 15. Waivers, Non-Exclusive Remedies. No
failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right
under the Credit Agreement, this Agreement or any other Loan
Document shall operate as a waiver thereof; nor shall any single
or partial exercise by the Agent or any Lender of any right under
the Credit Agreement, this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of
any other right. The rights in this Agreement, the Credit
Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law. This Agreement
is a Loan Document executed pursuant to the Credit Agreement.
SECTION 16. Successors and Assigns. This Agreement is
for the benefit of the Agent and the Lenders and their permitted
successors and assigns, and in the event of an assignment of all
or any of the Secured Obligations, the rights hereunder, to the
extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Agreement shall be
binding on the Grantors and their successors and assigns;
provided, however, that no Grantor may assign any of its rights
or obligations hereunder without the prior written consent of the
Agent and the Lenders.
SECTION 17. Changes in Writing. Neither this
Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by
the affected Grantors and the Agent with the consent of the
Required Lenders.
SECTION 18. Governing Law. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT PERFECTION (AND THE
EFFECT OF PERFECTION AND NONPERFECTION) AND CERTAIN REMEDIES MAY
BE GOVERNED BY THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK.
SECTION 19. Severability. If any provision hereof is
invalid and unenforceable in any jurisdiction, then, to the
fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the
Lenders in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision
in any other jurisdiction.
SECTION 20. Supplement. In the event that any
Subsidiary of the Borrower is required, under the terms of the
Credit Agreement or otherwise, to grant a security interest in
Collateral, such Subsidiary shall become a Grantor hereunder and
shall be bound by all of the terms and conditions hereof, upon
the delivery to the Agent of an executed counterpart of a
Supplement to this Security Agreement in the form of Exhibit A
attached hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed under seal by their respective
authorized officers as of the day and year first above written.
AFGL INTERNATIONAL, INC.
By: ______________________________
Name:
Title:
AFGL, INC.
By: ______________________________
Name:
Title:
FURASH & COMPANY, INC.
By: ______________________________
Name:
Title:
WHITNEY PARTNERS, INC.
By: ______________________________
Name:
Title:
HEADWAY CORPORATE STAFFING
SERVICES, INC.
By: ______________________________
Name:
Title:
CORPORATE STAFFING ALTERNATIVES,
INC.
By: ______________________________
Name:
Title:
CERTIFIED TECHNICAL STAFFING, INC.
By: ______________________________
Name:
Title:
IRENE COHEN TEMPS, INC.
By: ______________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as Agent
By: __________________________________
Name:
Title:
EXHIBIT A
to
Security Agreement
SUPPLEMENT TO SECURITY AGREEMENT
THIS SUPPLEMENT TO SECURITY AGREEMENT (this
"Supplement"), dated as of _____________ __, ____, is executed by
[_________________], [__________] (the "Supplementing Party"), in
favor of INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a
Delaware corporation ("ING"), as Agent (in such capacity, the
"Agent") for itself and the other lenders (ING and such other
lenders, collectively, the "Lenders") as are, or may from time to
time become, parties to the Credit Agreement (as defined below).
Terms used herein but not defined herein shall have the meaning
defined for those terms in the Security Agreement (as defined
below).
W I T N E S S E T H:
RECITALS.
A. AFGL International, Inc., a Nevada corporation
(the "Borrower"), the Lenders and the Agent have entered into a
Credit Agreement, dated as of May __, 1996 (as amended, restated,
supplemented, extended or otherwise modified from time to time,
the "Credit Agreement");
B. Certain Subsidiaries of the Borrower have executed
a Subsidiary Guaranty, dated as of May 31, 1996, in favor of the
Agent and the Lenders (as amended, restated, supplemented,
extended or otherwise modified from time to time, the
"Subsidiary Guaranty");
C. In order to induce the Lenders and the Agent to
enter into the Credit Agreement, and as a condition to the making
of the Loans thereunder, each of the Borrower and such
Subsidiaries, together with the Agent, have entered into a
Security Agreement, dated as of May 31, 1996, (as amended,
restated, supplemented, extended or otherwise modified from time
to time, the "Security Agreement");
D. The Supplementing Party has become a Subsidiary of
the Borrower and as such is required to become a party to the
Subsidiary Guaranty pursuant to the Credit Agreement and Section
9.14 of the Subsidiary Guaranty; and
E. Pursuant to the Credit Agreement and Section 20 of
the Security Agreement, the Supplementing Party also is required
to execute and deliver to the Agent this Supplement in order to
secure its obligations under the Subsidiary Guaranty, and the
Supplementing Party desires to execute and deliver this Supple
ment to satisfy such requirement and condition; and
NOW, THEREFORE, in consideration of the premises the
Supplementing Party hereby agrees as follows:
SECTION 1. Additional Security Interests. As
security for the payment and performance of the "Secured
Obligations" (as such term is defined in the Security Agreement),
the Supplementing Party hereby grants to the Agent for its
benefit and the benefit of the Lenders a continuing security
interest in and to all Collateral now or hereafter owned or
acquired by the Supplementing Party or in which such
Supplementing Party now has or hereafter has or acquires any
rights, and wherever located.
SECTION 2. Representations and Warranties. The
Supplementing Party, with respect to itself, hereby restates
each representation and warranty set forth in Section 2 of the
Security Agreement as of the date hereof.
SECTION 3. Binding Effect. This Supplement shall
become effective when it shall have been executed by the
Supplementing Party and thereafter shall be binding upon the
Supplementing Party and shall inure to the benefit of the Agent
and the Lenders. Upon the effectiveness of this Supplement, this
Supplement shall be deemed to be a part of and shall be subject
to all the terms and conditions of the Security Agreement. The
Supplementing Party shall not have the right to assign its rights
hereunder or any interest herein without the prior written
consent of the Lenders.
SECTION 4. Governing Law; Terms. THIS SUPPLEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT
PERFECTION (AND THE EFFECT OF PERFECTION AND NONPERFECTION) AND
CERTAIN REMEDIES MAY BE GOVERNED BY THE LAWS OF ANY JURISDICTION
OTHER THAN NEW YORK.
SECTION 5. Execution in Counterparts. This Supple
ment may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Supplementing Party has caused
this Supplement to be duly executed and delivered under seal by
its duly authorized officer as of the date first above written.
"Supplementing Party"
______________________________
By:
Name:
Title:
Acknowledged and Agreed to:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as Agent
By: ______________________________
Name:
Title:
WARRANT PURCHASE AGREEMENT
BETWEEN
AFGL INTERNATIONAL, INC.
AND
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
Dated as of May 31, 1996
TABLE OF CONTENTS
Page
RECITALS: 1
SECTION 1 Definitions 1
(a) Defined Terms 1
SECTION 2 Purchase and Sale of Warrants; Closing 11
SECTION 3 Investment Representations 12
SECTION 4 Conditions Precedent 12
SECTION 5 Warranties, etc. 13
(a) Credit Agreement Warranties 13
(b) Power, Authority, etc. 13
(c) Due Authorization 13
(d)Absence of Takeover Statutes 14
(e) Validity, etc. 14
(f) Capitalization and Ownership of the Company 14
(g) Authorization and Issuance of Warrants 15
(h) Securities Laws 15
(i) No Integration of Issue 15
SECTION 6 Covenants 15
(a) Financial and Business Information 16
(b) Public Company Information 17
(c) Maintenance of Corporate Existences, etc. 17
(d) Maintenance of Books and Records 17
(e) Inconsistent Agreements 17
(f) Organic Documents 17
(g) Transactions with Affiliates 18
(h) Issuance of Additional Rights, Options
and Warrants 18
(i) Antitakeover Statutes 18
(j) Governmental Approvals 18
(k) Issuance of Shares 18
SECTION 7 Warrant Certificates 19
SECTION 8 Execution of Warrant Certificates 19
SECTION 9 Registration 19
SECTION 10. Registration of Transfers and Exchanges 19
SECTION 11. Exercise of Warrants; Conversion of Warrants 21
SECTION 12. Payment of Taxes 23
SECTION 13. Mutilated or Missing Warrant Certificates 23
SECTION 14. Reservation of Warrant Shares 23
SECTION 15. Adjustment of Exercise Price and Number
of Warrant Shares Issuable 24
(a) Reorganization of the Company. 24
(b) When Issuance or Payment May Be Deferred. 25
SECTION 16. Fractional Interests 26
SECTION 17. Notice to Warrant Holders 26
SECTION 18. Cash Distributions and Dividends 27
SECTION 19. Put Rights; Tag-Along Rights 28
(a) Put by Holders 28
(b) Closing 28
(c) Restrictions on Purchase 29
(d) Tag-Along Rights 30
(e) Limitation on Put Rights of Others 31
(f) Severability 31
SECTION 20. Notices 31
SECTION 21. Costs and Expenses 32
SECTION 22. Indemnification 33
SECTION 23. Successors 34
SECTION 24. Termination 34
SECTION 25. Governing Law 34
SECTION 26. Benefits of this Agreement 34
SECTION 27. Counterparts 35
SECTION 28. Amendments; Waiver 35
SECTION 29. Waiver of Jury Trial 35
SECTION 30. Jurisdiction 35
SECTION 31. Specific Performance 36
SECTION 32. Confidentiality 36
SECTION 33. Entire Agreement 36
Exhibit A Form of Series E Warrant Certificate
Exhibit B Schedule of Exceptions
Exhibit C Holders of 5% of More of the Company's Stock
Exhibit D Existing Registration Rights
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of May 31, 1996 by and between AFGL
INTERNATIONAL, INC., a Nevada corporation (the "Company"), and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
corporation (the "Purchaser").
W I T N E S S E T H:
RECITALS:
A. Simultaneously herewith, the Purchaser is entering
into a Credit Agreement, dated of even date herewith, by and
among the Company, the Purchaser and various other lenders that
may become parties thereto (the "Lenders") and the Purchaser in
its capacity as Agent for the Lenders (the "Agent");
B. It is a condition precedent to the extensions of
credit by the Purchaser to the Company contemplated by the Credit
Agreement that the Company agree to issue to the Purchaser (1)
Series E Warrants initially exercisable for 575,000 shares of
Series E Convertible Preferred Stock, par value $0.001 per share,
of the Company ("Series E Convertible Preferred Stock") for an
exercise price of $0.02 per share;
C. Shares of Series E Convertible Preferred Stock are
convertible, at the option of each of the holders thereof, into
shares of common stock, par value $.01 per share, of the Company
(the "Common Stock"); and
D. The Purchaser and the Company desire to set forth
in this Agreement the terms and provisions of the Series E
Warrants (the "Warrants") and the conditions to the issuance and
sale of the Warrants to the Purchaser;
NOW, THEREFORE, in consideration of the premises and
the agreements herein set forth and to induce the Purchaser to
proceed with the transactions contemplated by the Credit
Agreement, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. Definitions.
(a) Defined Terms. Capitalized terms appearing herein
and not otherwise defined herein shall have the meanings ascribed
thereto in the Credit Agreement (irrespective of whether the
Credit Agreement is in effect or has been terminated). The
following terms (whether or not underscored) when used in this
Agreement, including its preamble and recitals, shall, except
where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and
plural forms thereof):
"Affiliate" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or under
common control with such Person (excluding any trustee under, or
any committee with responsibility for administering, any Plan).
A Person shall be deemed to be "controlled by" any other Person
if such other Person possesses, directly or indirectly, power (a)
to vote 5% or more of the securities having ordinary voting power
for the election of directors of such Person, or (b) to direct or
cause the direction of the management or policies of such Person
whether by contract or otherwise; provided that no Lender shall
be deemed to constitute an Affiliate of the Company solely by
virtue of holding Warrants or Warrant Shares.
"Agent" is defined in Recital A.
"Agreement" means this Warrant Purchase Agreement as in
effect on the date hereof and as hereafter amended, supplemented,
restated or otherwise modified.
"Authorized Officer" means, relative to the Company,
those officers of the Company whose signature, incumbency and
authority shall have been certified to the Agent and the Lenders
pursuant to Section 4.1.1 or Section 4.2.1 of the Credit
Agreement.
"Business Day" means any day which is neither a
Saturday or Sunday nor a legal holiday on which banks are
authorized or required to be closed in New York, New York.
"Capitalized Lease Liabilities" shall have the meaning
set forth in the Credit Agreement.
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation issued or guaranteed by the
United States of America or any agency or instrumentality thereof
and backed by the full faith and credit of the United States of
America, or issued by any state or political subdivision or
public instrumentality thereof, (i) which has a remaining
maturity at the time of purchase of not more than one (1) year or
which is subject to a repurchase agreement with any Lender or any
Eligible Lending Institution exercisable within one (1) year from
the time of purchase so long as such direct obligation remains in
the possession of the Borrower or in the possession of any Lender
and (ii) which, in the case of obligations of any state or
political subdivision or public instrumentality thereof, is rated
AA or better by Moody's Investors Service, Inc.;
(b) certificates of deposit, time deposits, demand
deposits and bankers' acceptances, having a remaining maturity at
the time of purchase of not more than one (1) year, issued by any
Lender or by any Eligible Lending Institution;
(c) corporate obligations rated Prime-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Corporation,
having a remaining maturity at the time of purchase of not more
than one (1) year;
(d) shares of funds registered under the Investment
Company Act of 1940, as amended, having assets of at least
$100,000,000 which invest only in obligations described above and
which shares are rated by Moody's Investors Service, Inc. or
Standard & Poor's Corporation in one of the two highest rating
categories assigned by such agencies for obligations of such
nature.
"Certificate of Designation" means the Certificate of
Designation, Preferences and Rights for the Series E Convertible
Preferred Stock filed with the Secretary of State of Nevada on
May 29, 1996.
"Change in Control" means (i) the failure of Gary S.
Goldstein to own at least 85% of the Stock of the Company which
he owns on the Closing Date, provided, however, that any Stock of
the Company sold or transferred to the Company in satisfaction of
the Goldstein Note shall not be considered for the purposes of
this clause (i), or (ii) the failure of either (A) Gary S.
Goldstein to be the Chief Executive Officer and President of the
Company and to be actively involved in the management of the
Company and its Subsidiaries or (B) any two of the following
individuals to be actively involved in the management of the
Company and its Subsidiaries at any time prior to the third
anniversary of the Closing Date or thereafter, at least one of
the following three individuals to be actively involved in the
management of the Company and its Subsidiaries at any time prior
to the fifth anniversary of the Closing Date: (1) Irene Cohen,
(2) Michael List, and (3) Ron Wendlinger, (iii) the acquisition
by any Person or group of Persons of beneficial ownership of more
than 20% of the outstanding Stock of the Company (within the
meaning of Section 13(d) or 14(d) of the Exchange Act and the
applicable rules and regulations thereunder); provided, however,
that this clause (iii) shall not apply to an underwriter(s) who
acquires Stock of the Company in connection with a public
offering of Stock of the Company which is being underwritten by
such underwriter(s), or (iv) during any period of 12 consecutive
months (whether commencing before or after the Closing Date), the
failure of individuals who on the first day of such period were
directors of the Company (together with any replacement or
additional directors who were nominated or elected by a majority
of directors then in office) to constitute a majority of the
Board of Directors of the Company.
"Closing" means the closing of the sale and purchase of
the Warrants as contemplated hereby.
"Closing Date" means May 31, 1996, the date of the
Closing.
"Common Stock" means shares now or hereafter authorized
of any class of common stock of the Company and any other capital
stock of the Company, however designated, that has the right
(subject to any prior rights of any class or series of preferred
stock) to participate in any distribution of the assets upon
voluntary or involuntary liquidation, dissolution or winding up
of the Company or in the earnings of the Company without limit as
to per share amount, and shall include, without limitation, the
presently authorized 20,000,000 shares of Common Stock, $0.01 par
value per share, of the Company. "Common Stock" shall not
include preferred or special stock.
"Company"is defined in the preamble to this Agreement.
"Contract Value per Share" means the value determined
in accordance with paragraphs (i), (ii) and, if the Company is
not a Public Company, (iii) below, and shall equal the highest
number yielded by such determination:
(i) If the Common Stock is traded on a national
securities exchange or quoted in a national inter-dealer
quotation system, the Contract Value per Share determined
pursuant to this paragraph (i) shall be an amount equal to
the average of the Quoted Prices for Common Stock for the
thirty (30) consecutive trading days commencing forty-five
(45) trading days before the date of determination.
(ii) The Contract Value per Share determined pursuant
to this paragraph (ii) shall equal the quotient of (A) five
and one half (5.5) times trailing twelve months EBITDA as of
the end of the end of the last fiscal month immediately
preceding a Put Date, minus (1) the outstanding principal
amount of Funded Indebtedness as of the last day of the
fiscal month ending immediately prior to the date of
determination, plus (2) cash and Cash Equivalent Investments
on the balance sheet of the Company and its Subsidiaries as
of the last day of the fiscal month ending immediately prior
to the date of determination, all determined in accordance
with GAAP, divided by (B) the sum of (1) the number of
shares of Common Stock outstanding on the date of
determination, plus (2) the number of Warrant Shares
purchasable and receivable upon exercise of the rights
represented by the Warrant Certificates as of the date of
determination.
(iii) If the Company is not a Public Company, the
Contract Value per Share determined pursuant to this
paragraph (iii) shall be equal to the Fair Market Value per
Share.
"Conversion Right" is defined in Section 11(b).
"Convertible Securities" means any evidences of
indebtedness, shares of stock or other securities which are
convertible into or exchangeable, with or without payment of
additional consideration in cash or property, for shares of
Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" means the Credit Agreement, dated of
even date herewith, by and among the Company, the Purchaser and
various other Lenders that may become parties thereto and the
Purchaser as Agent for the Lenders, as in effect on the date
hereof and as hereafter amended, supplemented, restated or
otherwise modified.
"EBITDA" shall have the meaning specified for such term
in the Credit Agreement as in effect on the Closing Date.
"Eligible Lending Institution" means a financial
institution having a branch or office in the United States and
having capital and surplus and undivided profits aggregating at
least $100,000,000 and whose long-term debt securities are rated
Prime-1 or better by Moody's Investor Service, Inc. or A-1 or
better by Standard & Poor's Corporation.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
"Excluded Shares" means (i) shares of Common Stock to
be issued upon exercise or conversion of the Company's Series A
Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C 8% Convertible Preferred Stock, Series D 8%
Convertible Preferred Stock and the Warrants, (ii) shares of
Stock issued on exercise of warrants to purchase Common Stock
which the Board of Directors has, by resolution duly adopted
prior to May 31, 1996, authorized to be granted or issued, not to
exceed 809,711 shares, and (iii) shares of Stock issued to
officers, directors or employees of, or consultants to, the
Company upon exercise of any stock option granted prior to the
Closing Date not in excess of 701,113 shares plus shares issued
or options granted to employees pursuant to a stock option plan
approved in good faith by the Board of Directors of the Company
after the Closing Date not exceeding 500,000 shares.
"Exercise Price" means the Series E Exercise Price.
"Fair Market Value per Share" means the fair market
value of a share of Common Stock of the Company, and shall be
equal to the quotient of (A) the fair market value of the Company
and its Subsidiaries taken as a whole on the date of
determination, taking into account all the factors relevant
thereto, including, without limitation, the highest of the prices
that could be obtained from an arms'-length sale without time
constraints of (1) all or substantially all of the assets of the
Company and the Subsidiaries subject to or after satisfaction of
all liabilities of the Company and the Subsidiaries or (2) all of
the Fully Diluted Shares of Common Stock of the Company, whether
by stock sale, merger, consolidation or otherwise, divided by (B)
the number of Fully Diluted Shares of Common Stock on the date of
determination. In no event shall the Fair Market Value per Share
be reduced or discounted on the basis that any securities to be
valued on the basis of such Fair Market Value per Share may
represent the right to acquire a minority interest in the Company
or may not be freely transferable under federal or state
securities laws, or for any other reason. The Fair Market Value
per Share shall be determined as provided in clause (a) or (b)
below, as applicable.
(a) In any circumstances in which the Fair Market
Value per Share is required to be determined, not later than ten
(10) days following the date as of which such determination is
required to be made, the Board of Directors of the Company shall
determine in good faith the Fair Market Value per Share, and the
Company shall give to the Holders (or, if such determination
affects less than all of the Holders, to the Holders so affected)
prompt written notice of such determination. If within thirty
(30) days after the date such notice is given, the Company and
the Required Holders agree upon the Fair Value per Share, then
the Fair Market Value per Share shall be as so agreed. If within
such 30-day period, the Company and the Required Holders do not
agree upon such Fair Market Value per Share, then the Fair Market
Value per Share shall be determined as provided in clause (b) of
this definition.
(b) If the Required Holders and the Company do not
agree upon such Fair Market Value per Share within the 30-day
period specified in clause (a) of this definition, then the
Required Holders and the Company shall appoint a recognized
investment banking firm of national reputation, reasonably
acceptable to the Required Holders and the Company. If the
Company and the Required Holders cannot agree on the appointment
of a mutually acceptable investment banking firm, or if the firm
so appointed declines or fails to serve, then the Required
Holders and the Company shall each choose one such investment
banking firm and the respective firms so chosen shall appoint
another recognized investment banking firm of national
reputation. The investment banking firm so selected shall
appraise the value of the Company (which shall be in the form of
a written report signed by such investment banking firm), and
such appraised value of the Company determined as herein provided
shall be final and conclusive and binding on the Company and the
Holders. If the appraised value of the Company as determined by
such investment banking firm is equal to or less than that
determined by the Board of Directors of the Company in accordance
with clause (a) of this definition, then all fees and expenses of
such investment banking firm shall be paid by the Required
Holders requesting such appraisal. If the appraised value of the
Company as determined by such investment banking firm is greater
than that determined by the Board of Directors in accordance with
clause (a) of this definition, then all fees and expenses of such
investment banking firm shall be paid by the Company.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means each accounting period ending
December 31.
"Fully Diluted Shares" means, as of any date of
determination, the number of shares of Common Stock of the
Company equal to the sum of (i) the number of shares of Common
Stock outstanding on such date of determination, plus (ii) the
number of Warrant Shares receivable upon conversion of all
outstanding Warrants as of such date of determination pursuant to
Section 11(b), plus (iii) the number of shares of Common Stock
that would be issued in respect of all Option Securities of the
Company outstanding and immediately exercisable as of such date
of determination if such Option Securities were to be converted
into shares of Common Stock in accordance with the following
formula:
X = Y (A - B)
A
where: X = the number of shares to be
issued to the holders of
such Option Securities;
Y = the number of shares for which such
Option
Securities are exercisable;
A = the Fair Market Value per
Share determined on the basis of
the then outstanding Common Stock
and assuming that all Option
Securities outstanding are
converted to Common Stock as of the
date of determination; and
B = the exercise price for such Option
Securities.
"Funded Indebtedness" means (i) the indebtedness under
the Credit Agreement, (ii) Capitalized Lease Liabilities, and
(iii) all other indebtedness of the Company and its Subsidiaries
which matures more than one year from the date of its creation or
matures within one year from such date but is renewable or
extendable, at the option of the Company or any of its
Subsidiaries, to a date more than one year from such date or
arises under an agreement which obligates the lender or lenders
to extend credit during a period of more than one year from such
date.
"GAAP" means generally accepted accounting principles
in effect from time to time in the United States.
"Governmental Authority" means any nation or
government, any state or other political subdivision thereof and
any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Holders" means, collectively, Purchaser and any
subsequent registered holders, from time to time, of Warrant
Securities; provided, however, that the rights of any Holder
under this Agreement shall terminate when all Warrant Shares
beneficially owned by such Holder have been effectively
registered under the Securities Act and sold pursuant to a
Registration Statement or Shelf Registration Statement covering
such Holder's Warrant Shares.
"Indemnified Liabilities" is defined in Section 22.
"Indemnified Parties" is defined in Section 22.
"Legally Available Funds" means, with respect to any
purchase of Warrant Securities pursuant to Section 19(a), the
amount of funds of the Company legally available therefor under
the corporate laws under which the Company is organized and
existing.
"Lenders" is defined in Recital A.
"Lien" means any mortgage, pledge, hypothecation,
assignment, charge, deposit arrangement, encumbrance, lien
(statutory or other), adverse claim or preference, priority or
other security agreement or preferential arrangement of any kind
or nature whatsoever (including any conditional sale or other
title retention agreement, any financing lease involving
substantially the same economic effect as any of the foregoing
and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Loans" shall have the meaning set forth in the Credit
Agreement.
"Obligations" means all obligations of the Company with
respect to the repayment or performance of any obligations
(monetary or otherwise) of the Company arising under or in
connection with the Credit Agreement, the "Notes" or the other
"Loan Documents" (as such terms are defined in the Credit
Agreement) and the Warrant Documents.
"Option Securities" is defined in Section 15.
"Organic Document" means, relative to any Person, its
articles or certificate of incorporation or organization or
certificate of limited partnership, its by-laws, partnership or
operating agreement or other organizational documents, and all
stockholders agreements, voting trusts and similar arrangements
applicable to any of its Stock or partnership interests or other
ownership interests, in each case, as amended.
"Person" means any natural person, corporation,
partnership, limited liability company, firm, association,
government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Preferred Stock" means shares now or hereafter
authorized of any class of capital stock of the Company other
than Common Stock, and shall include, without limitation, the
presently authorized 5,000,000 shares of Preferred Stock of which
(i) 2,800 shares have been designated Series A 8% Convertible
Preferred Stock, $0.001 par value, 2,800 shares of which are
outstanding, (ii) 6,858 shares have been designated Series B
Convertible Preferred Stock, $0.001 par value, 6,858 shares of
which are outstanding, (iii) 150 shares have been designated
Series C 8% Convertible Preferred Stock, $0.001 par value, 101.74
shares of which are outstanding, (iv) 80 shares have been
designated Series D 8% Convertible Preferred Stock, $0.001 par
value, of which are outstanding, (v) 575,000 shares of
Series E Convertible Preferred Stock, $0.001 par value, of which
no shares are outstanding, and (vi) 4,415,112 shares are
undesignated and unissued.
"Prospective Purchaser" shall have the meaning set
forth in Section 19(d).
"Public Company" means a company (i) which is subject
to the reporting requirements of Section 15(d) of the Exchange
Act, or (ii) any of whose securities are registered pursuant to
Section 12(b) or 12(g) of the Exchange Act.
"Put Closing Date" is defined in Section 19(b).
"Put Event" means any of the following: (a) any
representation or warranty of the Company under any Warrant
Document is or shall be incorrect when made in any material
respect; (b) the Company shall default in the due performance and
observance of any of its obligations under any Warrant Document
and such default shall have continued for a period of thirty (30)
days after written notice thereof has been given to the Company
by the Required Holders; (c) an Event of Default shall have
occurred and be continuing under the Credit Agreement; (d) a
merger or consolidation of the Company with or into any other
Person or any acquisition of the Company by means of a share
exchange; and (e) a Change of Control.
"Put Exercise Notice" is defined in Section 19(a).
"Put Purchase Price" is the amount payable to each
Holder for such Holder's Warrant Securities, as calculated in
accordance with Section 19(a).
"Put Notice" is the written notice to the Company
specifying the number and type of Warrant Securities with respect
to which the Put Right is being exercised.
"Put Right" is the right of each Holder to require that
the Company purchase all or any portion of the Warrant Securities
then owned by such Holder.
"Quoted Price" of Common Stock for each day means the
last reported sales price of Common Stock on such day as reported
by NASDAQ or, if Common Stock is listed on a national securities
exchange, the last reported sales price of Common Stock on such
exchange (which shall be consolidated trading if applicable to
such exchange) on such day, or if not so reported or listed, the
average of the last reported bid and ask prices of Common Stock
on such day, in each case as appropriately adjusted for any stock
splits or reverse stock splits occurring after the Closing Date.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated of even date herewith, between the
Company and the Purchaser, as in effect on the date hereof and as
hereafter amended, supplemented, restated or otherwise modified.
"Registration Statement" is defined in the Registration
Rights Agreement.
"Regulatory Approval" means each and every approval,
consent, filing and registration by or with any federal, state or
other regulatory authority (domestic or foreign) necessary to
authorize or permit the execution, delivery or performance of
this Agreement or any other Warrant Document, for the validity or
enforceability hereof or thereof or for the consummation of the
transactions contemplated hereby or thereby.
"Required Holders" means Holders holding at least 66-
2/3% of the Warrant Securities outstanding (treating all Warrants
as fully exercised for the Warrant Shares to which Holders would
be entitled upon exercise of such Warrants) or, if any matter
affects the interest of less than all of the Holders, then
Holders holding at least 66-2/3% of the Warrant Securities so
affected, as the context may require.
"Restriction on Purchase" exists if, at the time of a
Put Closing, (i) the purchase of such Warrant Securities would
result in a default under or a breach of any Restrictive
Provision (assuming that the covenants applicable to the Company
at the end of the Fiscal Quarter in which such purchase is to
occur were applicable on the date of such purchase), or (ii) the
Company would not have sufficient Legally Available Funds to pay
the Purchase Price for the Warrant Securities.
"Restrictive Provision" means any of the financial
covenants contained in Section 6.2.4 or the negative covenants
contained in Section 6.2.8 of the Credit Agreement, in each case
as the same may be amended from time to time; provided, however,
that to the extent noncompliance with any such covenant as a
result of the purchase by the Company of Warrant Securities is
waived in accordance with Section 9.1 of the Credit Agreement,
such covenant shall not constitute a Restrictive Provision.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended from time to time.
"Securities Legend" is defined in Section 10.
"Selling Holder" is defined in Section 19(c).
"Selling Holder Notice" is defined in Section 19(d).
"Selling Holder Offer" is defined in Section 19(d).
"Series E Convertible Preferred Stock" means the Series
E Convertible Preferred Stock, $0.001 par value per share, of the
Company, convertible into Common Stock at the option of the
Holder.
"Series E Exercise Price" means an amount per share
equal to $0.02.
"Series E Warrant Certificates" means the certificates
evidencing the Series E Warrants in the form of Exhibit A.
"Series E Warrants" means the warrants referred to in
clause (1) of Recital B as evidenced by the Series E Warrant
Certificates.
"Stock" means any capital stock of the Company.
"Shelf Registration Statement" is defined in the
Registration Rights Agreement.
"Subsidiary" of any corporation means any other
corporation greater than 50% of the outstanding shares of Stock
of which having ordinary voting power for the election of
directors is owned directly or indirectly by such corporation,
and, except as otherwise indicated herein, references to
Subsidiaries shall refer to Subsidiaries of the Company.
"Substitute Securities" is defined in Section 15.
"Transfer Agent" is defined in Section 14.
"Warrant Certificates" means, the Series E Warrant
Certificates.
"Warrant Documents" means, collectively, this
Agreement, the Warrants, the Registration Rights Agreement, the
Certificate of Designation and any other document, instrument or
agreement executed or delivered in connection with any of the
foregoing to which the Company is a party, but excluding the
Credit Agreement and the other Loan Documents (as defined in the
Credit Agreement).
"Warrant Securities" means, collectively, the Warrants
and Warrant Shares.
"Warrant Shares" means the securities which a Holder
may acquire upon exercise or conversion of a Warrant, together
with any other securities which such Holder may acquire on
account of any such securities, including, without limitation, as
the result of the shares of Series E Convertible Preferred Stock
being converted into shares of Common Stock and/or any dividend
or other distribution on Common Stock, any split-up of such
Common Stock, or in accordance with a recapitalization, merger,
consolidation, share exchange, reorganization or other
transaction or series of related transactions in which shares of
Common Stock are changed into or exchanged for securities of
another corporation or the exercise of any preemptive right (or
the exercise or conversion of any security which such Holder may
acquire in connection with the exercise of any preemptive right)
with respect to any such Common Stock.
"Warrants" means the Series E Warrants together with
any warrants issued in substitution or replacement therefor.
(b) Cross-References. Unless otherwise specified,
references in this Agreement to any Article or Section are
references to such Article or Section of this Agreement, and
unless otherwise specified, references in any Article, Section,
or definition to any clause are references to such clause of such
Section, Article or definition.
SECTION 2. Purchase and Sale of Warrants; Closing.
(a) The Company hereby agrees to sell to the Purchaser
and, subject to the provisions of Section 4, the Purchaser hereby
agrees to purchase from the Company for a total purchase price of
$1.00 Series E Warrants to purchase 575,000 shares of Series E
Convertible Preferred Stock of the Company for an initial
exercise price of $0.02 per share.
(b) The sale and purchase of the Warrants shall take
place at the Closing at the offices of Christy & Viener, 620
Fifth Avenue, New York, New York 10020-2457, at 10:00 a.m. on May
31, 1996, or such other place and time as may be agreed upon by
the Purchaser and the Company. At the Closing, the Company will
deliver to the Purchaser, upon payment therefor, (1) Series E
Warrant Certificates in the form of Exhibit A evidencing the
Series E Warrants to be purchased by the Purchaser in such
denomination or denominations as the Purchaser may request and
registered in its name or the name of its nominee and dated the
Closing Date.
SECTION 3. Investment Representations. Purchaser
represents and warrants that it is purchasing the Warrants and
any Warrant Shares issuable upon exercise or conversion of the
Warrants for its own account, for investment purposes and not
with a view to the distribution thereof; provided, however, that
the foregoing representation shall not be construed as imposing
any limitation on the Purchaser's right to transfer any of the
Warrants or Warrant Shares that is not otherwise expressly set
forth in the Warrant Documents or required under applicable law.
Each Holder agrees that it will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any of the Warrant Securities (or solicit any offers
to buy, purchase or otherwise acquire or take a pledge of the
Warrant Securities), except in compliance with the Securities Act
and applicable state securities laws. Each Holder agrees that it
will not transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any of the Warrant Securities if any such disposition
would cause the Company to be required to register any Warrant
Securities pursuant to Section 12(g) of the Exchange Act.
SECTION 4. Conditions Precedent. The obligation of
the Purchaser to purchase the Series E Warrants on the Closing
Date pursuant to Section 2 hereof shall be subject to the prior
or concurrent satisfaction of each of the conditions precedent
set forth in this Section 4, except as the Purchaser shall
otherwise consent:
(a) the accuracy of the representations set forth in
this Agreement and in the other Warrant Documents in all material
respects;
(b) the compliance by the Company in all material
respects with all covenants and agreements required to be
performed by it on or prior to the Closing;
(c) the satisfaction of all of the conditions
precedent set forth in Sections 4.1 through 4.2.6 of the Credit
Agreement;
(d) Purchaser's receipt of Warrant Certificates
registered in Purchaser's name (or in the name of a nominee of
Purchaser) evidencing the Warrants;
(e) Purchaser's receipt of the Registration Rights
Agreement with respect to the Warrants, in form and substance
satisfactory to Purchaser, duly executed and delivered by the
Company and dated the Closing Date;
(f) Purchaser's receipt of a copy of the Company's
articles of incorporation including provisions satisfactory to
the Purchaser relating to the Company's capital structure,
certified as of a recent date by the Secretary of State of
Nevada.
(g) Purchaser's receipt of a certificate of the
secretary or an assistant secretary of the Company, together with
true and correct copies of the resolutions of the Board of
Directors and, to the extent necessary, the stockholders of the
Company authorizing or ratifying the execution, delivery and
performance of this Agreement and the other Warrant Documents,
authorizing the adoption and filing of the Certificate of
Designation and authorizing the creation and issuance of the
Warrants and the Warrant Shares; and setting forth the names of
the Authorized Officers of the Company executing this Agreement
and the other Warrant Documents, together with a sample of the
true signature of each such Authorized Officer;
(h) Purchaser's receipt of certified copies of all
documents evidencing any other necessary corporate action,
consents and governmental approvals or filings (if any) with
respect to this Agreement and the other Warrant Documents;
(i) Purchaser's receipt of opinions, dated the Closing
Date, from Christy & Viener, counsel to the Company, and Kravitz,
Schnitzer & Sloane, special Nevada counsel to the Company, in
form and substance satisfactory to Purchaser and its counsel, and
covering such matters as the Purchaser may request;
(j) All proceedings taken in connection with the
transactions contemplated by this Agreement and the other Warrant
Documents shall be satisfactory in form and substance to
Purchaser and its counsel, and Purchaser and its counsel shall
have received copies (executed or certified as may be
appropriate) of all documents, instruments and agreements which
Purchaser or its counsel may request in connection with the
consummation of such transactions.
SECTION 5. Warranties, etc. In order to induce
Purchaser to enter into this Agreement, to engage in the
transactions contemplated herein and in the other Warrant
Documents and to purchase the Warrants hereunder, the Company
represents and warrants unto Purchaser as set forth in this
Section 5, except as provided in the Schedule of Exceptions
attached as Exhibit B, each and all of which representations and
warranties are made as of the Closing Date and shall survive the
execution and delivery of this Agreement and the Closing
hereunder:
(a) Credit Agreement Warranties. Each of the
representations and warranties of the Company set forth in the
Credit Agreement is true and correct.
(b) Power, Authority, etc. The Company has full power
and authority to enter into and perform its obligations under
this Agreement and each of the other Warrant Documents.
(c) Due Authorization. The Certificate of Designation
has been duly adopted pursuant to applicable law, has been duly
filed with the Nevada Secretary of State and is in full force and
effect. The execution and delivery by the Company of this
Agreement and each of the other Warrant Documents, the
performance by the Company of its obligations hereunder and
thereunder and the issuance of the Warrants hereunder by the
Company have been duly authorized by all necessary corporate
action, do not require any Regulatory Approval (except those
Regulatory Approvals already obtained), do not and will not
conflict with, result in any violation of, or constitute any
default under, any provision of any Organic Document of the
Company or any Subsidiary, any agreement or instrument to which
the Company or any of it's Subsidiaries is a party or by which it
or any of its property is bound, or any law or governmental
regulation or court decree or order and will not result in or
require the creation or imposition of any Lien on any of the
Company's or any Subsidiary's properties pursuant to the
provisions of any such agreement or instrument. No vote
(including any vote under the rules of any securities exchange or
trading system or market on which any of the Company's securities
are listed or traded) on the part of the stockholders of the
Company, other than those which have been obtained, is required
to approve or authorize the adoption and filing of the
Certificate of Designation, any of the transactions contemplated
by this Agreement, any of the other Warrant Documents or any of
the Loan Documents or the authorization of the issuance of Series
E Convertible Preferred Stock or the Warrant Securities or any
shares of capital stock to be issued pursuant to the Loan
Documents. None of the transactions contemplated by this
Agreement, any of the other Warrant Documents or any of the Loan
Documents (including the issuance of Series E Convertible
Preferred Stock, the Warrant Securities or any shares of capital
stock to be issued pursuant to the Loan Documents) will give rise
to any payment or the acceleration of any obligation (whether
with or without the passage of time or upon the occurrence of any
event) to any director, officer or employee of the Company or any
Subsidiary.
(d) Absence of Takeover Statutes. The Board of
Directors of the Company has approved for purposes of Sections
78.411 through 78.444 inclusive of the Nevada Revised Statutes
(the "Nevada Business Combination Statute-Combinations with
Interested Stockholders) the transactions contemplated by this
Agreement, the Warrant Documents and the issuance of the Warrant
Securities. No other "fair price," "moratorium," "control share
acquisition," "shareholder protection", or similar antitakeover
statute will apply to any Holder, this Agreement, any of the
other Warrant Documents or the authorization or issuance of the
Warrant Securities. The Company is not a party to, and is not
subject to, any stockholder rights plan, rights agreement or
similar agreement, arrangement or understanding, other than as
may result from the place of incorporation or domicile of any
Holder.
(e) Validity, etc. This Agreement and each of the
other Warrant Documents constitutes the legal, valid and binding
obligations of the Company enforceable in accordance with their
respective terms, subject to (i) the effect of any applicable
bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally; and (ii) the effect of general
principles of equity (regardless of whether considered in a
proceeding in equity or at law).
(f) Capitalization and Ownership of the Company. The
authorized capital stock of the Company consists of (1)
20,000,000 shares of Common Stock, 4,899,592 of which will be
outstanding on the Closing Date; and (2) 5,000,000 shares of
Preferred Stock of which (i) 2,800 shares have been designated
Series A 8% Convertible Preferred Stock, $0.001 par value, 2,800
shares of which are outstanding, (ii) 6,858 shares have been
designated Series B Convertible Preferred Stock, $0.001 par
value, 6,858 shares of which are outstanding, (iii) 150 shares
have been designated Series C 8% Convertible Preferred Stock,
$0.001 par value, 101.74 shares of which are outstanding, (iv) 80
shares have been designated Series D 8% Convertible Preferred
Stock, $0.001 par value, shares of which are outstanding,
(v) 575,000 shares have been designated Series E Convertible
Preferred Stock, $0.001 par value, of which no shares are
outstanding; and (vi) 4,415,112 shares are undesignated and
unissued. The record and, to the best knowledge of the Company,
beneficial ownership of five percent (5%) or more of the
outstanding capital stock of the Company as of the Closing Date
is set forth in Exhibit C. All such outstanding shares are duly
authorized, validly issued, fully paid and nonassessable, and are
not, and will not have been, issued in violation of any
preemptive rights. Except as set forth in Exhibit C, no issued,
no authorized but unissued and no treasury shares of capital
stock of the Company are subject to any preemptive right, option,
warrant, right of conversion or purchase or any similar right
issued or granted by the Company or, to the best knowledge of the
Company, by any of its shareholders. Except as set forth in the
Organic Documents of the Company or in Section 19, there are no
agreements or understandings with respect to the voting, sale or
transfer of any shares of capital stock of the Company to which
the Company or, to the best knowledge of the Company, any of its
Affiliates is a party.
(g) Authorization and Issuance of Warrants. The
issuance of the Warrants has been duly authorized and, upon
delivery to Purchaser of the Warrant Certificates therefor in
accordance with the terms hereof, the Warrants will have been
validly issued and fully paid and nonassessable, free and clear
of all Liens and the issuance thereof will not give rise to any
preemptive rights. The issuance of the shares of Series E
Convertible Preferred Stock subject to the Warrants has been duly
authorized and, when issued upon exercise of the Warrants in
accordance with the terms thereof, such shares will have been
validly issued and will be fully paid and nonassessable. The
issuance of the shares of Common Stock issuable upon conversion
of the Series E Convertible Preferred Stock has been duly
authorized and, when issued upon conversion of the Series E
Convertible Preferred Stock in accordance with the terms thereof,
such shares will have been validly issued and will be fully paid
and nonassessable and the issuance thereof will not give rise to
any preemptive rights. 575,000 shares of Series E Convertible
Preferred Stock have been duly reserved for issuance upon the
exercise of the Warrants. Except as set forth in the
Registration Rights Agreement and on Exhibit D, no Person has the
right to demand or any other right to cause the Company to file
any registration statement under the Securities Act relating to
any securities of the Company or any right to participate in the
any such registration.
(h) Securities Laws. In reliance on the investment
representations contained in Section 3, the offer, issuance, sale
and delivery of the Warrants to the Purchaser as provided in this
Agreement, the issuance and delivery of Series E Convertible
Preferred Stock upon the exercise of the Warrants by the
Purchaser, and the conversion of the Series E Convertible
Preferred Stock into Common Stock, are and will be exempt from
the registration requirements of the Securities Act and all
applicable state securities laws, as such laws are currently in
effect.
(i) No Integration of Issue. Neither the Company nor
any Person authorized or employed by the Company as agent, broker
or otherwise in connection with the offering of the Warrants has
offered the Warrants for sale to, or solicited any offers to buy
the Warrants from, or otherwise approached or negotiated or
communicated in respect thereof with, anyone other than
Purchaser. Neither the Company nor any Person acting on behalf
of the Company will sell or offer any class of securities to, or
solicit any offers to buy any class of securities from, or
otherwise approach, negotiate or communicate in respect thereof
with, any Person so as to require the registration of the
Warrants under the Securities Act or any applicable state
securities laws.
SECTION 6. Covenants. The Company agrees with each
Holder that, until the termination of this Agreement pursuant to
Section 24 hereof, the Company will perform the obligations set
forth in this Section 6:
(a) Financial and Business Information. For so long
as the Company is not a Public Company, the Company will furnish,
or will cause to be furnished, to each Holder copies of the
following financial statements, reports and information:
(i) promptly when available and in any event
within ninety (90) days after the close of each Fiscal
Year, a consolidated and consolidating balance sheet at
the close of such Fiscal Year, and related consolidated
and consolidating statements of operations, retained
earnings, and cash flows for such Fiscal Year, of the
Company and its Subsidiaries (with comparable
information at the close of and for the prior Fiscal
Year), certified (in the case of consolidated
statements) without qualification by Mortenson & Co.,
Inc. or other independent public accountants
satisfactory to the Required Holders, together with a
report containing a description of projected business
prospects (including capital expenditures) and
management's discussion and analysis of the financial
condition and results of operation of the Company and
its Subsidiaries; and
(ii) promptly when available and in any event
within forty-five (45) days after the close of each
Fiscal Quarter, consolidated and consolidating balance
sheets at the close of such Fiscal Quarter, and
consolidated and consolidating statements of
operations, retained earnings, and cash flows for such
Fiscal Quarter and for the period commencing at the
close of the previous Fiscal Year and ending with the
close of such Fiscal Quarter, of the Company and its
Subsidiaries (with comparable information at the close
of and for the corresponding Fiscal Quarter of the
prior Fiscal Year and for the corresponding portion of
such prior Fiscal Year), certified by the chief
financial or executive officer of the Company, together
with a brief report containing management's discussion
and analysis of the financial condition and results of
operations of the Company and its Subsidiaries
(including a discussion and analysis of any changes
compared to prior results) generally similar in scope
to that which would be required in a quarterly report
on Form 10-Q filed under the Exchange Act (delivery to
the Holders of such a quarterly report on Form 10-Q
with respect to any Fiscal Quarter will satisfy the
requirements of this clause (a)(ii) with respect to
such Fiscal Quarter.
(iii) promptly when available and in any event
within thirty (30) days after the close of each
calendar month of each Fiscal Year consolidated and
consolidating balance sheets at the close of such
month, and consolidated and consolidating statements of
operations, retained earnings, and cash flows for such
month and for the period commencing at the close of the
previous Fiscal Year and ending with the close of such
month, of the Company and Subsidiaries (with comparable
information at the close of and for the corresponding
month of the prior Fiscal Year and for the
corresponding portion of such prior Fiscal Year),
certified by the principal accounting or chief
financial Authorized Officer of the Company, together
with a description of projected business prospects
(including capital expenditures) and a brief report
containing management's discussion and analysis of the
financial condition and results of operations of the
Company and its Subsidiaries (including a discussion
and analysis of any changes compared to prior results);
and
(iv) promptly upon the sending or filing thereof,
copies of all reports that the Company sends to its
security holders generally, and copies of all reports
and registration statements that the Company or any of
its Subsidiaries files with the Securities and Exchange
Commission or any national securities exchange; and
(b) Public Company Information. During any period
while the Company is a Public Company:
(i) Filings. The Company will file with the SEC
on or before the required date all regular or periodic
reports required pursuant to the Exchange Act and
deliver to each Holder, promptly upon its becoming
available, one copy of each report, notice or proxy
statement sent by the Company to its stockholders
generally, and of each regular or periodic report filed
pursuant to the Exchange Act and any registration
statement, prospectus or written communication (other
than transmittal letters) pursuant to the Securities
Act filed by the Company with (i) the SEC or (ii) any
national securities exchange; and
(ii) Rule 144. The Company will make publicly
available information concerning the Company sufficient
to allow any Holder to dispose of all or a portion of
the Warrant Securities pursuant to Rule 144 (or any
successor provision) promulgated by the SEC under the
Securities Act.
(c) Maintenance of Corporate Existences, etc. Except
as permitted pursuant to Section 6.2.10 of the Credit Agreement,
the Company will cause to be done at all times all things
necessary to maintain and preserve the corporate existences of
the Company and its Subsidiaries.
(d) Maintenance of Books and Records. The Company
will, and will cause each Subsidiary to, keep books and records
reflecting all of its business affairs and transactions in
accordance with GAAP.
(e) Inconsistent Agreements. The Company will not,
and will not permit any Subsidiary to, enter into any agreement
containing any provision which would be violated or breached by
the issuance of the Warrants or the Warrant Shares or by the
performance by the Company or any Subsidiary of its obligations
under this Agreement or under any other Warrant Documents.
(f) Organic Documents. So long as any Warrant
Securities are outstanding, the Company's articles of
incorporation shall contain the provisions regarding the Series E
Convertible Preferred Stock set forth in its Organic Documents as
constituted on the date hereof. The Company shall not permit to
occur any amendment, alteration or modification to its Organic
Documents, as constituted on the date hereof, the effect of
which, in Purchaser's or the Required Holders' judgment, would be
to alter, impair or adversely affect either the rights and
benefits of Purchaser or the Holders or the duties and
obligations of the Company under this Agreement and the other
Warrant Documents.
(g) Transactions with Affiliates. The Company will
not, and will not permit any Subsidiary to, enter into, or cause,
suffer or permit to exist:
(i) any arrangement or contract with any of its
Affiliates of a nature customarily entered into by Persons
which are Affiliates of each other (including management or
similar contracts or arrangements relating to the allocation
of revenues, expenses or otherwise) requiring any payments
to be made by the Company or any of its Subsidiaries to any
Affiliate, other than (i) any arrangement solely among the
Company and its wholly-owned Subsidiaries, and (ii) the
Merger; and
(ii) any other transaction, arrangement or contract
with any of its Affiliates which is on terms which are less
favorable than are obtainable in a transaction from any
Person which is not one of its Affiliates.
(h) Issuance of Additional Rights, Options and
Warrants. The Company will not issue any rights, options or
warrants to subscribe for or purchase or otherwise acquire Common
Stock or Convertible Securities, whether or not the right to
exercise such rights, options or warrants or to convert or
exchange such Convertible Securities is immediately exercisable
or is conditioned upon the passage of time, an occurrence or non-
occurrence of some other event, or both, other than any rights,
options or warrants which constitute Excluded Shares.
(i) Antitakeover Statutes. The Company shall take all
action necessary to avoid the application of any "fair price,"
"moratorium," "control share acquisition," "business
combination," "shareholder protection" or similar antitakeover
statute to the transactions contemplated by this Agreement or any
other Warrant Document (including the issuance of the Warrant
Securities).
(j) Governmental Approvals. The Company will, and
will cooperate with the Holders to, secure all necessary
consents, approvals, authorizations and exemptions from all
governmental authorities in connection with the exercise of the
Warrants, the issuance of shares of Series E Convertible
Preferred Stock upon exercise of the Warrants and the issuance of
shares of Common Stock upon the conversion of such shares of
Series E Convertible Preferred Stock.
(k) Issuances of Shares. The Company will not issue
any shares of Series E Convertible Preferred Stock other than
pursuant to the exercise of the Warrants.
SECTION 7. Warrant Certificates. The Warrant
Certificates to be delivered pursuant to this Agreement shall be
in registered form only as provided in Section 9 and in the form
set forth as Exhibit A.
SECTION 8. Execution of Warrant Certificates. Warrant
Certificates shall be signed on behalf of the Company by the duly
authorized officers of the Company under its corporate seal.
Each such signature upon the Warrant Certificates may be in the
form of a facsimile signature of the duly authorized officers of
the Company and may be printed or otherwise reproduced on the
Warrant Certificates and for that purpose the Company may adopt
and use the facsimile signature of any person who shall have been
a duly authorized officer of the Company, notwithstanding the
fact that at the time the Warrant Certificates shall be delivered
or disposed of such person shall have ceased to hold such office.
The seal of the Company may be in the form of a facsimile thereof
and may be impressed, affixed, imprinted or otherwise reproduced
on the Warrant Certificates. In case any officer of the Company
who shall have signed any of the Warrant Certificates shall cease
to be such officer before the Warrant Certificates so signed
shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as
though such person had not ceased to be such officer of the
Company; and any Warrant Certificate may be signed on behalf of
the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer
of the Company to sign such Warrant Certificate although at the
date of the execution of this Agreement such person was not such
officer.
SECTION 9. Registration. The Company shall number and
register the Warrant Certificates in a register as they are
issued. The Company may deem and treat the registered holder(s)
of the Warrant Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing
thereon made by anyone) for all purposes and shall not be
affected by any notice to the contrary.
SECTION 10. Registration of Transfers and Exchanges.
(a) The Company shall from time to time register the transfer of
any outstanding Warrant Certificates in a Warrant register to be
maintained by the Company upon surrender of such Warrant
Certificates accompanied by a written instrument or instruments
of transfer in form reasonably satisfactory to the Company, duly
executed by the registered Holder or Holders thereof or by the
duly appointed legal representative thereof or by a duly
authorized attorney; provided, however, that prior to effecting
such transfer, the transferee shall agree (in a form reasonably
satisfactory to the Company) to be bound by the terms of this
Agreement, including, without limitation, Section 19. Upon any
such registration of transfer, a new Warrant Certificate shall be
issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled and disposed of by the Company.
Until the Warrant Certificate is transferred on the Warrant
register of the Company, the Company may treat the Holder as
shown in the Warrant register as the absolute owner of the
Warrant Certificate for all purposes, and notwithstanding any
notice to the contrary. The Company agrees that it will make the
Warrant register available for inspection by the Holders during
normal business hours at its office and that the Holders may rely
on the Warrant register for purposes of complying with the
preceding sentence.
(b) The Warrants shall be transferable in whole or in
part and, in the event that a Warrant Certificate is transferred
in respect of fewer than all the Warrants evidenced by the
Warrant Certificate, a new Warrant Certificate evidencing the
remaining Warrant or Warrants will be issued and delivered
pursuant to the provisions of this Section 10 and of Section 8.
(c) If any transfer of Warrants or Warrant Shares is
not made pursuant to an effective registration statement under
the Securities Act, the Holder will, if reasonably requested by
the Company, deliver to the Company an opinion of counsel, which
may be counsel to the Holder but which must be reasonably
satisfactory to the Company, reasonably satisfactory in form,
scope and substance to the Company, that such Warrants or Warrant
Shares may be sold without registration under the Securities Act
and applicable state securities laws, as well as:
(1) an investment covenant reasonably
satisfactory to the Company signed by the proposed
transferee (except that no such covenant will be required in
connection with a transfer effected in accordance with Rule
144A under the Securities Act);
(2) an agreement by such transferee to the
impression of the restrictive legends set forth below on the
Warrant Certificate or on the certificate evidencing such
Warrant Shares.
The Holders agree that each Warrant Certificate and each
certificate representing Warrant Shares will bear the following
legend (the "Securities Legend"):
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS.
SAID SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION, OR AN
OPINION OF COUNSEL (WHICH MAY BE COUNSEL
TO THE HOLDER) AS TO AN EXEMPTION, FROM
THE REGISTRATION PROVISIONS OF SAID ACT
OR LAWS."
Notwithstanding the foregoing provisions of this Section 10, the
restrictions upon the transferability of the Warrant Securities
and the Securities Legend requirement set forth above in this
Section 10 shall terminate as to any of the Warrant Securities
(i) when and so long as such Warrant Security shall have been
effectively registered under the Securities Act and disposed of
pursuant thereto or (ii) when the Company shall have received an
opinion of counsel reasonably satisfactory to it that such
Securities Legend is not required in order to ensure compliance
with the Securities Act and applicable state securities laws.
Whenever the restrictions imposed by this Section 10 shall
terminate as to any Warrant Security, as hereinabove provided,
the Holder thereof shall be entitled to receive from the Company,
at the expense of the Company, a new Warrant Certificate or
certificate for Warrant Shares bearing the following legend in
place of the Securities Legend set forth above:
"THE RESTRICTIONS ON TRANSFERABILITY OF
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE TERMINATED ON
______________, 19__, AND ARE OF NO
FURTHER FORCE AND EFFECT."
The Holders further agree that each Warrant Certificate and each
certificate representing Warrant Shares will bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS OF
A WARRANT PURCHASE AGREEMENT, DATED AS
OF MAY 31, 1996, BETWEEN AFGL
INTERNATIONAL, INC. (THE "COMPANY") AND
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION (THE "PURCHASER"),
AND A REGISTRATION RIGHTS AGREEMENT,
DATED AS OF MAY 31, 1996, AMONG THE
COMPANY AND THE PURCHASER, COPIES OF
EACH OF WHICH ARE ON FILE AT THE MAIN
OFFICE OF THE COMPANY. ANY SALE OR
TRANSFER OF THE SECURITIES EVIDENCED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS
OF THOSE AGREEMENTS AND ANY SALE OR
TRANSFER OF SUCH SECURITIES IN VIOLATION
OF SAID AGREEMENTS SHALL BE INVALID."
Warrant Certificates may be exchanged at the option of the
Holder(s) thereof when surrendered to the Company at its office
for another Warrant Certificate or other Warrant Certificates of
like tenor and representing in the aggregate a like number of
Warrants, including, without limitation, upon an adjustment in
the Exercise Price or in the number of Warrant Shares purchasable
upon exercise of the Warrants. Warrant Certificates surrendered
for exchange shall be canceled and disposed of by the Company.
SECTION 11. Exercise of Warrants; Conversion of
Warrants. (a) Subject to the terms of this Agreement, each
Holder shall have the right, which may be exercised at any time
or from time to time prior to May 31, 2004, to receive from the
Company the number of fully paid and nonassessable Warrant Shares
which such Holder may at the time be entitled to receive on
exercise of all or any part of the Warrants and payment of the
appropriate Exercise Price then in effect for such Warrant
Shares. A Warrant may be exercised upon surrender to the Company
at its office designated for such purpose (the address of which
is set forth in Section 20) of the certificate or certificates
evidencing the Warrants to be exercised with the form of election
to purchase attached thereto properly completed and signed, upon
payment to the Company of the appropriate Exercise Price for the
number of Warrant Shares in respect of which such Warrants are
then exercised. Payment of the aggregate Exercise Price shall be
made in cash or by check payable to the order of the Company.
Upon such surrender of Warrant Certificates and payment of the
appropriate Exercise Price, the Company shall issue and cause to
be delivered with all reasonable dispatch (and in any event
within five (5) Business Days of such surrender and payment) to
or upon the written order of the Holder, and in the name of the
Holder or the Holder's nominee, a certificate or certificates for
the number of full Warrant Shares issuable upon the exercise of
such Warrants together with such other property (including cash)
and securities as may then be deliverable upon such exercise,
including cash for fractional Warrant Shares as provided in
Section 16. Such certificate or certificates shall be deemed to
have been issued and the Person so named therein shall be deemed
to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrant Certificates and
payment of the Exercise Price.
(b) Subject to the terms of this Agreement, each
Holder shall have the right (the "Conversion Right"), which may
be exercised at any time or from time to time prior to May 31,
2004, to convert the Warrants, in whole or in part, into the
number of fully paid and nonassessable Warrant Shares calculated
pursuant to the following formula:
X = Y (A-B)
A
where: X = the number of Warrant Shares to be
issued to the Holders;
Y = the number of Warrant Shares for which
the Conversion Right
is being exercised;
A = the Fair Market Value per Share as of
the date of exercise of such Conversion
Right; and
B = the Exercise Price with respect to such
Warrants.
A Warrant may be converted upon surrender to the Company at its
office designated for such purpose (the address of which is set
forth in Section 20) of the certificate or certificates
evidencing the Warrants to be converted with the form of election
to convert attached thereto properly completed and signed. Upon
such surrender of Warrant Certificates, the Company shall issue
and cause to be delivered with all reasonable dispatch (and in
any event within ten (10) Business Days of such surrender) to or
upon the written order of the Holder, and in the name of the
Holder or the Holder's nominee, a certificate or certificates for
the number of full Warrant Shares issuable upon the conversion of
such Warrants together with such other property (including cash)
and securities as may then be deliverable upon such conversion,
including cash for fractional Warrant Shares as provided in
Section 16. Such certificate or certificates shall be deemed to
have been issued and the Person so named therein shall be deemed
to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrant Certificates.
(c) The Warrants shall be exercisable and convertible,
at the election of the Holders thereof, either in full or from
time to time in part, and in the event that a Warrant Certificate
is exercised or converted in respect of fewer than all of the
Warrant Shares issuable pursuant to such Warrant Certificate at
any time prior to the date of expiration of the Warrants, a new
Warrant Certificate evidencing the remaining Warrant or Warrants
will be issued and delivered pursuant to the provisions of this
Section 11 and of Section 8. All Warrant Certificates
surrendered upon exercise or conversion of Warrants shall be
canceled and disposed of by the Company. The Company shall keep
copies of this Agreement and any notices received hereunder
available for inspection during normal business hours at its
office. The Company will furnish, at its expense, copies of this
Agreement and all such notices, upon request, to any Holder of
any Warrant Certificates.
SECTION 12. Payment of Taxes. The Company will pay
all stamp and transfer taxes in connection with the issuance,
sale and delivery of the Warrants hereunder, as well as all such
taxes attributable to the initial issuance of Warrant Shares upon
the exercise of Warrants and payment of the appropriate Exercise
Price or upon conversion of the Warrants. The Company will not,
however, be required to pay any tax or other similar charges
imposed in connection with any transfer of any Warrant
Securities. Nothing herein shall be construed as requiring the
Company to pay any taxes imposed in respect of income realized by
any Holder upon the purchase, transfer or exercise of Warrants.
SECTION 13. Mutilated or Missing Warrant Certificates.
Upon receipt by the Company of evidence reasonably satisfactory
to the Company (which shall include an affidavit of the Holder)
that any Warrant Certificate shall have been mutilated, lost,
stolen or destroyed and, in the case of loss, theft or
destruction, a customary indemnity agreement from the Holder of
such Warrant Certificate, the Company shall issue, in exchange
and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant
Certificate of like tenor and representing an equivalent number
of Warrants.
SECTION 14. Reservation of Warrant Shares. The
Company will at all times that any Warrant is exercisable reserve
and keep available, free from preemptive or similar rights, out
of the aggregate of its authorized but unissued capital stock or
its authorized and issued capital stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue
Warrant Shares upon exercise of Warrants, (i) the maximum number
of shares of each class of capital stock constituting a part of
the Warrant Shares which may then be deliverable upon the
exercise of all outstanding Warrants and (ii) the maximum number
of shares of each class of capital stock of the Company which may
then be delivered upon the conversion of all issued Warrant
Shares into Common Stock of the Company. The Company shall cause
all shares of Common Stock into which shares of Series E
Convertible Preferred Stock issuable upon exercise of the
Warrants are convertible to be (x) listed (or to be listed
subject to notice of issuance) on each securities exchange on
which shares of Common Stock are listed, or (y) admitted for
trading in any inter-dealer quotation system on which shares of
Common Stock are traded. The Company or, if appointed, the
transfer agent for shares of each class of capital stock of the
Company (the "Transfer Agent") and every subsequent transfer
agent for any shares of the Company's capital stock issuable upon
the exercise of the Warrants will be irrevocably authorized and
directed at all times to reserve such number of authorized shares
as shall be required for such purpose. The Company will keep a
copy of this Agreement on file with the Transfer Agent and with
every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of
purchase represented by the Warrants or of the rights of
conversion of the Warrant Shares. The Company will furnish such
Transfer Agent a copy of all notices of adjustments, and
certificates related thereto, transmitted to each Holder pursuant
to Section 17. Before taking any action which would cause an
adjustment pursuant to Section 15 to the maximum number of
Warrant Shares deliverable upon the exercise of all outstanding
Warrants above the then authorized number of shares of Series E
Convertible Preferred Stock, the Company shall cause to be
authorized additional shares of Series E Convertible Preferred
Stock such that such maximum number of shares of Series E
Convertible Preferred Stock deliverable upon exercise of all
outstanding Warrants does not exceed the number of shares of
Series E Convertible Preferred Stock authorized pursuant to the
Organic Documents of the Company. Before taking any action which
would cause an adjustment pursuant to Section 15 to reduce the
Exercise Price below the then par value (if any) of the Warrant
Shares, the Company will take any corporate action which may, in
the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the
Exercise Price as so adjusted.
SECTION 15. Adjustment of Exercise Price and Number of
Warrant Shares Issuable. The Exercise Price and the number of
Warrant Shares issuable upon the exercise of each Warrant are
subject to adjustment from time to time upon the occurrence of
any of the events enumerated in this Section 15.
(a) Reorganization of the Company. In the event of
any capital reorganization, recapitalization or reclassification
of the capital stock of the Company, or consolidation, merger or
amalgamation of the Company with another entity, any acquisition
of capital stock of the Company by means of a share exchange, or
the sale, lease, transfer, conveyance or other disposition of all
or substantially all of its assets to another entity, then, as a
condition of such reorganization, recapitalization,
reclassification, consolidation, merger, amalgamation, share
exchange or sale, lease, transfer, conveyance or other
disposition, lawful and adequate provision shall be made whereby
the Holders of the Warrant Certificates shall thereafter have the
right to purchase and receive, on the basis and upon the terms
and conditions specified in this Agreement and in lieu of the
Warrant Shares immediately theretofore purchasable and receivable
upon the exercise of the rights represented by the Warrants, such
shares of stock, securities, cash or property as may be issued or
payable with respect to or in exchange for the number of Warrant
Shares immediately theretofore purchasable and receivable upon
the exercise of the rights represented by the Warrant
Certificates had such reorganization, recapitalization,
reclassification, consolidation, merger, amalgamation, share
exchange or sale, lease, transfer, conveyance or other
disposition not taken place. If such consolidation, merger,
amalgamation, share exchange, sale, lease, transfer, conveyance
or other disposition is with any Person or group of Persons
(within the meaning of Section 13(d) or 14(d) of the Exchange
Act) who shall have made a purchase, tender or exchange offer
which was accepted by the holders of not less than twenty percent
(20%) of the outstanding shares of Common Stock of the Company,
the Holders of the Warrants shall have been given a reasonable
opportunity (and, in no event, less than 30 days) to elect to
receive, either (x) the stock, securities, cash or property it
would have received pursuant to the immediately preceding
sentence or (y) the stock, securities, cash or property issued or
paid (or to be issued or paid) to holders of the Common Stock in
accordance with such offer. In any such case appropriate
provision shall be made with respect to the rights and interests
of the Holders of the Warrants to the end that the provisions of
this Agreement (including, without limitation, provisions for
adjustment of the Exercise Price and of the number and type of
securities purchasable upon the exercise of the Warrants) shall
thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities, cash or property thereafter
deliverable upon the exercise of the Warrants. The Company shall
not effect any such consolidation, merger, amalgamation, share
exchange or sale, lease, transfer, conveyance or other
disposition unless prior to or simultaneously with the
consummation thereof the successor entity (if other than the
Company) resulting from such consolidation, merger or
amalgamation, share exchange or the entity purchasing or
otherwise acquiring such assets or shares (i) shall assume by a
supplemental Warrant Agreement, satisfactory in form, scope and
substance to the Required Holders (which shall be mailed or
delivered to the registered Holders of the Warrants at the last
address of such Holders appearing on the books of the Company)
the obligation to deliver to such Holders such shares of stock,
securities, cash or property as, in accordance with the foregoing
provisions, such Holders may be entitled to purchase (the
"Substitute Securities") and (ii) shall assume all of the
obligations of the Company set forth in this Agreement and the
Registration Rights Agreement. Following such assumption such
obligations shall apply to the Substitute Securities rather than
to the Warrant Shares. If the issuer of securities deliverable
upon exercise of Warrants under the supplemental Warrant
Agreement is an Affiliate of the formed, surviving, transferee or
lessee entity, such issuer shall join the supplemental Warrant
Agreement. The foregoing provisions of this paragraph shall
similarly apply to successive reorganizations, recapitalizations,
reclassifications, consolidations, mergers, amalgamations, share
exchanges, sales, leases, transfers, conveyances or other
dispositions.
(b) When Issuance or Payment May Be Deferred. In any
case in which this Section 15 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the
occurrence of such event (i) issuing to the Holder of any Warrant
exercised after such record date the Warrant Shares issuable upon
such exercise over and above the Warrant Shares issuable upon
such exercise on the basis of the Exercise Price prior to such
adjustment and (ii) paying to such Holder any amount in cash in
lieu of a fractional share pursuant to Section 16; provided,
however, that the Company shall deliver to such Holder a bill or
other appropriate instrument evidencing such Holder's right to
receive such additional Warrant Shares and cash upon the
occurrence of the event requiring such adjustment.
SECTION 16. Fractional Interests. The Company shall
not be required to issue fractional Warrant Shares on the
exercise of Warrants. If more than one Warrant shall be
presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable
upon exercise thereof shall be computed on the basis of the
aggregate number of Warrant Shares purchasable on exercise of the
Warrants so presented. If any fraction of the Warrant Shares
would, except for the provisions of this Section 16, be issuable
on the exercise of any Warrants (or specified portion thereof),
the Company shall pay an amount in cash equal to the Fair Market
Value per Share on the day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
SECTION 17. Notice to Warrant Holders. Upon any
adjustment of the Exercise Price or number or type of securities
purchasable upon exercise of the Warrants pursuant to Section 15,
and as otherwise required by Section 15, the Company shall
promptly thereafter (i) upon the request of the Required Holders,
cause to be filed with the Company a certificate of the chief
financial officer of the Company setting forth the Exercise Price
and the number and type of securities or other property
constituting Warrant Shares after such adjustment and setting
forth in reasonable detail the method of calculation and the
facts upon which such calculations are based and, in the case of
an adjustment pursuant to Section 15, setting forth the number
and type of securities or other property constituting Warrant
Shares (or portion thereof) issuable, after such adjustment in
the Exercise Price or number of Warrant Shares purchasable upon
exercise of the Warrants, upon exercise of a Warrant and payment
of the adjusted Exercise Price, and (ii) cause to be given to
each of the Holders of the Warrant Certificates written notice of
such adjustments, together with a copy of such certificate.
Where appropriate, such notice may be given in advance and
included as a part of the notice required to be given under the
other provisions of this Section 17. In the event:
(a) the Company shall authorize the issuance to
holders (although not necessarily to all such holders) of shares
of Stock or rights, options or warrants to subscribe for or
purchase or otherwise acquire shares of Stock or of any other
securities or property (including securities of any other issuer)
or of any other subscription rights, options or warrants; or
(b) the Company shall authorize the payment of any
dividend or distribution to holders of shares of Stock of cash,
Stock or other securities or property (including securities of
any other issuer) of the Company; or
(c) of any capital reorganization, reclassification or
recapitalization of the capital stock of the Company, or any
amalgamation, consolidation or merger to which the Company is a
party, or any acquisition of capital stock of the Company through
a share exchange, or of the sale, lease, conveyance, transfer or
other disposition of the properties and assets of the Company
substantially as an entirety, or a purchase, tender or exchange
offer for shares of Common Stock or other securities constituting
part of the Warrant Shares (whether by the Company or some other
party); or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company proposes to take any action which
would require an adjustment of the Exercise Price or number of
Warrant Shares purchasable upon exercise of the Warrants pursuant
to Section 15;
then the Company shall cause to be given to each of the Holders,
at least 20 days prior to the applicable record date hereinafter
specified (or promptly in the case of events for which there is
no record date), a written notice stating (as applicable) (i) the
date as of which the holders of record of shares of Stock
entitled to receive any such rights, options, warrants or
dividends or distribution are to be determined, (ii) the date on
which any such reclassification, recapitalization or
reorganization, consolidation, merger, amalgamation, share
exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or winding up is expected to become
effective or be consummated, or (iii) the initial expiration date
set forth in any purchase, tender or exchange offer for shares of
Stock, and the date as of which it is expected that holders of
record of shares of Stock or other securities constituting a part
of the Warrant Shares (or securities into which the Warrant
Shares may be converted) shall be entitled to exchange such
shares or securities for securities or other property, if any,
deliverable upon such reclassification, recapitalization,
reorganization, consolidation, merger, amalgamation, share
exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or winding up. The failure to give the
notice required by this Section 17 or any defect therein shall
not affect the legality or validity of any distribution, right,
option, warrant, reorganization, recapitalization,
reclassification, consolidation, merger, amalgamation, share
exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or winding up, or the vote upon any
action. Nothing contained in this Agreement or in any of the
Warrant Certificates shall be construed as conferring upon the
Holders the right to vote or to consent as stockholders in
respect of the meetings of stockholders or the election of
members of the Board of Directors of the Company or any other
matter, or any rights whatsoever as stockholders of the Company.
SECTION 18. Cash Distributions and Dividends. If the
Company pays a dividend or makes a distribution to the holders of
its Stock of any securities (other than Stock) or property
(including cash and securities of other companies) of the
Company, or any rights, options or warrants to purchase
securities (other than Stock) or property (including securities
of other companies) of the Company, then, simultaneously with the
payment of such dividend or the making of such distribution, and
as a condition precedent to its right to do so, it will pay or
distribute to the Holders of Series E Warrant Certificates an
amount of property (including without limitation cash) and/or
securities (including without limitation securities of other
companies) of the Company as would have been received by such
Holders had they exercised all of the Series E Warrants
represented by the Series E Warrant Certificates immediately
prior to the record date (or other applicable date) used for
determining stockholders of the Company entitled to receive such
dividend or distribution. No adjustment to the Exercise Price
shall be made for any distribution of Convertible Securities of
the Company to the Holders pursuant to the provisions of this
Section 18.
SECTION 19. Put Rights; Tag-Along Rights.
(a) Put by Holders. Unless the Required Holders have
otherwise agreed in writing, at any time and from time to time on
or after the occurrence of a Put Event, the Put Right shall be
exercisable by each of the Holders. After receipt of a Put
Notice from any Holder, the Company will promptly (and in any
event within ten (10) days) give written notice (the "Put
Exercise Notice") to each of the other Holders of Warrant
Securities that a Put Right has been exercised. Each Holder will
have the right to participate in the Put Right and require the
Company to repurchase all or any portion of such Holder's Warrant
Securities by delivering written notice to the Company within ten
(10) days following receipt of the Put Exercise Notice. All
such notices delivered by such other Holders will be deemed to
have been delivered as of the date of the initial Put Notice and
taken together will be deemed to be one exercise of the Put
Right. Upon the exercise by a Holder of the Put Right, the
purchase price payable to such Holder (the "Put Purchase Price")
by the Company for such Holder's Warrant Securities shall be as
follows:
(i) in the case of Warrants, an amount equal to the
product of (A) the Contract Value per Share, multiplied by
(B) the number of shares of Common Stock that may be
acquired upon the conversion by such Holder of the shares of
Series E Convertible Preferred Stock that would be received
upon exercise of such Holder's Warrants with respect to
which the Put Right is being exercised;
(ii) in the case of Series E Convertible Preferred
Stock, an amount equal to the product of (A) the Contract
Value per Share, multiplied by (B) the number of shares of
Common Stock that may be acquired upon the conversion by
such Holder of the shares of Series E Convertible Preferred
Stock with respect to which the Put Right is being
exercised; and
(iii) in the case of Common Stock, an amount equal
to the product of (A) the Contract Value per Share,
multiplied by (B) the number of shares of Common Stock with
respect to which the Put Right is being exercised.
Promptly upon the receipt of a Put Notice pursuant to Section
19(a) the Company shall cause the Contract Value per Share to be
determined, and shall give written notice of the determination
thereof to each Holder, promptly upon the determination thereof
and in any event within thirty (30) days following the Company's
receipt of the Put Notice. The provisions of this Section 19(a)
shall apply until the termination of this Agreement pursuant to
Section 24 to any Person who acquires in any manner any Warrant
Securities from any Holder.
(b) Closing. Each closing of the purchase and sale of any
Warrant Securities pursuant to Section 19(a) shall take place on
a date (a "Put Closing Date") which is the later of (i) thirty
(30) days after the giving of the Put Notice, and (ii) ten (10)
days after determination of the Contract Value per share,
provided that if such day is not a Business Day such closing
shall be on the next succeeding Business Day. Payment of the Put
Purchase Price shall be due and payable in full on the Put
Closing Date. The closing of such purchase and sale of Warrant
Securities shall take place at 10:00 a.m. on the Put Closing Date
at such location in Atlanta, Georgia, or New York, New York, as
the Required Holders may reasonably determine and notify the
Company or at such other location as may be agreed to by the
Company and the Required Holders. The Put Purchase Price shall
be paid in full at each such closing, by wire transfer of
immediately available federal funds, and the Warrant Securities
to be repurchased at such closing shall be duly endorsed for
transfer. Such Warrant Securities shall be free and clear of all
liens and encumbrances of any kind, nature and description, other
than applicable restrictions under federal and state securities
laws, and each Holder shall represent and warrant to the Company
to such effect with respect to such Holder's Warrant Securities.
The Company will pay all stamp and transfer taxes in connection
with the repurchase of the Warrant Securities hereunder.
(c) Restrictions on Purchase. The Company covenants and
agrees that, other than the Restrictive Provisions, it shall not,
and shall not permit any of its Subsidiaries to, without the
prior written consent of the Required Holders, enter into or
agree to become subject to any term, condition, provision or
agreement that would conflict with or restrict in any way the
performance of the Company's obligations under this Agreement or
that would by its terms restrict the availability of Legally
Available Funds with which to perform such obligations. Anything
in this Agreement to the contrary notwithstanding, the Company
shall not be required to purchase Warrant Securities under
Section 19(a) if at the time of closing of the purchase and sale
of any Warrant Securities pursuant to Section 19(a) there exists
any Restrictions on Purchase. Upon receipt of a Put Notice, if
the Company's obligations under Section 19(a) at the time of
performance would be subject to Restrictions on Purchase, then
the Company (i) shall promptly use all reasonable efforts
(excluding the payment of waiver, consent or similar
transactional fees, but including reasonable documentation costs
and other similar expenses) to cause the Required Lenders to
waive compliance with any such Restrictive Provisions and/or to
amend the Restrictive Provisions so as to permit the purchase of
the Warrant Securities pursuant to this Agreement, (ii) shall not
repay, redeem, purchase or otherwise retire any indebtedness for
borrowed money of, or any debt securities issued by, the Company
in an amount or for a price or other consideration in excess of
the principal amount thereof, and (iii) shall not declare or pay
any dividend or distribution on any shares of Stock (other than
dividends that accrue and cumulate on Preferred Stock in
accordance with the terms of such Preferred Stock as is in effect
on the date such Put Notice is received by the Company). If,
notwithstanding the Company's reasonable efforts required under
this Section 19(c), the Company is unable to fulfill its
obligations under Section 19(a) because of the existence of one
or more Restrictions on Purchase, the Company shall give prompt
written notice thereof to each Holder exercising Put Rights,
specifying in reasonable detail the nature thereof and the
extent, if any, to which the Company would be able to fulfill its
obligation to pay the Purchase Price within the Restrictions on
Purchase. If any Restrictions on Purchase exist on the proposed
Put Closing Date, then at the sole and independent election of
each such Holder, and pursuant to written notice given by any
such Holder to the Company: (i) such Holder's Put Right shall
remain exercised and the closing of the purchase and sale of
Warrant Securities pursuant to such Holder's Put Right shall be
deferred until not more than five Business Days after all such
Restrictions on Purchase cease to exist; provided, however, that,
as and to the extent that such Restrictions on Purchase cease to
exist, the Company shall promptly make partial payments of the
Purchase Price to such Holder, in which case there shall be a
series of such closings, each of which shall take place not more
than five Business Days after such Restrictions on Purchase have
ceased to exist to an extent that would permit such partial
payments of the Purchase Price in increments of not less than
$100,000 ("Partially Available Funds"); or (ii) the exercise of
such Holder's Put Right shall be rescinded and such Holder shall
reserve its right to exercise the Put Right at any subsequent
time. In the event that any Holders make the election provided
in clause (i) of the immediately preceding sentence, the Company
shall purchase from such selling Holders that number of Warrant
Securities as may be purchased at the Purchase Price using that
portion of Partially Available Funds for such purchase as equals
the product of (a) all Partially Available Funds, and (b) the
ratio of (i) the Warrant Securities originally proposed to be
sold by such Holders electing to sell and not electing to rescind
pursuant to clause (ii) of the immediately preceding sentence, to
(ii) the Warrant Securities originally proposed to be sold by all
Holders (treating all Warrants as fully exercised for the Warrant
Shares to which the Holders would be entitled upon exercise of
such Warrants). Such purchase shall be made from each selling
Holder pro rata based on the ratio of (i) the number of Warrant
Securities originally proposed to be sold by such Holder to (ii)
the Warrant Securities originally proposed to be sold by all
Holders. None of the provisions of this Section 19(c) shall be
construed to limit any other right or remedy under applicable law
which any Holder may have as a result of the failure by the
Company to purchase Warrant Securities as herein provided.
(d) Tag-Along Rights. Without limitation to the right of
any Holder to exercise its Put Right pursuant to Section 19(a),
if at any time either the Company or Gary S. Goldstein (each a
"Selling Shareholder") shall determine to enter into any
transaction or series of transactions that would result in a
Change of Control (a "Change of Control Transaction") (any third
party proposing to enter into such transaction or transactions
being hereinafter referred to in this Section 19(d) as a
"Prospective Purchaser"), the Company or Selling Shareholder, as
the case may be, and any Prospective Purchaser shall first give
written notice (the "Offer Notice") to all of the Holders,
specifying the name and address of the Prospective Purchaser and
the number of shares, if any, of Stock proposed to be issued,
sold, transferred or otherwise disposed of and setting forth in
reasonable detail the price, structure and other terms and
conditions of the Change of Control Transaction, as applicable.
The Offer Notice shall represent the offer (the "Offer") from the
Prospective Purchaser to each of the Holders of the right to sell
to the Prospective Purchaser as a condition to the consummation
of the proposed transaction described in the Offer Notice, all
Warrant Securities then owned by each Holder to the Prospective
Purchaser and, at the option of the Holders, on the same terms
and conditions (including price and form of consideration) as are
being offered by the Prospective Purchaser to the Company or the
Selling Shareholder, as the case may be, or at the Fair Market
Value per Share, determined as of the date of the Offer Notice.
Each Holder shall have thirty (30) days from the date of receipt
of the Offer Notice to give written notice of its intention to
accept or reject the Offer. Failure to respond within such
thirty-day period shall be deemed notice of rejection. In the
event that any Holder gives written notice to the Company or the
Selling Shareholder, as the case may be, and the Prospective
Purchaser of its intention to accept such Offer, then such
written notice, taken in conjunction with the Offer Notice, shall
constitute a valid and legally binding agreement, and each of the
Holders so giving such written notice shall be entitled to sell
to the Prospective Purchaser, contemporaneously with the
consummation of the Change of Control Transaction, all of the
Warrant Securities at the price specified therefor by such Holder
in accordance with this Section 19(d). In the event that all of
the Holders reject or are deemed to have rejected the offer
represented by the Offer Notice, the Company or the Selling
Shareholder, as the case may be, shall be free to proceed to
consummate such Change of Control Transaction on the terms and
conditions set forth in the Offer Notice, provided that such sale
is not otherwise prohibited by any agreement between the Company
and the Purchaser. In the event the Company fails to complete
the proposed sale, transfer or other disposition within ninety
(90) days after the Holder or Holders rejected or were deemed to
have rejected the Offer, such transaction or transactions shall
again be subject to the provisions of this Section 19(d). The
provisions of this Section 19(d) shall apply until the
termination of this Agreement pursuant to Section 24 to any
Person who acquires in any manner any Warrant Securities from any
Holder.
(e) Limitation on Put Rights of Others. The Company
covenants and agrees that, neither the Company nor any of its
Subsidiaries shall, directly or indirectly, grant to any Person
or agree to or otherwise become obligated in respect of any
rights to require the Company or any of its Subsidiaries to
purchase securities of the Company upon the demand of any Person.
The Company represents and warrants that neither it nor any of
its Subsidiaries has previously entered into any agreement
granting any such rights to any Person.
(f) Severability. If any provision of this Agreement shall
be held or deemed to be, or shall in fact be, invalid,
inoperative or unenforceable as applied to any particular case in
any jurisdiction or jurisdictions, or in all jurisdictions or in
all cases, because of the conflict of any provision with any
constitution, statute, rule or public policy, or for any other
reason, such circumstances shall not have the effect of rendering
the provision or provisions in question, invalid, inoperative or
unenforceable in any other jurisdiction or in any other case or
circumstance or of rendering any other provision or provisions
herein contained invalid, inoperative or unenforceable to the
extent that such other provisions are not themselves actually in
conflict with such constitution, statute, rule or public policy,
but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative or
unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and
enforceable to the maximum extent permitted in such jurisdiction
or in such case.
SECTION 20. Notices. All notices, consents,
approvals, agreements and other communications provided hereunder
shall be in writing or by telecopy and shall be sufficiently
given to the Purchaser, the Holders and the Company if addressed
or delivered to them at the following addresses:
If to the Purchaser: ING Capital
135 East 57th Street
New York, New York 10022
Attention: Chief Credit Officer
Telecopier No.: (212) 750-8935
with copies to: ING Capital
Atlanta Office
200 Galleria Parkway
Suite 950
Atlanta, Georgia 30339
Attention: John N. Lanier
Telecopier No.: (770) 951-1005
and a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Walter W. Driver, Jr., Esq.
Telecopier No.: (404) 572-5100
If to any other At its last known address
appearing
Holder: on the books of the Company maintained
for such purpose
If to the Company: AFGL International, Inc.
850 Third Avenue. 11th Floor
New York, New York 10022
Date: Attention: Barry S. Roseman
Telecopier No.: (212) 508-3540
with a copy to: Christy & Viener
620 Fifth Avenue
New York, New York
Attention: Richard B. Salomon, Esq.
Telecopier No.: (212) 632-5555
or at such other address as any party may designate to any other
party by written notice. All such notices and communications
shall be deemed to have been duly given: (i) at the time
delivered by hand, if personally delivered, (ii) when received,
if deposited in the mail, postage prepaid, (iii) when
transmission is verified, if telecopied, and (iv) on the next
Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
SECTION 21. Costs and Expenses. The Company agrees to
pay all expenses of the Purchaser for the negotiation,
preparation, execution, and delivery of this Agreement and each
other Warrant Document and any consents, waivers, supplements or
other modifications to this Agreement or any Warrant Document
(including the reasonable fees of counsel retained by Purchaser
in connection therewith), whether or not the transactions
contemplated hereby are consummated, and the consideration of
legal questions relevant hereto and thereto. The Company also
agrees to reimburse the Purchaser and each Holder upon demand for
all out-of-pocket expenses (including reasonable attorneys' fees
and expenses) incurred by the Purchaser or such Holder in
enforcing the obligations of the Company under this Agreement or
any other Warrant Document or in connection with any amendment,
waiver, consent, supplement or other modification to this
Agreement or any Warrant Document.
SECTION 22. Indemnification. (a) In consideration of
the transactions contemplated by this Agreement and the other
Warrant Documents, the Company hereby agrees to indemnify,
exonerate and hold the Purchaser and each Holder, each of their
respective successors and assigns, each of the respective
officers, directors, employees, attorneys and agents of the
Purchaser and each Holder and each of their respective successors
and assigns (collectively, the "Indemnified Parties") free and
harmless from and against any and all actions, causes of action,
suits, losses, costs, liabilities, damages and expenses
(irrespective of whether such Indemnified Party is a party to the
action for which indemnification hereunder is sought), including
attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any
of them or asserted or awarded against the Indemnified Parties or
any of them as a result of, or arising out of, or relating to:
(i) any transaction contemplated by this Agreement or any
other Warrant Document;
(ii) the making of any claim by any investment banking firm,
broker or third party that it is entitled to
compensation from any Indemnified Party in connection
with this Agreement;
(iii) any claim, investigation, litigation, or
proceeding made or commenced by a third party related
to this Agreement or any other Warrant Documents,
whether or not the Indemnified Party or any other
Indemnified Party is party thereto;
(iv) the breach by the Company of any representation or
warranty set forth in this Agreement or in any other
Warrant Document; or
(v) the failure of the Company to comply with all terms,
conditions, and covenants set forth in this Agreement
or in any other Warrant Document;
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of the
relevant Indemnified Party's gross negligence or wilful
misconduct as determined by a final and nonappealable decision of
a court of competent jurisdiction. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the
Company hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law. The foregoing
indemnity shall become effective immediately upon the execution
and delivery hereof and shall remain operative and in full force
and effect notwithstanding the consummation of the transactions
contemplated hereunder, the issuance or exercise of the Warrants
hereunder, the termination of this Agreement pursuant to Section
24, the invalidity or unenforceability of any term or provision
of this Agreement or any other Warrant Document, or any
investigation made by or on behalf of any Holder or the
Purchaser.
(b) Promptly after receipt by an Indemnified Party of
notice of the commencement of any action (including any
governmental investigation or inquiry), such Indemnified Party
will, if such Indemnified Party intends to make a claim in
respect thereof against the Company, give written notice to the
Company of the commencement thereof, but the omission so to
notify the Company shall not relieve the Company from any of its
obligations hereunder. In case any such action is brought
against any Indemnified Party and it notifies the Company of the
commencement thereof, the Company shall be entitled to
participate in and to the extent that it may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the Company to such
Indemnified Party, the Company shall not be responsible for any
legal or other expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof. The Company will
not consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of
a release from all liability in respect of such claim or
litigation.
SECTION 23. Successors. All the covenants and
provisions of this Agreement by or for the benefit of the Company
or the Holders shall bind and inure to the benefit of their
respective successors and assigns, including those by operation
of law, merger, consolidation or as otherwise provided in
subsection (i) or (j) of Section 15.
SECTION 24. Termination. Except as otherwise provided
herein, this Agreement shall terminate (i) with respect to any
Holder, with respect to any Warrant Shares beneficially owned by
such Holder which have been effectively registered under the
Securities Act and sold pursuant to a Registration Statement or
Shelf Registration Statement and (ii) in its entirety when (a)
all Warrants have been exercised or expired unexercised in
accordance with their terms or all Warrant Securities have been
purchased pursuant to Section 19 hereof, and (b) all obligations
of the Company (or any successor) shall have been satisfied in
full and all contingencies in respect thereof shall no longer
exist, including, without limitation, the obligations set forth
in subsection (a) or (b) of Section 15.
SECTION 25. Governing Law. THIS AGREEMENT AND THE
WARRANTS SHALL BE GOVERNED BY THOSE PROVISIONS OF THE CORPORATE
CODE OF THE JURISDICTION IN WHICH THE COMPANY IS INCORPORATED AND
ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE OF THE JURISDICTION IN
WHICH THE COMPANY IS INCORPORATED WHICH ARE NECESSARILY
APPLICABLE TO SECURITIES ISSUED BY A CORPORATION INCORPORATED IN
SUCH JURISDICTION AND OTHERWISE SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID
STATE.
SECTION 26. Benefits of this Agreement. Nothing in
this Agreement shall be construed to give to any Person other
than the Company and the Holders any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be
for the sole and exclusive benefit of the Company and the
Holders.
SECTION 27. Counterparts. This Agreement may be
executed in any number of counterparts and each such counterpart
shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute one and the same
instrument.
SECTION 28. Amendments; Waiver. No provision of this
Agreement may be amended or waived except by an instrument in
writing signed by the party sought to be bound; provided,
however, that any amendment requested or waiver sought from the
Holders of any provision of this Agreement which affects Holders
generally may be given by the Required Holders and any waiver so
given shall be binding on all Holders; provided further, that the
provisions of Section 11 with respect to the type of securities
for which the Warrants are exercisable may not be changed without
the consent of each Holder affected thereby. No failure or delay
by any party in exercising any right or remedy hereunder shall
operate as a waiver thereof, nor shall a waiver of a particular
right or remedy on one occasion be deemed a waiver of any other
right or remedy or a waiver of the same right or remedy on any
subsequent occasion.
SECTION 29. Waiver of Jury Trial. THE PURCHASER, EACH
HOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, ON THE WARRANTS OR ON
ANY OF THE OTHER WARRANT DOCUMENTS, OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH, THIS AGREEMENT, THE WARRANTS OR ANY OF THE
OTHER WARRANT DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE
PURCHASER, ANY HOLDER OR THE COMPANY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PURCHASER'S ENTERING INTO THIS
AGREEMENT.
SECTION 30. Jurisdiction. The Company hereby agrees
that any legal action or proceeding against it with respect to
this Agreement, the Warrants or any of the other Warrant
Documents may be brought in the courts of the State of New York
or of the United States of America for the Southern District of
New York as any Holder may elect, and, by execution and delivery
hereof, it accepts and consents for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the
aforesaid courts and agrees that such jurisdiction shall be
exclusive, unless waived by the Required Holders in writing, with
respect to any action or proceeding brought by it against such
Holders. The Company hereby irrevocably designates, appoints and
empowers CT Corporation System whose present address is 1633
Broadway, New York, New York 10019, as its authorized agent to
receive, for and on its behalf and its property, service of
process in the State of New York when and as legal actions or
proceedings may be brought in the courts of the State of New York
or of the United States of America sitting in New York, and such
service of process shall be deemed complete upon the date of
delivery thereof to such agent, or upon the earliest of any other
date permitted by applicable law. It is understood that a copy
of said process served on such agent will be forwarded to the
Company as soon as practicable, at its address set forth herein,
but its failure to receive such copy shall not affect in any way
the service of said process on said agent as the agent of the
Company. The Company irrevocably consents to the service of
process out of any of the aforementioned courts in any such
action or proceeding by the mailing of the copies thereof by
certified mail, return receipt requested, postage prepaid, to it
at its address set forth herein, such service to become effective
upon the earlier of (i) the date 10 calendar days after such
mailing and (ii) any earlier date permitted by applicable law.
The Company agrees that it will at all times continuously
maintain an agent to receive service of process in the State of
New York on behalf of itself and its properties and in the event
that, for any reason, the agent named above or its successor
shall no longer serve as its agent to receive service of process
in the State of New York on its behalf, it shall promptly appoint
a successor so to serve and shall advise the Holders thereof.
The Company agrees that Sections 5-1401 and 5-1402 of the General
Obligations Law of the State of New York shall apply to this
Agreement and each of the other Warrant Documents and waives any
right to stay or to dismiss any action or proceeding brought
before said courts on the basis of forum non conveniens. Nothing
herein shall affect the right of any Holder to bring proceedings
against the Company in the courts of any other jurisdiction or
to serve process in any other manner permitted by applicable law.
SECTION 31. Specific Performance. The Company
recognizes that the rights of the Holders under this Agreement
and the other Warrant Documents are unique and, accordingly, the
Holders shall, in addition to such other remedies as may be
available to any of them at law or in equity, have the right to
enforce their rights hereunder and thereunder by actions for
injunctive relief and specific performance to the extent
permitted by law. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement or any of the
other Warrant Documents and hereby agrees to waive in any action
for specific performance the defense that a remedy at law would
be adequate. This Agreement is not intended to limit or abridge
any rights of the Holders which may exist apart from this
Agreement.
SECTION 32. Confidentiality. The Holders shall hold
all non-public, proprietary or confidential information (which
has been identified as such by the Company) obtained pursuant to
the requirements of this Agreement in accordance with their
customary procedures for handling confidential information of
this nature; provided, however, that each Holder may make
disclosure of any such information to its examiners, Affiliates,
outside auditors, counsel, consultants, appraisers and other
professional advisors in connection with this Agreement or as
reasonably required by any proposed transferee in connection with
the contemplated transfer of any Warrant Securities (but only if
the proposed transferee agrees to be bound by the terms of this
Section 32) or as required or requested by an Governmental
Authority or representative thereof or in connection with the
enforcement hereof or of any other Warrant Document or pursuant
to legal process. In no event shall any Holder be obligated or
required to return any materials furnished to it by the Company.
SECTION 33. Entire Agreement. The parties hereto
agree that this Agreement, the Registration Rights Agreement and
the Loan Documents constitute the entire agreement among the
parties with respect to the subject matter hereof and supersedes
all prior agreements and understandings between them as to such
subject matter; and there are no restrictions, agreements,
arrangements, oral or written, between any or all of the parties
relating to the subject matter hereof which are not fully
expressed or referred to herein or therein.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
AFGL INTERNATIONAL, INC.
By:
________________________________
___
Name:
Title:
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
By:
________________________________
___
Name:
Title:
-25-
REGISTRATION RIGHTS AGREEMENT
BETWEEN
AFGL INTERNATIONAL, INC.
AND
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
Dated as of May 31, 1996
TABLE OF CONTENTS
Page
Section 1. Definitions 1
Section 2. Registration of Securities by the Company 4
Section 3. Shelf Registration 10
Section 4. Registration Expenses 16
Section 5. Conditions to Registration 18
Section 6. Indemnification 19
Section 7. Exchange Act Registration;
Rule 144 Reporting 22
Section 8. Limitation on Registration Rights of
Others 23
Section 9. Mergers, etc. 23
Section 10. Notices, etc. 23
Section 11. Entire Agreement 24
Section 12. Waivers and Further Agreements 24
Section 13. Amendments 24
Section 14. Assignment; Successors and Assigns 24
Section 15. Severability 25
Section 16. Counterparts 25
Section 17. Section Headings 25
Section 18. Gender; Usage 25
Section 19. Governing Law 25
Section 20. Termination 26
Section 21. Expenses 26
Section 22. Specific Performance 26
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
made and entered into as of May 31, 1996, by and between AFGL
INTERNATIONAL, INC., a Nevada corporation (the "Company"), and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
corporation (the "Purchaser").
W I T N E S S E T H:
RECITALS.
A. Simultaneously herewith, the Purchaser is entering into
a Credit Agreement dated of even date herewith, by and among the
Company, the Purchaser and various other lenders that may become
parties thereto (the "Lenders") and the Purchaser in its capacity
as Agent for the Lenders (the Agent"); and
B. It is a condition precedent to extensions of credit by
the Purchaser to the Company contemplated by the Credit Agreement
that the Company agree to issue to the Purchaser Warrants
initially exercisable for 575,000 shares of Series E Convertible
Preferred Stock, par value $0.001 per share, of the Company (the
"Series E Convertible Preferred Stock") for an exercise price of
$0.02 per share; and
C. The Purchaser is unwilling to extend credit to the
Company pursuant to the Credit Agreement or to purchase the
Warrants pursuant to the Warrant Agreement (as defined in Section
1) unless it receives the assurances set forth in this Agreement;
and
D. The Company and the Purchaser desire to set forth
certain understandings with respect to the Warrants;
NOW, THEREFORE, in consideration of the premises and the
agreements herein set forth and to induce the Purchaser to
proceed with the transactions contemplated by the Warrant
Agreement and the Credit Agreement, the parties hereto, intending
to be legally bound, hereby agree as follows:
SECTION 1. Definitions.
(a) Defined Terms. The following terms (whether or
not underscored) when used in this Agreement, including its
preamble and recitals, shall, except where the context otherwise
requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):
"Agreement" means this Registration Rights Agreement as in
effect on the date hereof and as hereafter amended, supplemented,
restated or otherwise modified.
"Available Securities" is defined in Section 2.
"Business Day" is defined in the Warrant Agreement.
"Certificate of Designation" is the Certificate of
Designation, Preferences and Rights of the Series E Convertible
Preferred Stock.
"Common Stock" is defined in the Warrant Agreement.
"Company" means AFGL International, Inc.
"Credit Agreement" is defined in the Warrant Agreement.
"Exchange Act" is defined in the Warrant Agreement.
"Holder" is defined in the Warrant Agreement.
"Indemnified Person" is defined in Section 6(a).
"Indemnifying Person" is defined in Section 6(c).
"NASD" means the National Association of Securities Dealers,
Inc.
"Person" is defined in the Warrant Agreement.
"Prospectus" means each prospectus included as part of any
Registration Statement, as amended or supplemented, including
each preliminary prospectus and all material incorporated by
reference in such prospectus.
"Purchaser" is defined in the Preamble.
"Quoted Price" is defined in the Warrant Agreement.
"Registrable Securities" shall mean the shares of Common
Stock or any other securities issued or issuable upon the
conversion of shares of Series E Convertible Preferred Stock
(including any conversion in accordance with Part 2B or Part 2C
of the Certificate of Designation), but excluding (i) shares that
have been disposed of under a Registration Statement, the Shelf
Registration Statement or any other effective registration
statement, and (ii) shares distributed to the public pursuant to
Rule 144 under the Securities Act.
"Registration Expenses" is defined in Section 4(c).
"Registration Statement" means any registration statement of
the Company which covers Registrable Securities pursuant to
Section 2 of this Agreement, including the Prospectus,
amendments, including post-effective amendments, and supplements
to such registration statement and Prospectus and all exhibits
and all material incorporated by reference in such registration
statement.
"Required Holders" shall mean the holders of Series E
Convertible Preferred Stock and/or Warrant Securities which when
fully converted would represent at least two-thirds of the voting
power of such securities held by all of the Holders.
"Securities Act" is defined in the Warrant Agreement.
"SEC" is defined in the Warrant Agreement.
"Shelf Prospectus" shall mean the prospectus included in the
Shelf Registration Statement, including any preliminary
prospectus, and any amendment or supplement thereto, including
any supplement relating to the terms of the offering of any
portion of the Registrable Securities covered by the Shelf
Registration Statement, and in each case including all material
incorporated by reference therein.
"Shelf Registration" shall mean a registration required to
be effected pursuant to Section 3 hereof.
"Shelf Registration Statement" shall mean a registration
statement of the Company (and any other entity required to be a
registrant with respect to such registration statement pursuant
to the requirements of the Securities Act) that covers all of the
Registrable Securities to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act, or any
similar rule that may be adopted by the SEC, and all amendments
(including post-effective amendments) to such registration
statement, and all exhibits thereto and materials incorporated by
reference therein.
"Specified Registrable Securities" is defined in Section
2(a).
"Stock" is defined in the Warrant Agreement.
"Warrant Agreement" means the Warrant Purchase Agreement,
dated of even date herewith, by and between the Purchaser and the
Company, as in effect on the date hereof and as hereafter
amended, supplemented, restated or otherwise modified.
"Warrant Securities" is defined in the Warrant Agreement.
"Warrants" is defined in the Warrant Agreement.
(b) Cross-References. Unless otherwise specified,
references in this Agreement to any Article or Section are
references to such Article or Section of this Agreement, and
unless otherwise specified, references in any Article, Section,
or definition to any clause are references to such clause of such
Section, Article or definition.
SECTION 2. Registration of Securities by the Company.
(a) Piggyback Registration. If at any time or from
time to time the Company shall propose to file on its behalf or
on behalf of any of its security holders a registration statement
under the Securities Act on Form S-1, S-2 or S-3 (or on any other
form for the general registration of securities) with respect to
any class of securities (other than a Shelf Registration
Statement filed pursuant to Section 3), the Company shall in each
case:
(i) promptly give written notice to each
Holder at least thirty (30) days before the anticipated
filing date, indicating the proposed offering price and
describing the plan of distribution;
(ii) include in such registration (and any related
qualification under blue sky or other state securities
laws or other compliance) and, at the request of any
Holder, in any underwriting involved therein, all the
Registrable Securities specified by any Holder or
Holders of Registrable Securities (the "Specified
Registrable Securities") in a written request (the
"Registration Request") made within twenty (20) days
after receipt of such written notice from the Company,
specifying the number or amount of Specified
Registrable Securities; and
(iii) use its best efforts to cause the managing
underwriter(s) of such proposed underwritten offering
to permit the Specified Registrable Securities to be
included in the Registration Statement for such
offering on the same terms and conditions as any
similar securities of the Company included therein.
Notwithstanding the foregoing, if the managing
underwriter(s) of such offering advise(s) the Holders of
Specified Registrable Securities in writing that marketing
considerations require a limitation on the securities, other than
the securities the Company intends to sell, to be included in any
Registration Statement filed under this Section 2 to a certain
number of shares (the "Available Securities"), then the Company
shall in such case be obligated to such Holders only with respect
to such number of Available Securities. The limitation on the
number of Specified Registrable Securities will be imposed pro
rata (based upon the ratio of the number of shares of Specified
Registrable Securities which the managing underwriter(s) propose
to include at the anticipated initial public offering price to
the number of Specified Registrable Securities owned by each
Holder) among all Holders of Specified Registrable Securities.
Notwithstanding any other provision of this Agreement to the
contrary, neither the delivery of the notice by the Company nor
of the Registration Request by any Holder shall in any way
obligate the Company to file a Registration Statement and,
notwithstanding such filing, the Company may, at any time prior
to the effective date thereof, in its sole discretion, determine
not to offer the securities to which the Registration Statement
relates without liability to any of the Holders, other than to
pay Registration Expenses in connection with such Registration
Statement. No registration of Registrable Securities effected
under this Section 2 shall relieve the Company of its obligation
to effect the registration of Registrable Securities pursuant to
Section 3.
(b) Piggyback Registration Procedures. If and when
the Company shall be required by the provisions of this Section 2
to effect the registration of Registrable Securities under the
Securities Act, the Company will use its best efforts to effect
such registration to permit the sale of such Registrable
Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto it will, as
expeditiously as possible:
(i) before filing a Registration Statement or
Prospectus or any amendments or supplements thereto,
furnish to the Holders of the Registrable Securities
covered by such Registration Statement and the
underwriter(s), if any, copies of all such documents
proposed to be filed, which documents will be made
available, on a timely basis, for review by such
Holders and underwriters;
(ii) prepare and file with the SEC such amendments
and post-effective amendments to any Registration
Statement, and such supplements to the Prospectus, as
may be reasonably requested by any Holder of
Registrable Securities or the managing underwriter(s),
if any, or as may be required by the Securities Act,
the Exchange Act or by the rules, regulations or
instructions applicable to the registration form
utilized by the Company or as may otherwise be
necessary to keep such Registration Statement effective
for the applicable period; and cause the Prospectus as
so supplemented to be filed pursuant to Rule 424 (or
any successor rule) under the Securities Act; and
comply with the provisions of the Securities Act with
respect to the disposition of all securities covered
by such Registration Statement during the applicable
period in accordance with the intended methods of
disposition by the sellers thereof set forth in such
Registration Statement or Prospectus;
(iii) promptly notify the selling Holders of
Registrable Securities and the managing underwriter(s),
if any, and if requested by any such Person, confirm
such advice in writing:
(a)of the filing of the Prospectus or any
supplement to the Prospectus and of the
effectiveness of the Registration Statement
and/or any post-effective amendment,
(b)of any request by the SEC for amendments or
supplements to the Registration Statement or the
Prospectus or for additional information,
(c)of the issuance by the SEC of any stop
order suspending the effectiveness of the
Registration Statement or the initiation of any
proceedings for that purpose,
(d)of the Company's becoming aware at any time
that the representations and warranties of the
Company contemplated by paragraph (xiv)(a) below
have ceased to be true and correct,
(e)of the receipt by the Company of any
notification with respect to the suspension of
the qualification of the Registrable Securities
for sale in any jurisdiction or the initiation
or threat of any proceeding for such purpose,
and
(f)of the existence of any fact which, to the
knowledge of the Company, results in the
Registration Statement, the Prospectus or any
document incorporated therein by reference
containing an untrue statement of material fact
or omitting to state a material fact required to
be stated therein or necessary to make the
statements therein not misleading;
(iv) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of
the Registration Statement or any qualification
referred to in paragraph (iii)(e) at the earliest
possible moment;
(v) if reasonably requested by the managing
underwriter(s) or the Required Holders of Registrable
Securities being sold in connection with an
underwritten offering, immediately incorporate in a
supplement to the Prospectus or post-effective
amendment to the Registration Statement such
information as the managing underwriter(s) or the
Required Holders of the Registrable Securities being
sold reasonably request to have included therein
relating to the plan of distribution with respect to
such Registrable Securities, including, without
limitation, information with respect to the amount of
Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such
underwriters and any other terms of the underwritten
(or best-efforts underwritten) offering of the
Registrable Securities to be sold in such offering; and
make all required filings of such supplement to the
Prospectus or post-effective amendment to the
Registration Statement as soon as notified of the
matters to be incorporated in such supplement to the
Prospectus or post-effective amendment to the
Registration Statement;
(vi) at the request of any selling Holder of
Registrable Securities, furnish to such selling Holder
of Registrable Securities and each managing
underwriter, if any, without charge, at least one
signed copy of the Registration Statement and any post-
effective amendment thereto, including financial
statements and schedules, all documents incorporated
therein by reference and all exhibits (including those
incorporated by reference);
(vii) deliver to each selling Holder of Registrable
Securities and the managing underwriter(s), if any,
without charge, as many copies of the Registration
Statement, each Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto (in
each case including all exhibits), as such Persons may
reasonably request, together with all documents
incorporated by reference in such Registration
Statement or Prospectus, and such other documents as
such selling Holder may reasonably request in order to
facilitate the disposition of its Registrable
Securities covered by such Registration Statement; the
Company consents to the use of each Prospectus and any
supplement thereto by each of the selling Holders of
Registrable Securities and the managing underwriter(s),
if any, in connection with the offering and sale of the
Registrable Securities covered by each Prospectus or
any supplement thereto;
(viii) prior to any public offering of Registrable
Securities, register or qualify or reasonably cooperate
with the selling Holders of Registrable Securities, the
managing underwriter(s), if any, and their respective
counsel in connection with the registration or
qualification of such Registrable Securities for offer
and sale under the securities or blue sky laws of such
jurisdictions as any selling Holder or managing
underwriter(s) reasonably request(s) and do any and all
other acts or things necessary to enable the
disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement;
(ix) cooperate with the selling Holders of
Registrable Securities and the managing underwriter(s),
if any, to facilitate the timely preparation and
delivery of certificates representing Registrable
Securities to be sold and not bearing any legends
restricting the transfer thereof; and enable such
Registrable Securities to be in such denominations and
registered in such names as the managing underwriters
may request at least two Business Days prior to any
sale of Registrable Securities to the underwriters;
(x) use its best efforts to cause the Registrable
Securities covered by the applicable Registration
Statement to be registered with or approved by such
United States, state and local governmental agencies or
authorities as may be necessary to enable the seller or
sellers thereof or the underwriters, if any, to
consummate the disposition of such Registrable
Securities;
(xi) if any fact contemplated by paragraph (iii)(b)
or (iii)(f) above shall exist, promptly notify each
Holder on whose behalf Registrable Securities have been
registered and promptly prepare and furnish to such
Holders a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any
document incorporated therein by reference and promptly
file any other required document so that, as thereafter
delivered to the purchasers of the Registrable
Securities, neither the Registration Statement nor the
Prospectus will contain an untrue statement of a
material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading;
(xii) if requested by the Required Holders of the
Registrable Securities or by the managing
underwriter(s), if any, cause all Registrable
Securities covered by the Registration Statement to be
(A) listed on each securities exchange on which
securities of the same class are then listed or (B)
admitted for trading in any inter-dealer quotation
system on which securities of the same class are then
traded;
(xiii) not later than the effective date of the
applicable Registration Statement, provide a CUSIP
number for all Registrable Securities covered by the
Registration Statement and provide the applicable
transfer agent with printed certificates for such
Registrable Securities which are in a form eligible for
deposit with Depository Trust Company;
(xiv) enter into agreements (including underwriting
agreements) and take all other reasonable actions in
order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, except
as otherwise provided, whether or not an underwriting
agreement is entered into and whether or not the
registration is an underwritten registration:
(a)make such representations and warranties to
the Holders selling such Registrable Securities
and, in connection with any underwritten
offering, to the underwriters, in form,
substance and scope as are customarily made by
issuers to underwriters in similar underwritten
offerings;
(b)obtain opinions of counsel to the Company
and updates thereof addressed to each selling
Holder and the underwriters, if any, covering
the matters customarily covered in opinions
requested in similar underwritten offerings and
such other matters as may be reasonably
requested by such Holders and underwriters,
which counsel and opinions shall be reasonably
satisfactory (in form, scope and substance) to
the managing underwriters, if any, and the
Required Holders of such Registrable Securities;
(c)in connection with any underwritten
offering, obtain so-called "cold comfort"
letters and updates thereof from the Company's
independent certified public accountants
addressed to the selling Holders of Registrable
Securities and the underwriters, such letters to
be in customary form and covering matters of the
type customarily covered in "cold comfort"
letters to underwriters in connection with
similar underwritten offerings;
(d)if an underwriting agreement is entered
into, cause the same to set forth in full the
indemnification and contribution provisions and
procedures of Section 6 (or such other
substantially similar provisions and procedures
as the underwriters shall reasonably request)
with respect to all parties to be indemnified
pursuant to said Section 6; and
(e)deliver such documents and certificates as
may reasonably be requested by the Required
Holders of the Registrable Securities being
sold, or the managing underwriter(s), if any, to
evidence compliance with this paragraph (xiv)
and with any customary conditions contained in
the underwriting agreement or other agreement
entered into by the Company;
the foregoing to be done upon each closing under any
underwriting or similar agreement as and to the extent
required thereunder and from time to time as may reasonably
be requested by any selling Holder of Registrable Securities
in connection with the disposition of Registrable Securities
pursuant to such Registration Statement, all in a manner
consistent with customary industry practice;
(xv) upon execution and delivery of such
confidentiality agreements as the Company may
reasonably request, make available to the Holders of
the Registrable Securities being sold, any underwriter
participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant
retained by such Holders or underwriter, all financial
and other records, pertinent corporate documents and
properties of the Company, and cause the Company's
officers, directors and employees to supply all
information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with
the registration, at such time or times as the Person
requesting such information shall reasonably determine;
(xvi) otherwise use its best efforts to comply with
the Securities Act, the Exchange Act, all applicable
rules and regulations of the SEC and all applicable
state blue sky and other securities laws, rules and
regulations, and make generally available to its
security holders an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, as
soon as practicable, but in no event later than ninety
(90) days after the end of the 12 calendar month period
commencing after the effective date of the Registration
Statement;
(xvii) cooperate and assist in any filings required to
be made with the NASD and in the performance of any due
diligence investigation by any underwriter (including
any "qualified independent underwriter" that is
required to be retained in accordance with the rules
and regulations of the NASD); and
(xviii) prior to the filing of any document which is
being prepared for incorporation by reference into the
Registration Statement or the Prospectus, upon receipt
of such confidentiality agreements as the Company may
reasonably request, provide copies of such document to
counsel to the selling Holders of Registrable
Securities, and to the managing underwriter(s), if any,
and make the Company's representatives available for
discussion of such document.
SECTION 3. Shelf Registration.
(a) Filing of Shelf Registration Statement. Promptly
after the date hereof, the Company shall cause to be filed the
Shelf Registration Statement providing for the sale by the
Holders of all of the Registrable Securities in accordance with
the terms hereof, and the Company will use its best efforts to
cause such Shelf Registration Statement to be declared effective
by the SEC on or before May 30, 1997. The Company agrees to use
its best efforts to keep the Shelf Registration Statement with
respect to the Registrable Securities continuously effective so
long as any Holder holds Registrable Securities until such time
as each Holder has received an opinion of counsel to the Company
(which opinion and counsel shall be reasonably satisfactory to
the Holder) to the effect that each such Holder is permitted
under Rule 144 to dispose of all of its Registrable Securities
within three months without such registration. The Company
further agrees to amend the Shelf Registration Statement if and
as required by the rules, regulations or instructions applicable
to the registration form used by the Company for such Shelf
Registration Statement or by the Securities Act or any rules and
regulations thereunder; provided, however, that the Company
shall not be deemed to have used its best efforts to keep the
Shelf Registration Statement effective during the applicable
period if it voluntarily takes any action that would result in
selling Holders not being able to sell Registrable Securities
covered thereby during that period, unless such action is
permitted by this Agreement or required under applicable law or
the Company has filed a post-effective amendment to the Shelf
Registration Statement and the SEC has not declared it effective.
(b) Shelf Registration Procedures. In connection with
the obligations of the Company with respect to the Shelf
Registration Statement contemplated by this Section 3, the
Company shall use its best efforts to effect such registration to
permit the sale of such Registrable Securities in accordance with
the intended method or methods of disposition thereof, and
pursuant thereto it will, as expeditiously as possible:
(i) before filing a Shelf Registration Statement or
Shelf Prospectus or any amendments or supplements thereto,
furnish to the Holders of the Registrable Securities covered
by such Shelf Registration Statement and the underwriter(s),
if any, copies of all such documents proposed to be filed,
which documents will be made available, on a timely basis,
for review by such Holders and underwriters; and the Company
will not file any Shelf Registration Statement or amendment
thereto or any Shelf Prospectus or any supplement thereto to
which the Required Holders of the Registrable Securities
covered by such Shelf Registration Statement or the managing
underwriter(s), if any, shall reasonably object;
(ii) prepare and file with the SEC, within the time
period set forth in Section 3(a) hereof, the Shelf
Registration Statement, which Shelf Registration Statement
(a) shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods
of distribution by the selling Holders thereof and (b) shall
comply as to form in all material respects with the
requirements of the applicable form and include all
financial statements required by the SEC to be filed
therewith;
(iii) (a) prepare and file with the SEC such amendments
to such Shelf Registration Statement as may be reasonably
requested by any Holder of Registrable Securities or the
managing underwriter(s), if any, or as may be required by
the Securities Act, the Exchange Act or by the rules,
regulations or instructions applicable to the registration
form utilized by the Company or as may otherwise be
necessary to keep such Shelf Registration Statement
effective for the applicable period; (b) cause the Shelf
Prospectus to be amended or supplemented as may be
reasonably requested by any Holder of Registrable Securities
or the managing underwriter(s), if any, or as may be
required by the Securities Act, the Exchange Act or by the
rules, regulations or instructions applicable to the
registration form utilized by the Company or as may
otherwise be necessary to keep such Shelf Registration
Statement effective for the applicable period; (c) cause the
Shelf Prospectus as so amended or supplemented to be filed
pursuant to Rule 424 (or any successor rule) under the
Securities Act; (d) respond as promptly as practicable to
any comments received from the SEC with respect to the Shelf
Registration Statement or any amendment thereto; and (e)
comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
Shelf Registration Statement during the applicable period in
accordance with the intended method or methods of
distribution by the selling Holders thereof;
(iv) promptly notify the selling Holders of Registrable
Securities and the managing underwriter(s), if any, and if
requested by any such Person, confirm such advice in
writing:
(a) of the filing of the Shelf Prospectus or any
supplement to the Shelf Prospectus and of the
effectiveness of the Shelf Registration Statement
and/or any post-effective amendment,
(b) of any request by the SEC for amendments or
supplements to the Shelf Registration Statement or the
Shelf Prospectus or for additional information,
(c) of the issuance by the SEC of any stop order
suspending the effectiveness of the Shelf Registration
Statement or the initiation of any proceedings for
that purpose,
(d) of the Company's becoming aware at any time
that the representations and warranties of the Company
contemplated by paragraph (xv)(a) below have ceased to
be true and correct,
(e) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Registrable Securities for sale
in any jurisdiction or the initiation or threat of any
proceeding for such purpose, and
(f) of the existence of any fact which, to
the knowledge of the Company, results in the Shelf
Registration Statement, the Shelf Prospectus or any
document incorporated therein by reference containing
an untrue statement of material fact or omitting to
state a material fact required to be stated therein or
necessary to make the statements therein not
misleading;
(v) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
Shelf Registration Statement or any qualification referred
to in paragraph (iii)(e) at the earliest possible moment;
(vi) if reasonably requested by the managing
underwriter(s) or the Required Holders of Registrable
Securities being sold in connection with an underwritten
offering, immediately incorporate in a supplement to the
Shelf Prospectus or post-effective amendment to the Shelf
Registration Statement such information as the managing
underwriter(s) or the Required Holders of the Registrable
Securities being sold reasonably request to have included
therein relating to the plan of distribution with respect to
such Registrable Securities, including, without limitation,
information with respect to the amount of Registrable
Securities being sold to such underwriters, the purchase
price being paid therefor by such underwriters and any other
terms of the underwritten (or best-efforts underwritten)
offering of the Registrable Securities to be sold in such
offering; and make all required filings of such supplement
to the Shelf Prospectus or post-effective amendment to the
Shelf Registration Statement as soon as notified of the
matters to be incorporated in such supplement to the Shelf
Prospectus or post-effective amendment to the Shelf
Registration Statement;
(vii) at the request of any selling Holder of
Registrable Securities, furnish to such selling Holder of
Registrable Securities and each managing underwriter, if
any, without charge, at least one signed copy of the Shelf
Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(viii) deliver to each Holder of Registrable Securities
and the managing underwriter(s), if any, without charge, as
many copies of the Shelf Registration Statement, each Shelf
Prospectus and any amendment or supplement thereto (in each
case including all exhibits), as such Persons may reasonably
request, together with all documents incorporated by
reference in such Shelf Registration Statement or Shelf
Prospectus, and such other documents as such selling Holder
may reasonably request in order to facilitate the
disposition of its Registrable Securities; the Company
consents to the use of the Shelf Prospectus and any
amendment or supplement thereto by each such Holder of
Registrable Securities and the underwriter(s), if any, in
connection with the offering and sale of the Registrable
Securities covered by the Shelf Prospectus or amendment or
supplement thereto;
(ix) prior to the time the Shelf Registration Statement
is declared effective by the SEC, register or qualify the
Registrable Securities or reasonably cooperate with the
selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and
sale under the securities or blue sky laws of such
jurisdictions as any selling Holder or managing
underwriter(s), if any, reasonably request(s), keep each
such registration or qualification effective during the
period such Shelf Registration Statement is required to be
kept effective, and do any and all other acts or things
necessary to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Shelf Registration
Statement;
(x) cooperate with the selling Holders of Registrable
Securities and the managing underwriter(s), if any, to
facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold
and not bearing any legends restricting the transfer
thereof; and enable such Registrable Securities to be in
such denominations and registered in such names as the
selling Holders or the managing underwriters, if any, may
request at least two Business Days prior to any sale of
Registrable Securities;
(xi) use its best efforts to cause the Registrable
Securities covered by the Shelf Registration Statement to be
registered with or approved by such United States, state and
local governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such
Registrable Securities;
(xii) if any fact contemplated by paragraph (iv)(b) or
(iv)(f) above shall exist, promptly notify each Holder on
whose behalf Registrable Securities have been registered and
promptly prepare and furnish to such Holders a supplement or
post-effective amendment to the Shelf Registration Statement
or the related Shelf Prospectus or any document incorporated
therein by reference and promptly file any other required
document so that, as thereafter delivered to the purchasers
of the Registrable Securities, neither the Shelf
Registration Statement nor the Shelf Prospectus will contain
an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading;
(xiii) if requested by the Required Holders of the
Registrable Securities or by the managing underwriter(s), if
any, cause all Registrable Securities covered by the Shelf
Registration Statement to be (A) listed on each securities
exchange on which securities of the same class are then
listed or (B) admitted for trading in any inter-dealer
quotation system on which securities of the same class are
then traded;
(xiv) not later than the effective date of the Shelf
Registration Statement, provide a CUSIP number for all
Registrable Securities covered by the Shelf Registration
Statement and provide the applicable transfer agent with
printed certificates for such Registrable Securities which
are in a form eligible for deposit with Depository Trust
Company;
(xv) enter into agreements (including underwriting
agreements) and take all other reasonable actions in order
to expedite or facilitate the disposition of such
Registrable Securities and in such connection, except as
otherwise provided, whether or not an underwriting agreement
is entered into and whether or not the registration is an
underwritten registration:
(a) make such representations and warranties
to the Holders selling such Registrable Securities
and, in connection with any underwritten offering,
to the underwriters, in form, substance and scope as
are customarily made by issuers to underwriters in
similar underwritten offerings;
(b) obtain opinions of counsel to the Company
and updates thereof addressed to each selling Holder
and the underwriters, if any, covering the matters
customarily covered in opinions requested in similar
underwritten offerings and such other matters as may
be reasonably requested by such Holders and
underwriters, which counsel and opinions shall be
reasonably satisfactory (in form, scope and
substance) to the managing underwriters, if any, and
the Required Holders of such Registrable Securities;
(c) in connection with any underwritten
offering, to obtain so-called "cold comfort" letters
and updates thereof from the Company's independent
certified public accountants addressed to the
selling Holders of Registrable Securities and the
underwriters, if any, such letters to be in
customary form and covering matters of the type
customarily covered in "cold comfort" letters to
underwriters in connection with similar underwritten
offerings;
(d) if an underwriting agreement is entered
into, cause the same to set forth in full the
indemnification and contribution provisions and
procedures of Section 6 (or such other substantially
similar provisions and procedures as the
underwriters shall reasonably request) with respect
to all parties to be indemnified pursuant to said
Section 6; and
(e) deliver such documents and certificates as
may reasonably be requested by the Required Holders
of the Registrable Securities being sold, or the
managing underwriter(s), if any, to evidence
compliance with this paragraph (xiv) and with any
customary conditions contained in the underwriting
agreement or other agreement entered into by the
Company;
the foregoing to be done upon each closing under any
underwriting or similar agreement as and to the extent
required thereunder and from time to time as may reasonably
be requested by any selling Holder of Registrable Securities
in connection with the disposition of Registrable Securities
pursuant to such Shelf Registration Statement, all in a
manner consistent with customary industry practice;
(xvi) upon execution and delivery of such
confidentiality agreements as the Company may reasonably
request, make available to the Holders of the Registrable
Securities being sold, any underwriter participating in any
disposition pursuant to such Shelf Registration Statement,
and any attorney or accountant retained by such Holders or
underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply
all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with the
registration, at such time or times as the Person requesting
such information shall reasonably determine;
(xvii) otherwise use its best efforts to comply with the
Securities Act, the Exchange Act, all applicable rules and
regulations of the SEC and all applicable state blue sky and
other securities laws, rules and regulations, and make
generally available to its security holders, as soon as
practicable, an earnings statement satisfying the provisions
of Section 11(a) of the Securities Act;
(xviii) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due
diligence investigation by any underwriter (including any
"qualified independent underwriter" that is required to be
retained in accordance with the rules and regulations of the
NASD); and
(xix) prior to the filing of any document which is being
prepared for incorporation by reference into the
Registration Statement or the Prospectus, upon receipt of
such confidentiality agreements as the Company may
reasonably request, provide copies of such document to
counsel to the selling Holders of Registrable Securities,
and to the managing underwriter(s), if any, and make the
Company's representatives available for discussion of such
document.
(c) Covenants of Holders. In connection with and as a
condition to the Company's obligations with respect to the Shelf
Registration Statement pursuant to this Section 3, each Holder
covenants and agrees that (i) upon receipt of any notice from
the Company contemplated by Section 3(b)(iv) (in respect of the
occurrence of an event contemplated by clause (f) of Section
3(b)(iv)), such Holder shall not offer or sell any Registrable
Securities pursuant to the Shelf Registration Statement until
such Holder receives copies of the supplemented or amended Shelf
Prospectus contemplated by Section 3(b)(xii) hereof and receives
notice that any post-effective amendment has become effective,
and, if so directed by the Company, such Holder will deliver to
the Company (at the expense of the Company) all copies in its
possession, other than permanent file copies then in such
Holder's possession, of the Shelf Prospectus as amended or
supplemented at the time of receipt of such notice; (ii) such
Holder and any of its officers, directors or affiliates, if any,
will comply with the provisions of Rule 10b-6 and 10b-7 under the
Exchange Act as applicable to them in connection with sales of
Registrable Securities pursuant to the Shelf Registration
Statement; and (iii) such Holder and any of its officers,
directors or affiliates, if any, will comply with the prospectus
delivery requirements of the Securities Act as applicable to them
in connection with sales of Registrable Securities pursuant to
the Shelf Registration Statement.
(d) Mechanics of Shelf Registration. Each
registration effected pursuant to this Section 3 shall be
effected by the filing of a Shelf Registration Statement on Form
S-1 or Form S-3 (provided that if Form S-3 is used the Shelf
Prospectus shall contain the information that would have been
required to be included therein had Form S-1 been used), unless
the use of a different form has been agreed upon in writing by
the Required Holders; provided, however, that if the intended
method of disposition by the requesting Holders is to be an
underwritten offering, the Company shall use such form of
Registration Statement as is acceptable to the underwriter(s).
(e) Representation, Warranty and Covenant of the
Company.The Company represents and warrants that it meets all the
requirements for the use of Form S-3 for the registration and
sale by the Holders of the Registrable Securities, and the
Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such
eligibility for the use of Form S-3.
(f) Holdback Agreement. From the date of this
Agreement until the first anniversary thereof, each Holder of
Registrable Securities agrees not to effect any public or private
sale or distribution of Registrable Securities.
SECTION 4. Registration Expenses.
(a) All expenses incident to the Company's performance
of or compliance with its obligations under this Agreement
(excluding underwriting discounts, selling commissions and
brokerage fees, which will be paid by the selling Holders) will
be paid by the Company, regardless of whether Registrable
Securities are sold pursuant to any Registration Statement or
Shelf Registration Statement, including, without limitation:
(i) all registration, filing and listing fees;
(ii) fees and expenses of compliance with
securities or blue sky laws (including, without
limitation, the fees and disbursements of counsel for
the underwriters, if any, or selling Holders in
connection with blue sky and state securities
qualifications of Registrable Securities and
determination of their eligibility for investment under
the laws of such jurisdictions as the managing
underwriter(s), if any, or the Required Holders of the
Registrable Securities covered by such Registration
Statement or Shelf Registration Statement may
reasonably designate);
(iii) printing (including, without limitation,
expenses of printing or engraving certificates for the
Registrable Securities in a form eligible for deposit
with Depository Trust Company and of printing
prospectuses), messenger, telephone and delivery
expenses;
(iv) fees and disbursements of counsel for the
Company and, subject to Section 4(b), counsel for the
selling Holders of the Registrable Securities;
(v) fees and disbursements of all independent
certified public accountants of the Company (including,
without limitation, the expenses of any special audit
and, in connection with any underwritten offering,
"cold comfort" letters required by or incident to such
performance);
(vi) Securities Act liability insurance if the
Company so desires or if the managing underwriters, if
any, so require(s);
(vii) fees and expenses of other Persons (including
special experts) retained by the Company; and
(viii) fees and expenses associated with any NASD
filing required to be made in connection with any
Registration Statement or Shelf Registration Statement,
including, if applicable, the fees and expenses of any
"qualified independent underwriter" (and its counsel)
that is required to be retained in accordance with the
rules and regulations of the NASD.
The Company will, in any event, pay its internal expenses,
the expense of any annual audit, the fees and expenses incurred
in connection with the listing of the securities to be registered
on each securities exchange on which securities of the same class
are then listed or the qualification for trading of the
securities to be registered in each inter-dealer quotation system
in which securities of the same class are then traded, and rating
agency fees.
(b) In connection with each Registration Statement or
Shelf Registration Statement required hereunder, the Company will
reimburse the Holders of Registrable Securities being registered
pursuant to such Registration Statement or Shelf Registration
Statement for the reasonable fees and disbursements of not more
than one counsel chosen by the Required Holders of the
Registrable Securities being sold; the expense of any additional
counsel for the Holders shall be paid by the Holders.
(c) The term "Registration Expenses" shall mean the
expenses payable by the Company pursuant to the provisions of
this Section 4.
SECTION 5. Conditions to Registration.
Each Holder's right to have Registrable Securities included
in any Registration Statement or Shelf Registration Statement
filed by the Company in accordance with the provisions of Section
2 or Section 3 shall be subject to the following conditions:
(a) The Holders on whose behalf such Registrable
Securities are to be included shall be required to furnish the
Company in a timely manner with all information required by the
applicable rules and regulations of the SEC concerning the
proposed method of sale or other disposition of such securities,
the identity of and compensation to be paid to any proposed
underwriters to be employed in connection therewith, and such
other information as may be reasonably required by the Company
properly to prepare and file such Registration Statement or Shelf
Registration Statement in accordance with applicable provisions
of the Securities Act;
(b) If any such Holder desires to sell and distribute
Registrable Securities over a period of time, or from time to
time, at then prevailing market prices, then any such Holder
shall execute and deliver to the Company such written
undertakings as the Company and its counsel may reasonably
require in order to assure full compliance with relevant
provisions of the Securities Act and the Exchange Act;
(c) In the case of any registration requested pursuant
to the provisions of Section 2, the offering price for any
Registrable Securities to be so registered shall be no less than
for any securities of the same class then to be registered for
sale for the account of the Company or other security holders,
unless such Registrable Securities are to be offered from time to
time based on the prevailing market price;
(d) Upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (xi) of
Section 2(b) or paragraph (xii) of Section 3(b), such Holder will
forthwith discontinue disposition of Registrable Securities until
such Holder's receipt of the copies of the supplemented
Prospectus contemplated by such paragraph, or until it is advised
in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the
Prospectus, and, if so directed by the Company, such Holder will
deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice; and
(e) In the case of any underwritten offering on behalf
of the Holders of Registrable Securities, such Holders will enter
into such agreements (including underwriting agreements and lock-
up agreements) as the managing underwriters shall reasonably
request and as are customary in similar circumstances.
SECTION 6. Indemnification.
(a) Indemnification by the Company. In the event of
the registration of any Registrable Securities under the
Securities Act pursuant to the provisions hereof, the Company
will indemnify and hold harmless the seller of such Registrable
Securities, its partners, directors, officers, employees and
agents, each underwriter, broker and dealer, if any, who
participates in the offering or sale of such securities, and each
other Person, if any, who controls such seller or any such
underwriter, broker or dealer within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange
Act (each such Person being hereinafter sometimes referred to as
an "Indemnified Person", provided that for purposes of clauses
(b), (c) and (d) of this Section 6 "Indemnified Person" shall
include the Company, its partners, directors, officers, employees
and agents, and each other Person, if any who controls the
Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act) from and against any
losses, claims, damages, liabilities or expenses, joint or
several, to which such indemnified Person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained or incorporated by reference in any Registration
Statement, Shelf Registration Statement, Prospectus or Shelf
Prospectus or any amendment or supplement thereto, or any
document incorporated by reference therein, or arise out of or
are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse
each such Indemnified Person for any legal or other expenses
reasonably incurred by such Indemnified Person in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made or incorporated by reference in the
Registration Statement, Shelf Registration Statement, Prospectus
or Shelf Prospectus or any amendment or supplement thereto, in
reliance upon and in conformity with written information
furnished to the Company by such Indemnified Person for use in
preparation thereof. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf
of such Indemnified Person and shall survive the transfer of such
Registrable Securities by such seller.
(b) Indemnification by Holders of Registrable
Securities. In the event of the registration of any Registrable
Securities under the Securities Act pursuant to the provisions
hereof, each Holder on whose behalf such Registrable Securities
shall have been registered will indemnify and hold harmless each
and every Indemnified Person against any losses, claims, damages
or liabilities, joint or several, to which such Indemnified
Person may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue
statement of a material fact contained or incorporated by
reference in any Registration Statement, Shelf Registration
Statement, Prospectus or Shelf Prospectus or any amendment or
supplement thereto or any document incorporated by reference
therein, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, which untrue statement or alleged untrue statement or
omission or alleged omission has been made or incorporated
therein in reliance upon and in conformity with written
information furnished to the Company by such Holder specifically
stating that it is for use in preparation thereof, and will
reimburse each such Indemnified Person for any legal and other
expenses reasonably incurred by such Indemnified Person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the
liability of each Holder hereunder shall be limited to the
proceeds received by such Holder from the sale of Registrable
Securities covered by such Registration Statement or Shelf
Registration Statement.
(c) Procedure. Promptly after receipt by an
Indemnified Person of notice of the commencement of any action
(including any governmental investigation or inquiry), such
Indemnified Person will, if such Indemnified Person intends to
make a claim in respect thereof against the party agreeing to
indemnify such Indemnified Person pursuant to paragraphs (a) or
(b) hereof (each such Person being hereinafter referred to as an
"Indemnifying Person"), give written notice to such Indemnifying
Person of the commencement thereof, but the omission so to notify
the Indemnifying Person shall not relieve the Indemnifying Person
from any of its obligations pursuant to the provisions of this
Section 6 except to the extent that the Indemnifying Person is
actually prejudiced by such failure to give notice. In case any
such action is brought against any Indemnified Person and it
notifies an Indemnifying Person of the commencement thereof, the
Indemnifying Person shall be entitled to participate in, and to
the extent that it may wish, jointly with any other Indemnifying
Person similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such Indemnified Person, and
after notice from the Indemnifying Person to such Indemnified
Person, the Indemnifying Person shall not, except as hereinafter
provided, be responsible for any legal or other expenses
subsequently incurred by such Indemnified Person in connection
with the defense thereof. No Indemnifying Person will consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Person of a release
from all liability in respect of such claim or litigation.
Such Indemnified Person shall have the right to employ
separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall
be the expense of such Indemnified Person unless (a) the
Indemnifying Person has agreed to pay such fees and expenses or
(b) the Indemnifying Person shall have failed to assume the
defense of such action or proceeding or has failed to employ
counsel reasonably satisfactory to such Indemnified Person in any
such action or proceeding or (c) the named parties to any such
action or proceeding (including any impleaded parties) include
both such Indemnified Person and the Indemnifying Person and such
Indemnified Person shall have been advised by counsel that
representation of both parties by the same counsel would be
inappropriate due to actual or potential material differing
interests between them (in which case, if such Indemnified Person
notifies the Indemnifying Person in writing that it elects to
employ separate counsel at the expense of the Indemnifying
Person, the Indemnifying Person shall not have the right to
assume the defense of such action or proceeding on behalf of such
Indemnified Person). The Indemnifying Person shall not be liable
for any settlement of any such action or proceeding effected
without its written consent, which consent shall not unreasonably
be withheld, delayed or conditioned, but if settled with its
written consent, or if there is a final judgment for the
plaintiff in any such action or proceeding, the Company agrees to
indemnify and hold harmless such Indemnified Persons from and
against any loss or liability by reason of such settlement or
judgment.
(d) Contribution. If the indemnification provided for
in this Section 6 is unavailable to a party that would have been
an Indemnified Person under this Section 6 in respect of any
losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to herein, then each party that would
have been an Indemnifying Person thereunder shall, in lieu of
indemnifying such Indemnified Person, contribute to the amount
paid or payable by such Indemnified Person as a result of such
losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Person on the one hand and
the Indemnified Person on the other in connection with the
statement or omission which resulted in such losses, claims,
damages, liabilities or expenses (or actions in respect thereof),
as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission of a material
fact relates to information supplied by the Indemnifying Person
or the Indemnified Person and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable
by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 6(c),
any legal or other fees or expenses reasonably incurred by such
party in connection with the investigation or defense of any
action or claim. The Company and each Holder of Registrable
Securities agrees that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by pro
rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in
this Section 6. Notwithstanding the provisions of this Section
6(d), no Holder of Registrable Securities shall be required to
contribute any amount in excess of the amount by which the total
price at which the Registrable Securities sold by it exceeds the
amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
Indemnification or, if appropriate, contribution, similar to
that specified in the preceding provisions of this Section 6
(with appropriate modifications) shall be given by the Company
and each seller of Registrable Securities with respect to any
required registration or other qualification of such securities
under any federal or state law or regulation or governmental
authority other than the Securities Act.
In the event of any underwritten offering of Registrable
Securities under the Securities Act pursuant to the provisions of
Section 2 or Section 3, the Company and each Holder on whose
behalf such Registrable Securities shall have been registered
agree to enter into an underwriting agreement, in standard form,
with the underwriters, which underwriting agreement may contain
additional provisions with respect to indemnification and
contribution in lieu thereof.
SECTION 7. Exchange Act Registration; Rule 144 Reporting.
The Company covenants and agrees that until such time as the
Holders no longer hold any Registrable Securities it will:
(a) if required by law, maintain an effective
registration statement (containing such information and documents
as the SEC shall specify) with respect to the Common Stock of the
Company under Section 12(g) of the Exchange Act;
(b) make and keep public information available, as
those terms are understood and defined in Rule 144 under the
Securities Act, at all times after the effective date that the
Company becomes subject to the reporting requirements of the
Securities Act or the Exchange Act (even if the Company
subsequently ceases to be subject to such reporting
requirements);
(c) file with the SEC in a timely manner all reports
and documents required of the Company under the Securities Act
and the Exchange Act;
(d) furnish to any Holder promptly upon request (i) a
written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (and any similar or successor
rules) and of the Securities Act and the Exchange Act, (ii) a
copy of the most recent annual or quarterly report of the Company
(beginning after the Company becomes subject to such reporting
requirements), and (iii) such other reports and documents of the
Company and other information in the possession of or reasonably
attainable by the Company as such Holder may reasonably request
in availing itself of any rule or regulation of the SEC allowing
such Holder to sell any such securities without registration; and
(e) take such further action as any Holder of
Registrable Securities may from time to time reasonably request
to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of
the exemptions provided by (i) Rule 144 under the Securities Act,
as such rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the SEC.
The Company represents and warrants that such registration
statement or any information, document or report filed with the
SEC in connection therewith or any information so made public
shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary in order to make the statements contained therein not
misleading. The Company agrees to indemnify and hold harmless
(or to the extent the same is not enforceable, make contribution
to) the Holders, their partners, officers, directors, employees
and agents, each broker, dealer or underwriter (within the
meaning of the Securities Act) acting for any Holder in
connection with any offering or sale by such Holder of
Registrable Securities or any Person controlling (within the
meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act) such Holder and any such broker, dealer or
underwriter from and against any and all losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arising
out of or resulting from any breach of the foregoing
representation or warranty, all on terms and conditions
comparable to those set forth in Section 6.
SECTION 8. Limitation on Registration Rights of Others.
The Company represents and warrants that, except as set
forth on Exhibit D to the Warrant Agreement, it has not granted
to any Person the right to request or require the Company to
register any securities issued by the Company. The Company
covenants and agrees that, so long as any Holder holds any
Warrant Securities, the Company will not, directly or indirectly,
grant to any Person or agree to or otherwise become obligated in
respect of (a) any registration rights of securities of the
Company upon the demand of any Person (including any shelf
registration) without the prior written consent of the Required
Holders; or (b) rights of registration in the nature or
substantially in the nature of those set forth in Section 2
unless such rights are expressly subject and subordinated to the
rights of registration of the Holders pursuant to Section 2
hereof on terms reasonably satisfactory to the Required Holders.
SECTION 9. Mergers, etc.
In addition to any other restrictions on mergers,
consolidations and reorganizations contained in the Credit
Agreement, the Warrant Agreement or in the certificate of
incorporation, by-laws or agreements of the Company, the Company
covenants and agrees that it shall not, directly or indirectly,
enter into any merger, consolidation or reorganization in which
the Company shall not be the surviving corporation and in which
the Holders shall not have had the right to receive cash for all
their Registrable Securities, unless the surviving corporation
shall, prior to such merger, consolidation or reorganization,
agree in a writing satisfactory in form, scope and substance to
the Required Holders to assume the obligations of the Company
under this Agreement, and for such purpose references hereunder
to "Registrable Securities" shall be deemed to include the
securities which such Holders would be entitled to receive in
exchange for Registrable Securities pursuant to any such merger,
consolidation or reorganization.
If, and as often as, there are any changes in the
Registrable Securities by way of stock split, stock dividend,
combination or classification, or through merger, consolidation,
reorganization or recapitalization, or by any other means,
appropriate adjustments shall be made in the provisions hereof as
may be required, so that the rights and privileges granted hereby
shall continue with respect to the Registrable Securities as so
changed.
SECTION 10. Notices, etc.
All notices, consents, approvals, agreements and other
communications provided hereunder shall be in writing or by telex
or telecopy and shall be sufficiently given to the Purchasers,
the Holders and the Company if addressed or delivered to them in
accordance with Section 20 of the Warrant Agreement.
SECTION 11. Entire Agreement.
The parties hereto agree that this Agreement and the
agreements specifically referred to in Section 33 of the Warrant
Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior
agreements and understandings between them as to such subject
matter; and there are no restrictions, agreements, arrangements,
oral or written, between any or all of the parties relating to
the subject matter hereof which are not fully expressed or
referred to herein or therein.
SECTION 12. Waivers and Further Agreements.
Any waiver of any terms or conditions of this Agreement
shall not operate as a waiver of any other breach of such terms
or conditions or any other term or condition, nor shall any
failure to enforce any provision hereof operate as a waiver of
such provision or of any other provision hereof; provided,
however, that no such written waiver unless it by its own terms
explicitly provides to the contrary, shall be construed to effect
a continuing waiver of the provision being waived and no such
waiver in any instance shall constitute a waiver in any other
instance or for any other purpose or impair the right of the
party against whom such waiver is claimed in all other instances
or for all other purposes to require full compliance with such
provision. Each of the parties hereto agrees to execute all such
further instruments and documents and to take all such further
action as the other parties may reasonably require in order to
effectuate the terms and purposes of this Agreement.
SECTION 13. Amendments.
This Agreement may not be amended nor shall any waiver,
change, modification, consent or discharge be effected except by
an instrument in writing executed by or on behalf of the party or
parties against whom enforcement of any amendment, waiver,
change, modification, consent or discharge is sought; provided,
however, that any waiver sought from the Holders of any provision
of this Agreement which affects the Holders generally, and any
action required to be taken by the Holders as a group pursuant to
this Agreement, shall be given or taken by the Required Holders,
and any such waiver or action so given or taken shall be binding
on all Holders. No failure or delay by any party in exercising
any right or remedy hereunder shall operate as a waiver thereof,
and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or a
waiver of the same right or remedy on any subsequent occasion.
SECTION 14. Assignment; Successors and Assigns.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs,
executors, legal representatives, successors and permitted
assigns, including, without limitation, any Holders, from time to
time of the Registrable Securities. Anything in this Agreement
to the contrary notwithstanding, the term "Holders" as used in
this Agreement shall be deemed to include the registered Holders
from time to time of the Warrant Securities.
SECTION 15. Severability.
If any provision of this Agreement shall be held or deemed
to be, or shall in fact be, invalid, inoperative or unenforceable
as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because
any provision conflicts with any constitution, statute, rule or
public policy, or for any other reason, such circumstance shall
not have the effect of rendering the provision or provisions in
question, invalid, inoperative or unenforceable in any other
jurisdiction or in any other case or circumstance or of rendering
any other provision or provisions herein contained invalid,
inoperative or unenforceable to the extent that such other
provisions are not themselves actually in conflict with such
constitution, statute, rule or public policy, but this Agreement
shall be reformed and construed in any such jurisdiction or case
as if such invalid, inoperative or unenforceable provision had
never been contained herein and such provision reformed so that
it would be valid, operative and enforceable to the maximum
extent permitted in such jurisdiction or in such case.
SECTION 16. Counterparts.
This Agreement may be executed in two or more counterparts
(each of which need not be executed by each of the parties), each
of which shall be deemed an original, but all of which together
shall constitute one and the same instrument, and in pleading or
proving any provision of this Agreement, it shall not be
necessary to produce more than one such counterpart.
SECTION 17. Section Headings.
The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 18. Gender; Usage.
Whenever used herein the singular number shall include the
plural, the plural shall include the singular, and the use of any
gender shall include all genders. The words "hereof," "herein"
and "hereunder," and words of similar import, when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
SECTION 19. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
SECTION 20. Termination.
The rights of any Holder under Sections 2 and 3 of this
Agreement shall terminate as to any Registrable Securities when
such Registrable Securities have been effectively registered
under the Securities Act and sold pursuant to a Registration
Statement or Shelf Registration Statement covering such
Registrable Securities. The indemnification and contribution
provisions of Sections 6 and 7 shall survive any termination of
this Agreement.
SECTION 21. Expenses.
The Company shall be obligated to pay to the Holders, on
demand, all costs and expenses (including, without limitation,
court costs and reasonable attorneys' fees and expenses and
interest to the extent permitted by applicable law on overdue
amounts) paid or incurred in collecting any sums due from, or
enforcing any other obligations of, the Company.
SECTION 22. Specific Performance.
The Company recognizes that the rights of the Holders under
this Agreement are unique and, accordingly, the Holders shall, in
addition to such other remedies as may be available to any of
them at law or in equity, have the right to enforce their rights
hereunder by actions for injunctive relief and specific
performance to the extent permitted by law. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of
this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be
adequate. This Agreement is not intended to limit or abridge any
rights of the Holders which may exist apart from this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
AFGL INTERNATIONAL, INC.
By:/s/
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
By:/s/
