<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
Headway Corporate Resources, Inc.
---------------------------------
(Name of Issuer)
Common Stock $0.0001 par value
------------------------------
(Title of Class of Securities)
75 2134871
----------
(CUSIP Number)
Mr. E. Garrett Bewkes, III With a copy to:
GarMark Partners, L.P. Scott M. Zimmerman, Esq.
c/o GarMark Associates, L.L.C. Shereff, Friedman, Hoffman & Goodman, LLP
1325 Avenue of the Americas 919 Third Avenue
26th Floor New York, New York 10022
New York, New York 10019 (212) 758-9500
(212) 713-8500
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
June 19, 1998
-----------------------
(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this statement because of Rule 13d-1(b) (3) or (4), check the
following: [ ].
Note: One copy and an EDGAR version of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other parties to
whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 102 sequentially numbered pages
Exhibit Index appears at sequentially numbered Page 9.
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No. 75 2134871 Page 2 of 85 Pages
----------- ------- --------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GarMark Partners L.P.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ]
(b)[X]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,389,486
BENEFICIALLY -----------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING -----------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 2,389,486
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,389,486
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
N/A
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.15%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING
EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
Page 2 of 102 Pages
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No. 75 2134871 Page 3 of 85 Pages
------------ -------- --------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GarMark Associates L.L.C.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ]
(b)[X]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,389,486
BENEFICIALLY -------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING -------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 2,389,486
-------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,389,486
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
N/A
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.15%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING
EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
Page 3 of 102 Pages
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No. 75 2134871 Page 4 of 85 Pages
----------- ------- ------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
E. Garrett Bewkes, III
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ]
(b)[X]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY ---------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 2,389,486
REPORTING ---------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,389,486
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,389,486
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
N/A
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.15%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING
EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
Page 4 of 102 Pages
<PAGE>
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No. 75 2134871 Page 5 of 85 Pages
---------- ------- ------
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Mark G. Solow
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ]
(b)[X]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY ---------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 2,389,486
REPORTING ---------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
---------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,389,486
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,389,486
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
N/A
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.15%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING
EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
Page 5 of 102 Pages
<PAGE>
SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this statement on
Schedule 13D (this "Statement") relates is the common stock, $0.0001 par value
per share (the "Common Stock") of Headway Corporate Resources, Inc., a Delaware
corporation (the "Issuer"). As of March 19, 1998, the date of the transaction
that will give rise to the event which will require the filing of this
Statement, the principal executive offices of the Issuer were located at 850
Third Avenue, 11th Floor, New York, New York 10022, telephone (212) 508-3500.
ITEM 2. IDENTITY AND BACKGROUND
(a), (b), (c) and (f). This Schedule 13D is being filed
jointly by (i) GarMark Partners, L.P., a Delaware limited partnership
("GarMark Partners"), (ii) GarMark Associates L.L.C., a Delaware limited
liability company ("GarMark Associates") and the general partner of GarMark
Partners, (iii) E. Garrett Bewkes, III, a United States citizen ("Bewkes") and
(iv) Mark G. Solow, a United States citizen ("Solow"). Bewkes and Solow are
the controlling members of GarMark Associates. GarMark Partners, GarMark
Associates, Bewkes and Solow are hereinafter sometimes referred to
collectively as the "Reporting Persons". The business address of each
Reporting Person is 1325 Avenue of the Americas, 26th Floor, New York, New
York 10019.
GarMark Partners is a private investment partnership.
Bewkes' present principal occupation is Managing Member of GarMark Associates.
Solow's present principal occupation is Managing Member of GarMark Associates.
See Item 5 for information regarding ownership of Common
Stock.
(d) and (e). During the past five years, none of the
Reporting Persons or other persons listed above has been convicted in any
criminal proceeding (excluding traffic violations or similar misdemeanors) or
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
GarMark Partners purchased an aggregate of (i) 666.67 shares
of the Series F Convertible Preferred Stock $0.0001 par value per share (the
"Preferred Stock") of the Issuer for an aggregate purchase price of
$13,333,333, and (ii) $6,666,667 of the Increasing Rate Senior Subordinated
Notes (the "Notes") of the Issuer, in each case using its own funds.
Page 6 of 102 Pages
<PAGE>
ITEM 4. PURPOSE OF TRANSACTION.
On March 19, 1998, GarMark Partners, the other purchasers
(together with GarMark Partners, the "Purchasers") that are signatories to the
Securities Purchase Agreement (as defined below) and the Issuer entered into a
Securities Purchase Agreement (the "Securities Purchase Agreement"), pursuant
to which the Purchasers purchased Preferred Stock and Notes of the Issuer. A
copy of the Securities Purchase Agreement is attached hereto as Exhibit A. The
terms of the Preferred Stock are set forth in the Certificate of Designations,
Preferences and Rights of the Series F Convertible Preferred Stock (the
"Certificate of Designations"), a copy of which is attached hereto as Exhibit
B.
The Certificate of Designations provides that: (i) after
June 19, 1998, the shares of Preferred Stock shall be convertible into shares
of Common Stock of the Issuer at a rate of $5.58 per share, which number of
shares and the per share price are subject to adjustment pursuant to the terms
of the Certificate of Designations, (ii) the Purchasers have certain
preemptive and redemption rights (as set forth in the Certificate of
Designations) with respect to, among other things, certain sales of Common
Stock of the Issuer, (iii) the Purchasers have certain voting rights with
resect to, among other things, (a) extraordinary corporate transactions such
as a merger, reorganization or liquidation of the Issuer or any subsidiary of
the Issuer, (b) the sale or transfer of substantially all of the assets of the
Issuer, (c) certain changes in the Issuers capitalization or dividend policy,
(d) material change in the Issuer's or the Issuer's subsidiaries' business,
(e) changes in the Issuer's certificate of incorporation or by-laws, (f) the
sale of the Issuer's Common Stock in certain circumstances, (g) the incurrence
of debt by the Issuer in certain instances, (h) the sale of certain
subsidiaries of the Issuer, or (i) amending the size of the Board of Directors
of the Issuer in certain instances.
Pursuant to the Securities Purchase Agreement and the
Certificate of Designations, (i) on March 19, 1998, Bewkes was elected, as a
designee of GarMark Partners, as an additional director of the Issuer's Board
of Directors and as a member of each committee of such Board of Directors, and
(ii) GarMark Partners is entitled to appoint one non-voting observer to the
Board of Directors and of each committee thereof. Pursuant to the Certificate
of Designations, upon the failure of the Issuer to (i) pay the dividends on
the Preferred Stock for four consecutive quarterly periods, or (ii) default
upon any redemption obligation, the number of directors of the Issuer's Board
of Directors will be increased to allow the Purchasers, voting as a class, to
elect one third of the Issuer's Board of Directors.
The terms of the Securities Purchase Agreement and the
Certificate of Designations set forth above are qualified in their entirety by
the copies of the Securities Purchase Agreement and Certificate of
Designations attached hereto as Exhibits A and B, respectively, and
incorporated herein by reference.
The Reporting Persons may acquire or dispose of securities
of the Issuer including shares of Common Stock, directly or indirectly, in
open-market or privately negotiated transactions, depending upon the
evaluation of the performance and prospects of the Issuer by the
Page 7 of 102 Pages
<PAGE>
Reporting Persons, and upon other developments and circumstances, including,
but not limited to, general economic and business conditions and stock market
conditions.
Except for the foregoing and as disclosed below, no
Reporting Person has any present plans or proposals which relate to or would
result in any of the actions or events described in paragraphs (a) through (j)
of Item 4 of Schedule 13D. However, the Reporting Persons retain their
respective rights to modify their plans with respect to the transactions
described in this Item 4, to acquire or dispose of securities of the Issuer
and to formulate plans and proposals which could result in the occurrence of
any such events, subject to applicable laws and regulations.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
(a) and (b) GarMark Partners is the beneficial owner of
2,389,486 shares of Common Stock (as such number may be adjusted pursuant to
the Certificate of Designations), or 21.15% of the outstanding shares of
Common Stock.
As the general partner of GarMark Partners, GarMark
Associates has the power to vote and to direct the voting of and the power to
dispose of and direct the disposition of the 2,389,486 shares beneficially
owned by GarMark Partners. Accordingly, GarMark Associates may be deemed to be
the beneficial owner of 2,389,486 shares of Common Stock, or 21.15% of the
outstanding shares of Common Stock.
As the Managing Members of GarMark Associates, the general
partner of GarMark Partners, each of Bewkes and Solow has the power to vote
and to direct the voting of and the power to dispose of and direct the
disposition of the 2,389,486 shares beneficially owned by GarMark Partners.
Accordingly, each of Bewkes and Solow may be deemed to be the beneficial owner
of 2,389,486 shares of Common Stock, or 21.15% of the outstanding shares of
Common Stock.
The percentage of beneficial ownership of the Reporting
Persons is based on 8,907,110 outstanding shares of Common Stock of the
Company on December 31, 1997, as reported in the Issuer's Annual Report on
Form 10-K for the period ended December 31, 1997.
Other than as disclosed in this Schedule 13D, there were no
transactions in the Common Stock effected by the Reporting Persons during the
past sixty days.
(d) Not applicable.
(e) Not applicable.
Page 8 of 102 Pages
<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF ISSUER.
The Securities Purchase Agreement and the Certificate of
Designations, copies of each of which are attached hereto as Exhibit A and B,
respectively, and which are incorporated herein by reference, each provide,
among other things, that (i) one person to be chosen by GarMark Partners be
elected as an additional director of the Issuer's Board of Directors and as a
member of each committee of such Board of Directors, and (ii) one person to be
chosen by GarMark Partners be elected as a non-voting observer of the Board of
Directors and of each committee thereof. The Certificate of Designations
provides that, among other things, upon the failure of the Issuer to (i) pay
the dividends on the Preferred Stock for four consecutive quarterly periods,
or (ii) default upon any redemption obligation, the number of directors of the
Issuer's board of Directors will be increased to allow the Purchasers, voting
as a class, to elect one third of the Issuer's Board of Directors.
The Registration Rights Agreement, dated as of March 19,
1998, a copy of which is attached hereto as Exhibit C and which is
incorporated herein by reference, provides for the grant by the Issuer of
certain demand and piggy-back registration rights to the Purchasers.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
Exhibit A. Securities Purchase Agreement dated as of March
19, 1998 between the Issuer and the Purchasers.
Exhibit B. Certificate of Designations, Preferences and Rights of
the Series F Convertible Preferred Stock of the Issuer,
dated as of March 19, 1998.
Exhibit C. Registration Rights Agreement dated as of March
19, 1998 between the Issuer and the Purchasers.
Exhibit D. Agreement of Joint Filing among signatories of this
Schedule 13D with respect to its filing.
Page 9 of 102 Pages
<PAGE>
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
GARMARK PARTNERS, L.P.
By: GarMark Associates L.L.C.
its general partner
By: /s/ E. Garrett Bewkes, III
-------------------------------
Name: E. Garrett Bewkes, III
Title:
GARMARK ASSOCIATES L.L.C.
By: /s/ E. Garrett Bewkes, III
-------------------------------
Name: E. Garrett Bewkes, III
Title:
/s/ E. Garrett Bewkes, III
--------------------------
E. GARRETT BEWKES, III
/s/ Mark G. Solow
--------------------------
MARK G. SOLOW
Dated: April 24, 1998
Page 10 of 102 Pages
<PAGE>
Exhibit A
- -------------------------------------------------------------------------------
-------------------------------------
SECURITIES PURCHASE AGREEMENT
-------------------------------------
INCREASING RATE SENIOR SUBORDINATED NOTES
DUE MARCH 12, 2006
AND
SERIES F CONVERTIBLE PREFERRED STOCK
OF
HEADWAY CORPORATE RESOURCES, INC.
Dated as of March 19, 1998
- -------------------------------------------------------------------------------
Page 11 of 102 Pages
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ------
<S> <C> <C>
1. Definitions.....................................................................................1
2. Issuance, Purchase and Sale of the Securities...................................................8
2.1 Issuance of the Securities.............................................................8
2.2 Sale and Purchase of the Securities....................................................9
3. Closing of Sale of Securities...................................................................9
4. Deliveries at the Closing.......................................................................9
4.1 Deliveries by the Company to the Purchasers on the Closing Date........................9
(a) Securities. .................................................................9
(b) Compliance Certificate. .....................................................9
(c) Opinion of Counsel...........................................................10
(d) Note Indenture...............................................................10
(e) Credit Facility. ...........................................................10
(f) Registration Rights Agreement. ..............................................10
(h) Certificate of Designations. ...............................................10
(i) Bylaws Amendment.............................................................11
(j) Board of Directors...........................................................11
(k) Other Transaction Documents. ...............................................11
(l) Governmental and Third Party Permits, Consents, Etc..........................11
(m) Information Memorandum.......................................................11
(n) Corporate Documents..........................................................11
(o) Waivers......................................................................12
(p) Payment of Closing Fees......................................................12
(q) Payment of the Signing Fee and the Commitment Fee. ..........................12
4.2 Deliveries by the Purchasers to the Company on the Closing Date. .....................12
(a) Purchase Price. ............................................................12
(b) Compliance Certificate. ....................................................12
(c) Registration Rights Agreement. ..............................................13
5. Representations and Warranties. Etc. ..........................................................13
5.1 Organization and Qualification; Authority.............................................13
5.2 Subsidiaries; Other Holdings..........................................................13
5.3 Licenses..............................................................................14
5.4 Corporate and Governmental Authorization; Contravention...............................14
5.5 Validity and Binding Effect...........................................................15
5.6 Capitalization........................................................................16
5.7 Litigation; Defaults..................................................................18
5.8 Outstanding Debt......................................................................18
5.9 No Material Adverse Change............................................................18
5.10 Employee Programs.....................................................................19
Page 12 of 102 Pages
<PAGE>
<CAPTION>
<S> <C> <C>
5.11 Private Offerings.....................................................................20
5.12 Broker's or Finder's Commissions......................................................21
5.13 Company SEC Documents; Information Memorandum.........................................21
5.14 Financial Statements; No Undisclosed Liabilities; Accounts Receivable.................22
5.15 Foreign Assets Control Regulation. Etc................................................23
5.16 Federal Reserve Regulations and Other Matters.........................................23
5.17 Investment Company Act................................................................24
5.18 Public Utility Holding Company Act....................................................24
5.19 Interstate Commerce Act...............................................................24
5.20 Environmental Regulation, Etc.........................................................24
5.21 Properties and Assets.................................................................25
5.22 Insurance.............................................................................25
5.23 Employment Practices..................................................................26
5.24 Intellectual Property.................................................................26
5.25 Material Contracts and Obligations....................................................27
5.26 Taxes.................................................................................29
5.27 Transactions with Affiliates; Arm's-Length Transactions; Conflicts of Interest........30
5.28 Limitation on Subsidiary Payment Restrictions.........................................30
5.29 Notes.................................................................................30
5.30 Solvency..............................................................................30
5.31 RICO..................................................................................31
5.32 Absence of Certain Practices.........................................................31
5.33 No Other Business.....................................................................31
5.34 Minute Books..........................................................................31
5.35 Regulatory Requirements; Cessation of Direct Investment Program.......................31
6. Purchase for Investment; Source of Funds.......................................................32
7. Covenants of the Company.......................................................................33
7.1 Use of Proceeds.......................................................................33
7.2 The Company's Board of Directors......................................................33
7.3 Publicly Available Information........................................................34
7.4 Public Documents......................................................................34
7.5 Information Relating to the Purchasers................................................34
7.6 Notice Regarding Certain Corporate Actions............................................34
7.7 Access to Information.................................................................34
7.8 True Books and Records of the Company.................................................35
7.9 Officer's Knowledge of Default........................................................35
7.10 Suits or Other Proceedings............................................................35
7.11 Hedging Obligations...................................................................35
7.12 Projections. Prepare all ............................................................35
8. Restrictions on Transfer.......................................................................35
8.1 Restrictive Legends...................................................................35
8.2 Notice of the Proposed Transfer; Opinions of Counsel..................................36
Page 13 of 102 Pages
<PAGE>
<CAPTION>
<S> <C> <C>
9. Miscellaneous..................................................................................37
9.1 Indemnification: Expenses Etc.........................................................37
9.2 Survival of Representations and Warranties; Severability..............................39
9.3 Amendment and Waiver..................................................................39
9.4 Notices, Etc..........................................................................39
9.5 Successors and Assigns................................................................39
9.6 Agreement and Action of the Purchasers................................................40
9.7 Descriptive Headings..................................................................40
9.8 Satisfaction Requirement..............................................................40
9.9 GOVERNING LAW.........................................................................40
9.10 Service of Process....................................................................40
9.11 Counterparts..........................................................................41
9.12 Disclosure to Other Persons...........................................................41
9.13 Acknowledgment by Purchasers..........................................................42
9.14 No Adverse Interpretation of Other Agreements.........................................42
9.15 WAIVER OF JURY TRIAL..................................................................42
</TABLE>
Page 14 of 102 Pages
<PAGE>
SCHEDULES
---------
SCHEDULE 5.1 -- Jurisdictions in which the Company is qualified
SCHEDULE 5.2 -- Subsidiaries; Jurisdictions in which the Subsidiaries are
qualified
SCHEDULE 5.4 -- Authorization and Approvals
SCHEDULE 5.6 -- Capitalization
SCHEDULE 5.7 -- Litigation; Defaults
SCHEDULE 5.8 -- Debt and Other Liabilities
SCHEDULE 5.9 -- Material Developments
SCHEDULE 5.10 -- Employee Programs
SCHEDULE 5.14 -- Undisclosed Liabilities
SCHEDULE 5.19 -- Environmental
SCHEDULE 5.21 -- Condemnation Proceedings and Liens
SCHEDULE 5.22 -- Insurance
SCHEDULE 5.23 -- Employment Practices
SCHEDULE 5.24 -- Patents and Trademarks
SCHEDULE 5.25 -- Material Contracts and Obligations
SCHEDULE 5.26 -- Taxes
SCHEDULE 5.27 -- Transactions with Affiliates
SCHEDULE 5.28 -- Subsidiary Payment Restrictions
SCHEDULE 5.35 -- Earnout Provisions
SCHEDULE 5.36 -- Existing Investments
Page 15 of 102 Pages
<PAGE>
EXHIBITS
--------
EXHIBIT A -- Form of Certificate of Designations, Preferences and Rights of
the Preferred Stock
EXHIBIT B -- Form of Opinion of Christy & Viener
EXHIBIT C -- Form of Note Indenture
EXHIBIT D -- Form of Amendment to the Company's Bylaws
EXHIBIT E -- Form of Registration Rights Agreement
EXHIBIT F -- Form of Guaranty Agreement
Page 16 of 102 Pages
<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
This SECURITIES PURCHASE AGREEMENT ("Agreement") dated as of March
19, 1998, among Headway Corporate Resources, Inc., a Delaware corporation (the
"Company"), and each purchaser executing a signature page hereto or any
subsequent holder of the Securities (each a "Purchaser," and collectively the
"Purchasers").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to issue and sell to the Purchasers, and
the Purchasers desire to purchase from the Company, (i) the Notes in the
aggregate amount of up to $10,000,000, and (ii) the Preferred Stock in the
aggregate liquidation preference of up to $20,000,000 (the Notes and the
Preferred Stock are herein collectively referred to as the "Securities"), on
the terms, and subject to the conditions, set forth herein.
NOW THEREFORE, in consideration of these premises, the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
1. Definitions. For purposes hereof unless the context otherwise
requires, the following terms shall have the meanings indicated. All
accounting terms not otherwise defined herein, shall have the respective
meanings accorded to them under GAAP. Unless the context otherwise requires,
(i) references to a "Schedule" or an "Exhibit" are to a Schedule or an Exhibit
attached to this Agreement, (ii) references to a "section" or a "subdivision"
are to a section or a subdivision of this Agreement, or (iii) any of the
following terms may be used in the singular or the plural, depending on the
reference:
"Acquisition Documents" means, collectively, (a) that certain Asset
Purchase Agreement dated as of March 31, 1997 between the Company, Headway
Corporate Staffing Services of North Carolina, Inc., Advanced Staffing
Solutions, Inc., H. Wade Gresham and Mark F. Herron, (b) that certain Asset
Purchase Agreement dated as of July 28, 1997 between the Company, ASA
Personnel Services, Inc., Administrative Sales Associates, Inc.,
Administrative Sales Associates Temporaries, Inc., Richard Brody and Arnold
Katz, (c) that certain Asset Purchase Agreement dated as of September 29, 1997
between the Company, Irene Cohen Temps, Inc., Quality Outsourcing, Inc.,
George J. Burt, Richard E. Gaudy and Peter F. Notaro, (d) that certain
Purchase Agreement dated as of September 30, 1997 between the Company, Headway
Corporate Staffing Services of Connecticut, Inc., Electronic Data Resources,
L.L.C., EDR Associates, Inc., Maurice Dusel, James Roberts and Michael
Russell, (e) that certain Asset Purchase Agreement, to be dated on or about
March 23, 1998, among the Company, Headway Corporate Staffing Services of
North Carolina, Inc., Select Staffing Services, Inc. and Jack Powell, (f) that
certain Asset Purchase Agreement, to be dated on or about March 23, 1998,
among the Company, Cheney Associates, L.L.C. and Timothy Cheney, an individual
doing business under the names Cheney Associates, Inc. and Cheney Consulting
Group, (g) that certain Stock Purchase Agreement, to be dated on or about
March 23, 1998, among the Company, L&M Shore Family Holdings Limited
Partnership, Elder Investments Limited Partnership, Mark Shore and Linda
Elder, and (h) any other purchase agreement entered into hereafter by the
Company and/or any Subsidiaries relating to the acquisition of any entity or
any assets thereof.
Page 17 of 102 Pages
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"Affiliate" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.
"Agreement" means this Agreement, as amended, modified or supplemented
from time to time, in accordance with the terms hereof, together with any
exhibits, schedules or other attachments thereto.
"Business Day" has the meaning ascribed thereto in the Note
Indenture.
"Bylaws Amendment" means the Amendment to the Company's by-laws,
attached hereto as Exhibit D.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated
and whether voting or non-voting) of such Person's capital stock or any form
of membership interests, as applicable, whether outstanding on the Closing
Date or issued after the Closing Date and any and all rights, warrants
or options exercisable or exchangeable for or convertible into such capital
stock.
"Certificate of Designations" means the Certificate of Designations,
Preferences and Rights of the Series F Convertible Preferred Stock of the
Company, attached hereto as Exhibit A.
"Change of Control" has the meaning ascribed thereto in the Note
Indenture.
"Charter Documents" has the meaning ascribed thereto in Section 5.1
hereof.
"Closing" has the meaning ascribed thereto in Section 3 hereof.
"Closing Date" has the meaning ascribed thereto in Section 3 hereof.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, as amended from time to time.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
"Commitment Fee" means (i) one (1) percent of the principal amount of
the Notes, plus (ii) one (1) percent of the aggregate liquidation preference
of the Preferred Stock, as determined pursuant to the Certificate of
Designation.
"Commitment Letter" means those certain commitment letters between
each Purchaser and the Company, each dated January 27, 1998, with respect to
the transactions contemplated hereby.
Page 18 of 102 Pages
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"Common Stock" means the common stock, par value $.0001 per share, of
the Company.
"Company" has the meaning ascribed thereto in the introduction
hereof.
"Contract" has the meaning ascribed thereto in Section 5.25 hereof.
"Credit Agreement" means the Credit Agreement, dated as of March 19,
1998, entered into between the Company and NationsBank, National Association,
as agent, and the lenders party thereto from time to time, providing for the
Credit Facility, as the same may at any time be amended, amended and restated,
supplemented or otherwise modified, including any refinancing, refunding,
replacement or extension thereof permitted under the Note Indenture which
provides for working capital and other financing, whether by the same or any
other lender or group of lenders.
"Credit Facility" means the $75,000,000 revolving credit facility,
pursuant to the Credit Agreement.
"Current Affiliate" has the meaning ascribed thereto in Section 5.10
hereof.
"Default" has the meaning ascribed thereto in the Note Indenture.
"DGCL" shall mean the Delaware General Corporation Law in effect as
of the date hereof, as amended from time to time.
"Dilution Event" has the meaning ascribed thereto in the Note
Indenture.
"Domestic Subsidiary" has the meaning ascribed thereto in the Note
Indenture.
"Employee Program" has the meaning ascribed thereto in Section 5.10
hereof.
"Employees" means officers, directors, consultants, employees and all
other persons who render services to the Company.
"Environment" means soil, surface waters, groundwaters, land, stream
sediments, surface or subsurface strata and ambient air.
"Environmental Law(s)" means and includes any Laws relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including ambient air, soil, surface water, ground
water, wetlands, land or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
and the rules and regulations thereunder, as amended from time to time.
Page 19 of 102 Pages
<PAGE>
"ERISA Plan" has the meaning ascribed thereto in Section 5.10 hereof.
"Event of Default" has the meaning ascribed thereto in the Note
Indenture.
"Executive Officer" means the Chief Executive Officer, the President,
the Chief Operating Officer, the Chief Financial Officer, the Treasurer and
any Senior Vice President of the Company or any other person who, by whatever
title, has control over or responsibility for the management and operations of
the Company.
"Financial Statements" has the meaning ascribed thereto in Section
5.14 hereof.
"GAAP" means generally accepted accounting principles and practices
set forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as may be approved by a
significant segment of the accounting profession that are applicable to the
circumstances as of the date of determination.
"GarMark" means GarMark Partners, L.P.
"Governmental Authority" means any governmental or quasi-governmental
authority including, without limitation, any federal, state, territorial,
county, municipal or other governmental or quasi-governmental agency, board,
branch, bureau, commission, court, arbitration panel, department, authority,
body or other instrumentality or political unit or subdivision or official
thereof, whether domestic or foreign.
"Guaranty Agreement" means the Guaranty Agreement of even date
herewith, by and among the Company's Domestic Subsidiaries and the Trustee,
for the benefit of the Purchasers, substantially in the form of Exhibit F
hereto, as amended, modified or supplemented from time to time in accordance
with the terms thereof, together with any exhibits, schedules or other
attachments thereto.
"Hazardous Materials" means and includes any pollutants, hazardous or
toxic materials, substances or wastes, including: petroleum and petroleum
products and derivatives; asbestos; radon; polychlorinated bi-phenyls;
urea-formaldehyde foam insulation; explosives; radioactive materials;
laboratory wastes and medical wastes (including contaminated clothing, body
fluids, contaminated medical instruments and equipment, catheters, used
bandages, gauzes, needles or other sharp instruments); and any chemicals,
materials or substances designated or regulated as hazardous or as toxic
substances, materials, or wastes, or otherwise regulated, under any
Environmental Law; hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
human health or safety, as defined or regulated under any Environmental Law.
"Hazardous Waste" means and includes any hazardous waste as defined
or regulated under any Environmental Law.
"Hedging Obligations" has the meaning ascribed thereto in the Note
Indenture.
Page 20 of 102 Pages
<PAGE>
"Information Memorandum" means that certain Information Memorandum of
the Company dated December 1, 1997, together with all attachments, schedules
and exhibits thereto, distributed in connection with the purchase and sale of
the Securities, and any supplement or amendment thereto reviewed by each
Purchaser prior to the date of this Agreement.
"Initial Purchasers" means the Purchasers listed on the signature
pages hereto and each of their respective Affiliates.
"Illegal Transfer Notice" has the meaning ascribed thereto in Section
8.2 hereof.
"Indemnified Party" or "Indemnified Parties" has the meaning ascribed
thereto in Section 9.1(a) hereof.
"Intellectual Property" has the meaning ascribed thereto in Section
5.24(a) hereof.
"IRS" means the Internal Revenue Service or any successor agency.
"Law" Any statute, ordinance, code, rule, regulation or order
enacted, adopted, promulgated, applied or followed by any Governmental
Authority.
"License" or "Licenses" has the meaning ascribed thereto in Section
5.3 hereof.
"Lien" means any security agreement, financing statement (whether or
not filed) mortgage, lien (statutory or otherwise), charge, pledge,
hypothecation, conditional sales agreement, adverse claim, title retention
agreement or other security interest, encumbrance, lien, charge, restrictive
agreement, mortgage, deed of trust, indenture, pledge, option, limitation,
exception to or other title defect in or on any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale, lease, consignment, or bailment given for security purposes,
trust receipt or other title retention agreement with respect to any Property
or asset of such Person, whether direct, indirect, accrued or contingent.
"Losses" has the meaning ascribed thereto in Sect on 9.1(a) hereof.
"Material Adverse Effect" has the meaning ascribed thereto in Section
5.1 hereof.
"Moore" means Remington Investment Strategies L.P. and Moore Global
Investments, Ltd. or any of their Affiliates.
"Multiemployer Plan" has the meaning ascribed thereto in Section 5.10
hereof.
"Notes" means the Increasing Rate Senior Subordinated Notes of the
Company, due March 19, 2006, issued pursuant to the Note Indenture as amended,
modified or supplemented from time to time in accordance with the terms
thereof and the Note Indenture.
"Note Indenture" means the Indenture of even date herewith by and
between the Company and the Trustee, substantially in the form of Exhibit C
hereto, as amended, modified or
Page 21 of 102 Pages
<PAGE>
supplemented from time to time in accordance with the terms thereof, together
with any exhibits, schedules or other attachments thereto.
"Officers' Certificate" means a certificate executed on behalf of the
Company by (a) the Chairman of the Board of Directors (if an officer) or the
President or one of the Vice Presidents of the Company and (b) the Treasurer
or one of the Assistant Treasurers or the Secretary or one of the Assistant
Secretaries of the Company.
"Option Plan" means any stock award or option plan, grant of
warrants, grant of rights (including grant of exercise, exchange or conversion
rights), agreement or arrangement, undertaking or commitment of any kind, for
Employees relating to Capital Stock or other securities of the Company.
"Permitted Acquisitions" has the meaning ascribed thereto in the Note
Indenture.
"Permitted Investments" has the meaning ascribed thereto in the Note
Indenture.
"Permitted Liens" has the meaning ascribed thereto in the Note
Indenture.
"Person" means any individual, entity or group, including, without
limitation, individual, corporation, limited liability company, limited or
general partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Preferred Stock" means the Series F Convertible Preferred Stock
$0.0001 par value per share of the Company having the terms outlined in the
Certificate of Designations and an aggregate liquidation preference of
$20,000,000.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Public Document" has the meaning ascribed thereto in Section 7.4
hereof.
"Purchasers" except as defined elsewhere in this Agreement, shall be
as defined in the introduction hereto.
"Registration Rights Agreement" means the Registration Rights
Agreement of even date herewith, by and among the Company and the Purchasers,
substantially in the form of Exhibit E hereto, as amended, modified or
supplemented from time to time in accordance with the terms thereof, together
with any exhibits, schedules or other attachments thereto.
"Regulation D" means Regulation D under the Securities Act.
"Regulation S" means Regulation S under the Securities Act.
Page 22 of 102 Pages
<PAGE>
"Release" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the Environment.
"Restricted Security" has the meaning ascribed thereto in Section 8.2
hereof.
"Rule 144" means Rule 144 as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
"Rule 144A" means Rule 144A as promulgated by the Commission under
the Securities Act, and any successor rule or regulation thereto.
"Securities" means, collectively, the Notes and the Preferred Stock.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations of the Commission promulgated thereunder, as amended.
"Security Documents" has the meaning ascribed thereto the Note
Indenture.
"Signing Fee" means the aggregate amount of $50,000.
"Subsidiary" means with respect to any Person, any corporation,
association or other business entity of which securities representing more
than 50% of the combined voting power of the total Voting Stock (or in the
case of an association or other business entity which is not a corporation,
more than 50% of the equity interest) is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. When used therein without reference to any
Person, Subsidiary means a Subsidiary of the Company.
"Swap Agreements" has the meaning ascribed thereto in the Note
Indenture.
"Taxes" has the meaning ascribed thereto in Section 5.26 thereof.
"Threat of Release" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the Environment which may
result from such Release.
"Transaction Documents" means, collectively, this Agreement, the Note
Indenture, the Notes, the Registration Rights Agreement, the Guaranty
Agreement and the Credit Agreement and any and all agreements, exhibits,
schedules, certificates, instruments and other documents contemplated thereby
or executed and delivered in connection therewith.
"Trustee" has the meaning ascribed thereto in the Notes Indenture.
"Voting Stock" means any class or classes of Capital Stock pursuant
to which the holders thereof have the general voting power under ordinary
circumstances to vote for the election of directors, managers or trustees of
any Persons (irrespective of whether or not at the time, stock of any class or
classes will have, or might have, voting power by the reason of the happening
of any contingency).
Page 23 of 102 Pages
<PAGE>
"Waivers" means the documents waiving the "change-in-control"
provisions contained in certain stock option agreements.
2. Issuance, Purchase and Sale of the Securities.
----------------------------------------------
2.1 Issuance of the Securities.
(a) The Company has authorized the issuance and sale of the
Notes, in the aggregate principal amount of up to $10,000,000 to be acquired
by the Purchasers in accordance with the terms of this Agreement. The Notes
shall be issued pursuant to and in accordance with the terms of the Note
Indenture. Each Note will be issued in the principal amount of $100,000 and
integral multiples of $1,000 in excess thereof, and will otherwise be in the
form of the Note attached to the Note Indenture, with such changes thereto, if
any, as may be approved by the Purchasers and the Company.
(b) The Company has authorized the issuance and sale of the
Preferred Stock in the aggregate liquidation preference of up to $20,000,000
to be acquired by the Purchasers in accordance with the terms of this
Agreement. The Preferred Stock shall have the voting powers, dividend rights,
liquidation rights, designations, preference and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof, as are set forth in the Certificate of Designations
which shall be filed with the Secretary of State of the State of Delaware on
or before the Closing Date.
2.2 Sale and Purchase of the Securities. Subject to the terms and
conditions of this Agreement and the Note Indenture, contemporaneously with
the execution hereof, the Company will issue, sell and deliver to each
Purchaser and each Purchaser will purchase from the Company, (a) such
principal amount of Notes, and (b) such amount of the aggregate liquidation
preference of Preferred Stock, as is specified opposite such Purchaser's name
on the signature pages hereto. The purchase price of the Securities shall be
as set forth on the signature page of each Purchaser and shall be payable by
each Purchaser to the Company in cash by wire transfer of immediately
available funds.
3. Closing of Sale of Securities. The purchase and delivery of the
Securities to be purchased by the Purchasers hereunder shall take place at the
offices of Christy & Viener, 620 Fifth Avenue, New York, New York 10020, at a
closing (the "Closing") on March 19, 1998 or at such other place or on such
other date as the Purchasers and the Company may agree upon (such date on
which the Closing shall have actually occurred, the "Closing Date"). At the
Closing, the Company will deliver or cause to be delivered to each Purchaser
the Securities to be purchased by each such Purchaser pursuant hereto against
payment of the purchase price therefor. The Notes and the Preferred Stock to
be purchased by each Purchaser hereunder shall be, with respect to each such
Purchaser, in the form of a single Note and a single Preferred Stock
certificate, respectively (or such greater number of Preferred Stock
certificates as each Purchaser may request no less than 48 hours prior to the
Closing), in each case dated the date of the Closing and registered in the
Purchaser's name or that of its nominee (provided to the Company no less than
48 hours prior to the Closing). If at the Closing the Company shall fail to
tender to the Purchasers any of the Securities to be purchased by them as
provided in this Section 3, or any of the items to be delivered pursuant to
Section 4.1 shall not have been delivered or such delivery has not been waived
by the Purchasers,
Page 24 of 102 Pages
<PAGE>
the Purchasers shall, at their election, be relieved of all further
obligations, if any, under the Commitment Letter or this Agreement, without
thereby waiving any other respective rights it may have by reason of such
failure or such non-fulfillment.
4. Deliveries at the Closing.
--------------------------
4.1 Deliveries by the Company to the Purchasers on the Closing Date.
At the Closing, the Company will deliver or cause to be delivered to each
Purchaser, against payment of the purchase price as provided herein:
(a) Securities. The Securities, as provided in Section 3 hereof;
(b) Compliance Certificate. An Officers' Certificate, dated the
date of the Closing, certifying that:
(i) the representations and warranties of the Company and
the Subsidiaries contained in this Agreement, the other Transaction
Documents, and those otherwise made in writing by or on behalf of
the Company and the Subsidiaries, in connection with transactions
contemplated by this Agreement and the other Transaction Documents
are true and correct as of the date hereof, after giving effect to
the sale of the Securities and the other transactions contemplated
by this Agreement and the other Transaction Documents, except that
any representations and warranties that relate to a particular date
or period shall be true and correct as of such date or period; and
(ii) the Company and each of its Subsidiaries have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions contained in, and required by,
this Agreement and the other Transaction Documents, to be performed,
satisfied or complied with prior to or at the Closing, and at the
time of the Closing after giving effect to the sale of the
Securities and the other transactions contemplated by this Agreement
and the other Transaction Documents, no Default or Event of Default
has occurred and is continuing.
(c) Opinion of Counsel. A favorable opinion, from
Christy & Viener counsel for the Company, substantially in the form set forth
in Exhibit B, addressed to the Purchasers, dated the Closing Date and
otherwise satisfactory in substance and form to the Purchasers, and their
respective counsel;
(d) Note Indenture. Fully-executed original counterparts
of the Note Indenture, duly executed by the Company and the Trustee and
evidence that such Note Indenture is in full force and effect and no term or
condition thereof has been amended, modified or waived;
(e) Credit Facility. Fully-executed counterparts of the
Credit Agreement, duly executed by the Company, NationsBank, National
Association, as agent, and the lenders party thereto and evidence that (i)
such Credit Agreement is in full force and effect and no term or condition
thereof has been amended, modified or waived, and (ii) that all transactions
with respect to the Credit Facility have been consummated;
Page 25 of 102 Pages
<PAGE>
(f) Registration Rights Agreement. Fully-executed
original counterparts of the Registration Rights Agreement, duly executed by
the Company, and evidence that such Registration Rights Agreement is in full
force and effect and no term or condition thereof has been amended, modified
or waived;
(g) Guaranty Agreement. Fully-executed original
counterparts of the Guaranty Agreement, duly executed by each of the Company's
Domestic Subsidiaries, and evidence that such Guaranty Agreement is in full
force and effect and no term or condition thereof has been amended, modified
or waived;
(h) Certificate of Designations. Evidence of filing
with the Secretary of State of the State of Delaware of the Certificate of
Designations pursuant to Section 151 of the DGCL with respect to the issuance
and sale of the Preferred Stock contemplated hereunder;
(i) Bylaws Amendment. Evidence of the adoption of the
Bylaws Amendment pursuant to Section 109 of the DGCL;
(j) Board of Directors. Evidence of the increase of the
size of the Company's Board of Directors and of each of the Compensation
Committee, Stock Incentive Plan Committee, Finance Committee and Audit
Committee by one (1), and of the election of a person chosen by GarMark, to
each of the vacancies created by such increases, all as set forth in Section
7.2 hereof.
(k) Other Transaction Documents. Evidence that other
Transaction Documents and any other agreements and documents contemplated
thereby and in connection therewith have been duly executed and delivered by
all respective parties thereto and are in full force and effect;
(l) Governmental and Third Party Permits, Consents, Etc.
Evidence that, except as set forth on Schedule 5.4, the Company and its
Subsidiaries have duly applied for and obtained all approvals, orders,
licenses, consents and other authorizations (collectively, the "Approvals")
from each federal, state and local government and governmental agency,
department or body, pursuant to any agreement to which the Company or any of
its Subsidiaries is a party, or to which any of them or any of their assets is
subject, that may be required in connection with this Agreement, the other
Transaction Documents or any other agreements and documents contemplated
thereby and in connection therewith;
(m) Information Memorandum. Evidence that the
Information Memorandum has not been amended or supplemented subsequent to the
delivery thereof to the Purchasers;
(n) Corporate Documents.
(i) copies of the Company's and of each of its
Subsidiaries' certificate of incorporation or formation, as the
case may be, certified as of a recent date by the Secretary of
State of the jurisdiction of incorporation or formation, as the
case may be, of any such entity;
Page 26 of 102 Pages
<PAGE>
(ii) a certificate of such Secretary of State, dated as
of a recent date, as to the good standing of and payment of
taxes by the Company and each of its Subsidiaries which lists
the Charter Documents on file in the office of such Secretary
of State;
(iii) a certificate dated as of a recent date as to the
good standing of and payment of taxes by the Company and each
of its Subsidiaries issued by the Secretary of State of each
jurisdiction in which such entity is qualified as a foreign
corporation, except to the extent that any failure to so
qualify would not have a Material Adverse Effect on the Company
or any of its Material Subsidiaries; and
(iv) A certificate, dated the Closing Date of the
Secretary of each of the Company and the Subsidiaries, (i)
certifying as true, complete and correct its Charter Documents
(as appropriate) and in the case of the Company (x) resolutions
of the Company's Board of Directors relating to the adoption of
the Bylaws Amendment, (y) resolutions of the Company's Board of
Directors relating to the transactions contemplated hereby, and
(z) a certificate of the Company's Stock Incentive Plan
Committee certifying that no "change-in-control" (as such term
is used in any option agreement or other award issued pursuant
to the Company's 1993 Stock Incentive Plan) has occurred, or
will occur upon the conversion of the Preferred Stock, as a
result of the transactions contemplated hereby, (ii) as to the
absence of proceedings or other action for dissolution,
liquidation or reorganization of the Company, (iii) as to the
incumbency and specimen signatures of officers who shall have
executed instruments, agreements and other documents in
connection with the transactions contemplated hereby, (iv) as
to the effect that certain agreements, instruments and other
documents are in the form approved in the resolutions referred
to in clause (i) above, and (v) covering such other matters,
and with such other attachments thereto, as Purchasers'
respective counsel may reasonably request at least one Business
Day before the Closing Date, which certificates and attachments
thereto shall be satisfactory in form and substance to such
Purchasers and their respective counsel;
(o) Waivers. The Waivers relating to the stock option
agreements between the Company and each of Michael List and Ronald Wendlinger
in form and substance acceptable to the Purchasers and each of their counsel,
duly executed by each of Michael List and Ronald Wendlinger;
(p) Payment of Closing Fees. The fees, expenses and
disbursements of each Purchaser's counsel reflected in statements of such
counsel rendered prior to or on the Closing Date; and
(q) Payment of the Signing Fee and the Commitment Fee.
Each of the Signing Fee and the Commitment Fee, to the extent not previously
paid, in immediately available funds. The Signing Fee shall be payable to
GarMark. The Commitment Fee shall be payable to each initial Purchaser in
proportion to the Securities purchased by such initial Purchaser pursuant to
the transactions contemplated hereby.
Page 27 of 102 Pages
<PAGE>
4.2 Deliveries by the Purchasers to the Company on the Closing
Date. At the Closing, each Purchaser will deliver or cause to be delivered to
the Company the following:
(a) Purchase Price. Such Purchaser's portion of the
Purchase Price, as provided herein;
(b) Compliance Certificate. An Officers' Certificate,
dated the date of the Closing, certifying that:
(i) the representations and warranties of each
Purchaser contained in this Agreement, the other Transaction Documents, and
those otherwise made in writing by or on behalf of such Purchaser, in
connection with transactions contemplated by this Agreement and the other
Transaction Documents are true and correct as of the date hereof, after giving
effect to the sale of the Securities and the other transactions contemplated
to be consummated at the Closing by this Agreement and the other Transaction
Documents, except that any representations and warranties that relate to a
particular date or period shall be true and correct as of such date or period;
(ii) such Purchaser has performed satisfied and
complied in all material respects with all covenants, agreements and
conditions contained in, and required by, this Agreement and the other
Transaction Documents, required to be performed, satisfied or complied with
prior to or at the Closing; and
(c) Registration Rights Agreement. The Registration
Rights Agreement, duly executed by the Purchasers.
5. Representations and Warranties, Etc. In order to induce the
Purchasers to purchase the Securities, the Company represents and warrants to
the Purchasers that:
5.1 Organization and Qualification; Authority. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, has full corporate power and authority to own
and lease its Properties and carry on its business as presently conducted, is
duly qualified, registered or licensed as a foreign corporation to do business
and is in good standing in each jurisdiction in which the ownership or leasing
of its Properties or the character of its present operations makes such
qualification, registration or licensing necessary, except where the failure
to so qualify or be in good standing would not have a material adverse effect
on the condition (financial or otherwise), assets, business or results of
operations of (a "Material Adverse Effect") the Company and its Subsidiaries
on a consolidated basis. The Company has heretofore delivered to each
Purchaser's counsel complete and correct copies of (i) the certificate of
incorporation, articles of organization or equivalent organizational document,
and (ii) the by-laws, operating agreement or equivalent document, of the
Company, each as amended to date and as presently in effect (collectively,
"Charter Documents"). A list of all jurisdictions in which the Company is
qualified, registered or licensed to do business as a foreign corporation is
attached hereto as Schedule 5.1.
Page 28 of 102 Pages
<PAGE>
5.2 Subsidiaries; Other Holdings. Set forth on Schedule 5.2
hereto are (i) the Company's Subsidiaries, and (ii) the number and/or
percentage of outstanding shares or other equity interests (including options,
warrants and other rights to acquire any interest) of each class of Capital
Stock or other equity or ownership interests owned by the Company. Except as
set forth on Schedule 5.2, the Company does not own any Person or Capital
Stock or any other security of any Person, other than Permitted Investments.
Schedule 5.2 states as of the date hereof (i) the organizational form of each
Subsidiary, (ii) the authorized and issued capitalizations of each Subsidiary,
(iii) the number of shares or other equity interests (including options,
warrants and other rights to acquire any interest) of each class of Capital
Stock or interest issued and outstanding of each such Subsidiary, and (iv) the
number and/or percentage of outstanding shares or other equity interests
(including options, warrants and other rights to acquire any interest) of each
class of Capital Stock or other equity interests owned by any such Subsidiary.
Except as set forth on Schedule 5.2, no Subsidiary owns any Person or Capital
Stock or any other security of any Person, other than Permitted Investments.
Each Subsidiary is a corporation or limited liability company, as the case may
be, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation, as the case may be, has
full corporate power and authority to own and lease its Properties, and carry
on its business as presently conducted, is duly qualified, registered or
licensed as a foreign corporation or limited liability company, as the case
may be, to do business and is in good standing in each jurisdiction in which
the ownership or leasing of its Properties or the character of its present
operations make such qualification, registration or licensing necessary,
except where the failure so to qualify or be in good standing would not have a
Material Adverse Effect on such Subsidiary. A list of all jurisdictions in
which each Subsidiary is qualified, registered or licensed to do business as a
foreign corporation or limited liability company, as the case may be, is
attached hereto as Schedule 5.2. The Company owns, directly or indirectly, all
of the outstanding shares of Capital Stock of each of its Subsidiaries free of
any Liens (other than restrictions generally applicable to securities under
federal, provincial or state securities laws and except as imposed by the
Security Documents), and said shares have been duly issued and are fully paid
and validly outstanding.
5.3 Licenses. The Company and its Subsidiaries hold all
material licenses, franchises, permits, consents, registrations, certificates
and other approvals (including, without limitation, those relating to
environmental matters, public and worker health and safety, buildings,
highways or zoning) (individually, a "License" and collectively, "Licenses")
required for the conduct of their business as now being conducted, and is
operating in substantial compliance therewith, except where the failure to
hold any such License or to operate in compliance therewith would not have a
Material Adverse Effect on the Company and its Subsidiaries on a consolidated
basis. The Company and its Subsidiaries are in substantial compliance with all
Laws applicable to them, except in each case, where the failure so to comply
would not have a Material Adverse Effect on the Company and its Subsidiaries
on a consolidated basis or a Material Adverse Effect on the ability of the
Company or any of its Subsidiaries to perform on a timely basis any obligation
that it has or will have under any Transaction Document to which it is a
party.
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5.4 Corporate and Governmental Authorization; Contravention.
Except as set forth on Schedule 5.4, the execution, delivery and performance
by the Company of the Transaction Documents and all other instruments or
agreements to be executed in connection herewith or therewith, the issuance
and sale to the Purchasers of the Securities pursuant to this Agreement, and
the amendment to the Company's by-laws as contemplated by the Bylaws Amendment
(x) are within the Company's corporate powers, having been duly authorized by
all necessary corporate action on the part of the Company, do not require any
License, authorization, approval, qualification or formal exemption from, or
other action by or in respect of, or filing of a declaration (other than the
filing of the Certificate of Designations) or registration with, any court,
Governmental Authority, agency or official or other Person (except such as
have been obtained); (y) do not and will not (with or without the giving or
receipt of notice or the passage of time or both) contravene or constitute a
default under or violation of or give rise to any right of termination,
cancellation or acceleration under (i) any provision of Law, (ii) the Charter
Documents of the Company or any of its Subsidiaries, (iii) any agreement or
Contract (or require the consent of any Person under any agreement or Contract
that has not been obtained) to which the Company or any of its Subsidiaries is
a party, or (iv) any judgment, injunction, order, decree or other instrument
binding upon the Company, any of its Subsidiaries or any of their respective
Properties, except in the case of clauses (iii) and (iv) above, where such
contravention, default or violation would not have a Material Adverse Effect
on the Company and its Subsidiaries on a consolidated basis; and (z) do not
and will not (with or without the giving or receipt of notice or the passage
of time or both) result in the creation or imposition of any Lien on any
Property of the Company or any of its Subsidiaries, other than Permitted Liens
or Liens contemplated by the Note Indenture and the Security Documents.
(b) The execution, delivery and performance by each of the
Subsidiaries of the Transaction Documents to which it is a party, and all
other instruments or agreements to be executed by such Subsidiary in
connection therewith, (x) are within such Subsidiary's powers, having been
duly authorized by all necessary action on the part of such Subsidiary, do not
require any License, qualification or formal exemption from, or other action
by or in respect of, or filing of a declaration or registration with, any
Governmental Authority or other Person (except such as have been obtained);
(y) do not and will not (with or without the giving or receipt of notice or
the passage of time or both) contravene or constitute a default under or
violation of or give rise to any right of termination, cancellation or
acceleration under (i) any provision of Law, (ii) the Charter Documents of
such Subsidiary, (iii) any Contract (or require the consent of any Person
under any Contract that has not been obtained) to which such Subsidiary is a
party, or (iv) any judgment, injunction, order, decree or other instrument
binding upon such Subsidiary or any of their respective Properties, except, in
the case of clauses (iii) and (iv) above, where such contravention, default or
violation would not have a Material Adverse Effect on such Subsidiary; and (z)
do not and will not (with or without the giving or receipt of notice or the
passage of time or both) result in the creation or imposition of any Lien on
any Property of such Subsidiary, other than Permitted Liens or Liens
contemplated by the Note Indenture and the Security Documents.
5.5 Validity and Binding Effect. Each of the Transaction
Documents has been duly executed and delivered by the Company and is a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
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(b) Each of the Transaction Documents to which any of the
Subsidiaries is a party has been duly executed and delivered by such
Subsidiary and is a valid and binding agreement of such Subsidiary,
enforceable against such Subsidiary in accordance with its terms.
5.6 Capitalization.
(a) The authorized Capital Stock of the Company consists of
20,000,000 shares of common stock, $.0001 par value ("Common Stock"). As of
the date hereof: (A) (i) 9,098,594 shares of the Company's Common Stock are
issued and outstanding; (ii) no shares of the Company's Common Stock are held
by the Company in its treasury; (iii) 1,827,712 shares of the Company's Common
Stock are reserved for issuance pursuant to the Company's Option Plans; (iv)
200,000 shares of the Company's Common Stock are reserved for issuance under
options granted pursuant to agreements with Strategic Growth International,
Inc.; (v) 50,000 shares of the Company's Common Stock are reserved for
issuance under warrants granted pursuant to a Consulting Agreement with JW
Charles Financial; (vi) 128,461 shares of the Company's Common Stock are
reserved for issuance under warrants granted to Tallwood; (vii) 240,000 shares
of the Company's Common Stock are reserved for issuance under warrants granted
to The Tailwind Fund; (viii) 120,000 shares of the Company's Common Stock are
reserved for issuance under warrants granted to Ehud Laska; (ix) 120,000
shares of the Company's Common Stock are reserved for issuance under warrants
granted to Ziad Abdelnaur; (x) 272,352 shares of the Company's Common Stock
are reserved for issuance under warrants granted to former holders of the
Company's Series D Convertible Preferred Stock; and (xi) up to $333,333 in
shares of the Company's Common Stock in each year of the Earnout under that
certain Asset Purchase Agreement, dated as of July 28, 1997, between the
Company, ASA Personnel Services, Inc., Administrative Sales Associates, Inc.,
Richard Brody and Arnold Katz; (B) 575,000 shares of the Company's Common
Stock are reserved for issuance under the Company's Series E Convertible
Preferred Stock; and (C) 575,000 shares of the Company's Series E Convertible
Preferred Stock are reserved for issuance under warrants granted to ING (U.S.)
Capital Corporation. All of the issued and outstanding shares of Capital Stock
are fully paid and non-assessable. The Company has made available to the
Purchasers complete and correct copies of the Option Plans, and all forms of
options and warrants listed above.
(b) Schedule 5.6 sets forth a complete, true and accurate
list of (i) the holders of record, including the amount owned by each such
holder, of all issued and outstanding preferred stock of the Company, or (ii)
all options, warrants and other equity based derivatives (including stock
appreciation rights) of the Company outstanding as of the date of this
Agreement, including (w) the date of grant, (x) the exercise price, (y) the
expiration date, and (z) the holder, including the number of securities owned
by each holder, of each such outstanding option and warrant of the Company.
(c) The Preferred Stock to be issued to the Purchasers
hereunder will have the voting powers, dividend rights, liquidation rights,
designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations and restrictions, as are
set forth in (i) the Certificate of Designations, the form of which is
attached hereto as Exhibit A, which will be filed with the Secretary of State
of the State of Delaware on or prior to the Closing Date, and (ii) the Bylaws
Amendment, the form of which is attached hereto as Exhibit D, pursuant to
which the by-laws of the Company will be amended on or prior to the Closing
Date. The Company has duly reserved for issuance the shares of Common Stock
issuable upon conversion of
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the Preferred Stock. The Company has duly reserved for issuance the shares of
Common Stock issuable upon conversion of the Preferred Stock. When paid for
by, and issued to, the Purchasers, the Preferred Stock will be duly and
validly issued, fully paid and non-assessable, and will be free and clear of
any and all Liens, and except as set forth in this Agreement, the Certificate
of Designations or applicable securities Laws, will not be subject to any
restriction on use, voting or transfer; and the shares of Common Stock
issuable to the Purchasers upon conversion of the Preferred Stock, when issued
in accordance with the Certificate of Designations, will be duly and validly
issued, fully paid and non-assessable, and will be free and clear of any and
all Liens, and except as set forth in this Agreement and the Certificate of
Designations, will not be subject to any restriction on use, voting or
transfer. The offer, sale and issuance of the Preferred Stock by the Company
to the Purchasers (and any shares of Common Stock issuable on conversion
thereof) are exempt from the registration requirements of the Securities Act
and state securities laws. On the basis of the representations contained in
Section 6 hereof, the offer, sale and issuance of the Securities by the
Company to the Purchasers, and any shares of Common Stock issuable to the
Purchasers (or any transferee of any Purchaser; provided that such transferee
had executed a Transferee Letter of Representation (with respect to the Notes,
substantially in the form attached as Exhibit C to the Note Indenture, and
with respect to the Preferred Stock, such Transferee Letter of Representation
in a form amended to apply to the Preferred Stock) contemporaneously with, or
prior to, such transfer) upon conversion of the Preferred Stock, are exempt
from the registration requirements of the Securities Act and state securities
Laws. No further approval or authorization of the stockholders or the
directors of the Company, of any Governmental Authority or any other Person is
required for the issuance and sale of the Preferred Stock or the shares of
Common Stock issuable on conversion thereof.
(d) Except as set forth above, no shares of Capital Stock or
other voting securities of the Company are issued, reserved for issuance or
outstanding. Except as set forth in Schedule 5.6, (i) there are no outstanding
options, warrants, rights, exercise, exchange conversion rights, agreements,
arrangements, undertakings or commitments of any kind (A) relating to the
issuance, sale, purchase, redemption, voting or transfer of any Capital Stock
or other securities of the Company, or (B) containing any "change-in-control"
provisions, (ii) there are no rights outstanding which permit or allow the
holder thereof to cause the Company to file a registration statement or which
permit or allow the holder thereof to include securities of the Company in a
registration statement filed by the Company, and (iii) no events have occurred
that would lower the exercise price of, accelerate vesting of, or increase the
number of shares of the Company's Common Stock into which any such securities
can be exercised, exchanged or converted. There are no preemptive or other
similar rights with respect to any Capital Stock of the Company. None of the
outstanding Capital Stock or other securities of the Company were issued in
violation of the Securities Act, or the securities or blue sky laws of any
state or other jurisdiction.
5.7 Litigation; Defaults. Except as set forth on Schedule
5.23 hereto, there is no action, suit, proceeding or investigation pending or,
to the knowledge of the Company, threatened against or affecting the Company,
any of its Subsidiaries, , any director, officer, agent, employee, consultant
or other Person acting on the behalf of the Company or any of its
Subsidiaries, or any properties of any of the foregoing, before or by any
Governmental Authority, which (individually or in the aggregate) could
reasonably be expected to (i) have a Material Adverse Effect on the Company
and its Subsidiaries on a consolidated basis, or (ii) impair the ability of
the Company or any of its Subsidiaries to perform fully on a timely basis any
obligation which the Company or such
Page 32 of 102 Pages
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Subsidiary has or will have under any Transaction Document. Neither the
Company nor any of its Subsidiaries is in violation of, or in default under
(and there does not exist any event or condition which, after notice or lapse
of time or both, would constitute such a default under), any term of its
Charter Documents, or of any term of any agreement, Contract, instrument,
judgment, decree, writ, determination, arbitration award, or Law (including,
without limitation, those relating to labor, employment, occupational health
and safety or similar matters) applicable to the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries is bound, or
to any properties of the Company or any of its Subsidiaries, except in each
case to the extent that such violations or defaults, individually or in the
aggregate, could not reasonably (a) affect the validity or enforceability of
any Transaction Document, (b) have a Material Adverse Effect on the Company
and its Subsidiaries on a consolidated basis, or (c) impair the ability of the
Company or any of its Subsidiaries to perform fully on a timely basis any
obligation which the Company or any such Subsidiary will have under any
Transaction Document.
5.8 Outstanding Debt. Except as set forth in the Financial
Statements or on Schedule 5.8 hereto, at and as of the Closing Date, neither
the Company nor any of its Subsidiaries has outstanding any debt for borrowed
money, or obligations or liabilities evidenced by bonds, debentures, notes or
other similar instruments or under capital leases other than the Credit
Facility and short-term debt incurred in the ordinary course of business
consistent with the Company's past practices. Schedule 5.8 contains a complete
and accurate list of all material guarantees, assumptions, purchase agreements
and similar agreements and arrangements whereby the Company or any of its
Subsidiaries is or may become directly or indirectly liable or responsible for
the indebtedness or other obligations of another Person other than the Company
or any of its Subsidiaries, except for negotiable instruments endorsed for
collection or deposit in the ordinary course of its business, identifying,
with respect to each of the respective parties, amounts, terms and maturities.
5.9 No Material Adverse Change. Except as set forth on Schedule
5.9, since December 31, 1997, there has been (i) no material adverse change in
the condition (financial or otherwise), assets, business, projects or results
of operations of the Company or any of its Subsidiaries, (ii) no obligation or
liability (contingent or otherwise) incurred by the Company or any of its
Subsidiaries, other than obligations and liabilities incurred in the ordinary
course of business consistent with the Company's past practices and no Lien
placed on any of the Properties of the Company or any of its Subsidiaries that
remains in existence on the date hereof, other than Permitted Liens and
liabilities and Liens described on Schedule 5.21 hereto, and (iii) no
acquisition or disposition of any material assets by the Company or any of its
Subsidiaries (or any contract or arrangement therefor) or any other material
transaction, otherwise than for fair value, as determined in good faith by the
Company's Board of Directors, in the ordinary course of business.
5.10 Employee Programs. Schedule 5.10 sets forth a list of every
Employee Program maintained by the Company or any Current Affiliate at any
time during the six-year period ending on the Closing Date or with respect to
which a liability, contingent or otherwise, of the Company or an Affiliate
exists. Each Employee Program (other than a Multiemployer Plan) which has been
maintained by the Company during the six-year period ending on the Closing
Date and which has been intended to qualify under Section 401(a) or Section
501(c)(9) of the Code has received a favorable determination or approval
letter from the Internal Revenue Service regarding its qualification under
such section, or the remedial amendment period under Section 401(b) of the
Code has not yet expired with respect to such Employee Program and, to the
knowledge of the
Page 33 of 102 Pages
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Company, nothing has occurred that would adversely affect such qualification
from the date of such letter or application (which was timely made) for a
determination or approval letter, and to the knowledge of the Company, no
reason exists why a favorable determination or approval shall not be granted.
Except as set forth on Schedule 5.10, the Company does not know of any failure
of any party to comply with any Laws applicable with respect to the Employee
Programs that have been maintained by the Company or any Current Affiliate,
and no such failure will result from completion of the transactions
contemplated hereby. With respect to any Employee Program ever maintained by
the Company or an Affiliate, there has been no "prohibited transaction," as
defined in Section 406 of ERISA or Code Section 4975, or breach of any duty
under ERISA or other applicable Law or any agreement which in any such case
could subject the Company to material liability either directly or indirectly
(including, without limitation, through any obligation of indemnification or
contribution) for any damages, penalties, or taxes, or any other loss or
expense. No litigation or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine
claims for benefits) is pending or threatened with respect to any such
Employee Program (other than a Multiemployer Plan).
The Company and its Current Affiliates have not incurred any
liability under Title IV of ERISA which has not been paid in full prior to the
Closing. Neither the Company nor any of its Current Affiliates is liable for
any material "accumulated funding deficiency" (whether or not waived) with
respect to any Employee Program ever maintained by the Company or any
Affiliate and subject to Code Section 412 or ERISA Section 302. With respect
to any Employee Program subject to Title IV of ERISA, there has been no (and
the transactions contemplated by this Agreement will not result in any) (i)
"reportable event," within the meaning of ERISA Section 4043 or the
regulations thereunder (for which the notice requirement is not waived under
29 C.F.R. Part 2615) or (ii) other event or condition which presents a
material risk of plan termination or any other event that may cause the
Company or any Current Affiliate to incur material liability, contingent or
otherwise, or have a material Lien imposed on its assets under Title IV of
ERISA. All payments and/or contributions required to have been made by the
Company and its Current Affiliates (under the provisions of any agreements or
other governing documents or applicable Law) with respect to all Employee
Programs subject to Title IV of ERISA ever maintained by the Company or any
Affiliate, for all periods prior to the Closing, have been timely made. Except
as described on Schedule 5.10, no Employee Program maintained by the Company
or an Affiliate and subject to Title IV of ERISA (other than a Multiemployer
Plan) has any "unfunded benefit liabilities" within the meaning of ERISA
Section 4001(a)(18), as of the Closing Date. With respect to Multiemployer
Plans maintained by the Company or any Affiliate, Schedule 5.10 states the
aggregate amount of withdrawal liability or other termination liability that
would be incurred by the Company or any Affiliate if there were a withdrawal
from any such plan as determined by the most recent withdrawal liability
calculation prepared by such plan. Except as disclosed on Schedule 5.10, none
of the Employee Programs which is a welfare plan maintained by the Company or
any Affiliate provides health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part
6 of subtitle B of title I of ERISA or comparable statutes or regulations) or
has ever promised to provide such post-termination benefits.
For purposes of this section:
(i) "Employee Program" means (A) any employee benefit plan
within the meaning of Section 3(3) of ERISA and employee benefit plans
(such as foreign or excess
Page 34 of 102 Pages
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benefit plans) which are not subject to ERISA, and (B) any stock option
plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation arrangements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in (A) above, and (C) any
trust used to fund benefits under the foregoing maintained by the Company
or any Affiliate.
(ii) An entity is an "Affiliate" of the Company if it would have
ever been considered a single employer with the Company under ERISA
Section 4001(b) or part of the same "controlled group" as the Company for
purposes of ERISA Section 302(d)(8)(C); an entity is a "Current
Affiliate" if it currently would be considered a single employer with the
Company under ERISA Section 4001(b) or part of the same "controlled
group" as the Company for purposes of ERISA Section 302(d)(8)(C); and
each reference to the Company includes the Subsidiaries.
(iii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under such Employee
Program, or has any obligation (by agreement or under applicable law) to
contribute to or provide benefits under such Employee Program, or if such
Employee Program provides benefits to or otherwise covers employees of
such entity (or, in respect of such employees, their spouses, dependents,
or beneficiaries).
(iv) "Multiemployer Plan" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes and
which is maintained pursuant to one or more collective bargaining
agreements.
5.11 Private Offerings. No form of general solicitation or general
advertising including, but not limited to, advertisements, articles, notices
or other communications, published in any newspaper, magazine or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising, was used by the Company or any of its Subsidiaries or any of the
Company's or such Subsidiary's representatives, or, any other Person acting on
behalf of the Company or any of its Subsidiaries, in connection with the
offering of the Securities being purchased under this Agreement or under any
other Transaction Document. None of the Company, any of its Subsidiaries or
any Person acting on the Company's or such Subsidiary's behalf has directly or
indirectly offered the Securities, or any part thereof or any other similar
securities, for sale to, or sold or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with any Person
or Persons other than the Purchasers and other investors who the Company
reasonably believed had such knowledge and experience in financial and
business matters that they were capable of evaluating the merits and risks of
purchasing the Securities. The Company further represents to the Purchasers
that, assuming the accuracy of the representations of the Purchasers as set
forth in Section 6 hereof, none of the Company, any of its Subsidiaries or any
Person acting on the Company's or such Subsidiary's behalf has taken or will
take any action which would subject the issue and sale of the Securities being
purchased hereunder or under any other Transaction Document to the provisions
of Section 5 of the Securities Act, except as contemplated by the Registration
Rights Agreement. The Company has not sold the Securities to anyone other than
the Purchasers designated in this Agreement. No securities of the same class
or series as the Securities have been issued and sold by the Company prior to
the date hereof. Each Note and Preferred Stock certificate shall bear
substantially the same legend set forth in Section 8.1 hereof, as applicable,
for at least so long as such restrictions apply.
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5.12 Broker's or Finder's Commissions. In addition to and not in
limitation of any other rights hereunder, the Company and the Subsidiaries
will indemnify and hold harmless each Purchaser from and against any and all
claims, demands or liabilities for broker's, finder's, placement agent's or
other similar fees or commissions and any and all liabilities with respect to
any taxes (including interest and penalties) payable or incurred, or alleged
to have been incurred, by the Company or any of its Subsidiaries or any Person
acting, or alleged to have been acting, on the Company's or such Subsidiary's
behalf, in connection with this Agreement, the issuance or sale of the
Securities, or any other transaction contemplated by any of the Transaction
Documents (including, without limitation, the Company's obligation to pay the
transaction fee to NationsBanc Montgomery Securities LLC).
5.13 Company SEC Documents; Information Memorandum.
(a) The Company has timely filed with the SEC, and has
heretofore made available to the Purchasers true and complete copies of, each
report, schedule, registration statement and definitive proxy statement
required to be filed by it under the Exchange Act or the Securities Act (as
such documents have been amended since the time of their filing, collectively,
the "Company SEC Documents"). The Company SEC Documents, including without
limitation, any financial statements or schedules included therein, at the
time filed, (x) complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be,
and the applicable rules and regulations of the SEC thereunder, and (y) did
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 therein, in the light of the circumstances under which they were
made, not misleading.
(b) None of this Agreement, each of the other Transaction
Documents and the Information Memorandum, 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 herein and therein, in
light of the circumstances under which they were made, not misleading.
(c) The historical financial and operating information
contained in the Information Memorandum has been derived from the consolidated
books and records of the Company and its Subsidiaries based upon reasonable
methods as to allocations and calculations of such financial information.
(d) The financial projections concerning the Company included
in the Information Memorandum have been prepared in good faith based upon
reasonable assumptions.
(e) There is no material fact known to the Company which the
Company has not disclosed to the Purchasers, or counsel to the Purchasers, in
writing which has or, insofar as the Company can reasonably foresee, may have
or will have a Material Adverse Effect on the Company to perform its
obligations under any of the Transaction Documents or in respect of the
Securities or any document contemplated hereby or thereby.
(f) The Company has provided the Purchasers with complete and
accurate information as to the Company, each of its Subsidiaries and its
affairs. No representation or warranty made by the Company set forth herein,
or in any schedule hereto, in any supplement to any
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schedule, in the Note Indenture or in any other Transaction Document, or in
any certificate or other document delivered or to be delivered in connection
with the transactions contemplated hereby or thereby, contains or will contain
any untrue statement of a material fact, or omits to state any material fact,
necessary in order to make the statement therein, in light of the
circumstances in which it was made, not misleading.
5.14 Financial Statements; No Undisclosed Liabilities; Accounts
Receivable.
(a) The financial statements of the Company included or
incorporated by reference in the Company SEC Documents (the "Company Financial
Statements") comply, as of their respective dates, as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto with respect to audited statements or, in the case of the
unaudited statements, as permitted by Form 10-QSB of the SEC) and fairly
present in all material respects (subject, in the case of the unaudited
statements, to normal, recurring year-end audit adjustments) the consolidated
financial position of the Company and its consolidated Subsidiaries as at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of any unaudited interim
financial statements, to normal year-end audit adjustments, none of which
would, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect on the Company and its consolidated Subsidiaries,
taken as a whole). Since December 31, 1997, neither the Company nor any of its
Subsidiaries has incurred any liabilities or obligations of any nature,
whether or not accrued, absolute, contingent or otherwise, other than
liabilities (i) disclosed in Schedule 5.14 or in the Company SEC Documents
filed prior to the date of this Agreement (complete, true and correct copies
of all of which have been furnished to the Purchasers), (ii) adequately
provided for in the Company Financial Statements or disclosed in any related
notes thereto (complete, true and correct copies of all of which have been
furnished to the Purchasers), (iii) not required under GAAP to be reflected in
the Company's financial statements or disclosed in any related notes thereto,
(iv) incurred in connection with this Agreement, or (v) incurred after
December 31, 1997 in the ordinary course of business consistent with the
Company's past practices and which would not have a Material Adverse Effect on
the Company and its consolidated Subsidiaries, taken as a whole.
(b) All accounts receivable as shown on the Company Financial
Statements or on the accounting records of the Company as of the date hereof
are valid, genuine and subsisting, have arisen in the ordinary course of
business from customers believed to be commercially responsible, and the
reserves shown on the Company Financial Statements are adequate and calculated
consistent with past practice and consistent with GAAP.
5.15 Foreign Assets Control Regulation, Etc. Neither the issue and
sale of the Securities by the Company nor its use of the proceeds thereof as
contemplated by this Agreement will violate the Foreign Assets Control
Regulations, the Transaction Control Regulations, the Cuban Assets Control
Regulations, the Foreign Funds Control Regulations, the Iranian Assets Control
Regulations, the Nicaraguan Trade Control Regulations, the South African
Transactions Control Regulations, the Libyan Sanctions Regulations, the Soviet
Gold Coin Regulations, the Panamanian Transactions Regulations, the Haitian
Transactions Regulations, or the Iraqi Sanctions Regulations
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of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as
amended) or Executive Orders 12722 and 12724 (transactions with Iraq).
5.16 Federal Reserve Regulations and Other Matters. Neither the
Company nor any of its Subsidiaries will, directly or indirectly, use any of
the proceeds from the sale of the Securities for the purpose, whether
immediate, incidental or ultimate, of buying any "margin stock," or of
maintaining, reducing or retiring any indebtedness originally incurred to
purchase any stock that is currently a "margin stock," or for any other
purpose which might constitute the transactions contemplated hereby a "purpose
credit," in each case within the meaning of Regulation G or U of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207 and 221, as amended,
respectively), or otherwise take or permit to be taken any action which would
involve a violation of such Regulation G or Regulation U or of Regulations T
or X of the Board of Governors of the Federal Reserve System (12 C.F.R. 220
and 224, as amended, respectively), or any other regulation of such Board. No
indebtedness that may be maintained, reduced or retired with the proceeds from
the sale of the Securities was incurred for the purpose of purchasing or
carrying any "margin stock" and neither the Company nor any of its
Subsidiaries own any such "margin stock" or have any present intention of
acquiring, directly or indirectly, any such "margin stock."
5.17 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
5.18 Public Utility Holding Company Act. Neither the Company nor any
of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended.
5.19 Interstate Commerce Act. To the Company's knowledge, neither the
Company nor any of its Subsidiaries is, nor will be, a "rail carrier," or a
Person controlled by or affiliated with a "rail carrier," within the meaning
of Title 49, U.S.C. Neither the Company nor any of its Subsidiaries is a
"carrier" or other Person to which 49 U.S.C. Section 11301(b)(1) is
applicable.
5.20 Environmental Regulation, Etc.
(a) Each of the Company and its Subsidiaries (i) has no
liability under any Environmental Law or common law cause of action relating
to or arising from environmental conditions which could have a Material
Adverse Effect on the Company and its Subsidiaries on a consolidated basis and
any property owned, operated, leased, or used by the Company and its
Subsidiaries and any facilities and operations thereon comply with and will
continue to comply with all applicable Environmental Laws to the extent that
failure to comply could have a Material Adverse Effect on the Company and its
Subsidiaries on a consolidated basis; (ii) has never entered into or been
subject to any judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety matter or
received any request for information, notice, demand letter, administrative
inquiry, or formal or informal complaint or claim with respect to any
environmental or health and safety matter or the enforcement of any
Environmental Law, and (iii) has no reason to believe that any of the items
enumerated in clause (ii) of this paragraph will be forthcoming.
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(b) (i) Each of the Company and its Subsidiaries has never, and
will never, generate, transport, use, store, treat, dispose of, or manage any
Hazardous Waste, other than in accordance with applicable Environmental Laws,
except where failure to so comply with applicable Environmental Laws would not
have a Material Adverse Effect on the Company or any of its Subsidiaries; (ii)
the Company has not caused any Release or Threat of Release of a Hazardous
Material at any site presently or formerly owned, operated, leased, or used by
the Company or any of its Subsidiaries; (iii) the Company and its Subsidiaries
have never had Hazardous Material transported from any site presently or
formerly owned, operated, leased, or used by the Company or any of its
Subsidiaries for treatment, storage, or disposal at any other place, other
than in accordance with applicable Environmental Laws, except where failure to
so comply with applicable Environmental Laws would not have a Material Adverse
Effect on the Company or any of its Subsidiaries; (iv) the Company and its
Subsidiaries do, not presently own, operate, or, to the best knowledge of the
Company or any of its Subsidiaries, lease, or use any site on which
underground storage tanks are or were located; (v) the Company and its
Subsidiaries have never placed underground tanks on any site owned, operated,
leased or used by the Company or any of its Subsidiaries; (vi) the Company and
its Subsidiaries have never removed underground tanks from any site presently
or formerly owned, operated, leased or used by the Company or any of its
Subsidiaries; and (vii) the Company and its Subsidiaries have never had a Lien
imposed by any Governmental Authority on any property, facility, machinery, or
equipment owned, operated, leased, or used by the Company or any of its
Subsidiaries in connection with the presence of any Hazardous Material.
5.21 Properties and Assets. The Company and its Subsidiaries have
good record and marketable fee title to all real Property and all other
Property and assets, whether tangible or intangible, owned by them and
reasonably necessary in the conduct of business of the Company or such
Subsidiaries. All of the leases necessary in any material respect for the
operation of their respective properties and assets, under which the Company
or any of its Subsidiaries holds any Property or assets, real or personal, are
valid, subsisting and enforceable and afford peaceful and undisturbed
possession of the subject matter of the lease, and no material default by the
Company or any of its Subsidiaries exists under any of the provisions thereof.
All buildings, machinery and equipment of the Company and its Subsidiaries are
in good repair and working order, except for ordinary wear and tear. All
material current and proposed uses of such Property of the Company and its
Subsidiaries as set forth in the Company SEC Documents and the Information
Memorandum are permitted as of right and no such Law interferes with such
current or proposed uses. To the knowledge of the Company, there is no pending
or formally proposed change in any such Laws, which would have a Material
Adverse Effect on the Company and its Subsidiaries on a consolidated basis.
Except as set forth on Schedule 5.21, no condemnation proceeding is pending
or, to the knowledge of the Company, threatened against the Company or any of
its Subsidiaries. All Property of the Company and its Subsidiaries are free
from all Liens except for (i) Liens which would not have a Material Adverse
Effect on the Company and its Subsidiaries on a consolidated basis; (ii) Liens
disclosed on Schedule 5.21 hereto; and (iii) Permitted Liens. Except as set
forth on Schedule 5.21 hereto and except as entered into pursuant to the
Transaction Documents neither the Company nor any of its Subsidiaries has
signed any material financing statement, as debtor or lessee, or any security
agreement authorizing any secured party thereunder to file any such financing
statement.
5.22 Insurance. A list of all insurance policies and fidelity bonds
covering the assets, business, equipment, Properties, operations, employees,
officers and directors under which the Company or any of its Subsidiaries may
derive any material benefit is set forth on Schedule 5.22
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hereof. There is no claim by the Company or any of its Subsidiaries pending
under any of such policies or bonds as to which coverage has been questioned,
reserved, denied or disputed by the underwriters of such policies or bonds or
their agents. All premiums due and payable under all such policies and bonds
have been paid, and the Company and its Subsidiaries are otherwise in full
compliance with the terms and conditions of all such policies and bonds.
Except as set forth on Schedule 5.22, such policies of insurance and bonds (or
other policies and bonds providing substantially similar insurance coverage)
are and have been in full force and effect for at least the last year or since
the inception of the Company or any of its Subsidiaries, as the case may be,
and remain in full force and effect. Such policies of insurance and bonds are,
to the best knowledge of the Company, of the type and in amounts customarily
carried by Persons conducting business similar to that presently conducted by
the Company and its Subsidiaries. The Company knows of no threatened
termination of any such policies or bonds.
5.23 Employment Practices. Neither the Company nor any of its
Subsidiaries is a party to, or in the process of negotiating, any collective
bargaining or labor agreement or union contract. There is no (i) charge,
complaint or suit pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries respecting employment, hiring
for employment, terminating from employment, employment practices, employment
discrimination, terms and conditions of employment, safety, wrongful
termination, or wages and hours, except as set forth on Schedule 5.23 hereto,
(ii) unfair labor practice charge or complaint pending or, to the knowledge of
the Company, threatened against, or decision or order in effect and binding
on, the Company or any of its Subsidiaries before or of the National Labor
Relations Board, (iii) grievance or arbitration proceeding arising out of or
under collective bargaining agreements pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, (iv)
strike, labor dispute, slow-down, work stoppage or other interference with
work pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or (v) to the knowledge of the Company,
union organizing activities or union representation question threatened or
existing with respect to any groups of employees of the Company or any of its
Subsidiaries.
5.24 Intellectual Property.
(a) The Company and its Subsidiaries have exclusive ownership
of, or exclusive licenses to use, all patent, copyright, trade secret,
trademark, or other proprietary rights used, or to be used, in the business of
the Company or any of its Subsidiaries (collectively, "Intellectual
Property"). There are no claims or demands of any other Person pertaining to
any of such Intellectual Property and no proceedings have been instituted, or
are pending or, to the knowledge of the Company, threatened, which challenge
the rights of the Company or any of its Subsidiaries in respect thereof. The
Company and its Subsidiaries have the right to use, free and clear of claims
or rights of other Persons, all customer lists, designs, manufacturing or
other processes, computer software (subject to applicable licenses), systems,
surveys, data compilations, research results and other information required
for or incident to their products and business as presently conducted or
contemplated.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights that are owned by, or
licensed to, the Company or any of its Subsidiaries or used or to be used by
the Company or any of its Subsidiaries in their business as presently
conducted, are listed on Schedule 5.24. All of such patents, patent
applications,
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trademark registrations, trademark applications and registered copyrights have
been duly registered in, filed in, or issued by, the United States Patent and
Trademark Office, the United States Register of Copyrights, or the
corresponding offices of other jurisdictions as identified on said Schedule,
and have been properly maintained and renewed in accordance with all
applicable provisions of Law in the United States and each such jurisdiction.
(c) All material licenses or other agreements under which the
Company or any of its Subsidiaries is granted rights in Intellectual Property
are listed on Schedule 5.24. Except as set forth on Schedule 5.24, all said
licenses or other agreements are in full force and effect and there is no
default by any party thereto.
(d) All material licenses or other agreements under which the
Company or any of its Subsidiaries has granted rights to others in
Intellectual Property owned or licensed by the Company or any of its
Subsidiaries are listed on Schedule 5.24. Except as set forth on Schedule
5.24, all of said licenses or other agreements are in full force and effect,
and there is no default by any party thereto.
(e) To the best knowledge of the Company and each of its
Subsidiaries, the present business, activities, services and products of the
Company and each of its Subsidiaries do not infringe any intellectual property
of any other Person. No proceeding, charging the Company or any of its
Subsidiaries with infringement of any adversely held Intellectual Property has
been filed or is, to the knowledge of the Company, threatened to be filed.
Neither the Company nor any of its Subsidiaries is making unauthorized use of
any confidential information or trade secrets of any Person, including without
limitation any former employer of any past or present employee of the Company
or any of its Subsidiaries. Neither the Company or any of its Subsidiaries
nor, to the knowledge of the Company or any of its Subsidiaries, any of its or
any Subsidiary's employees have any agreements or arrangements with any
Persons other than the Company or any of its Subsidiaries related to
confidential information or trade secrets of such Persons or restricting any
such employee's engagement in business activities of any nature.
5.25 Material Contracts and Obligations.
(a) Schedule 5.25 is a true, complete and accurate list prepared
by the Company, categorized by subject matter, of the following contracts,
agreements, commitments, options, liens, licenses, mortgages, other security
interests, understandings or promises, whether written or oral ("Contract"),
to which the Company or any of its Subsidiaries are a party or by which its or
any of their properties or assets are bound:
(i) purchase or sale orders, and all agreements to or with
any one customer or supplier for the sale of products or services of an
amount or value in excess of $500,000;
(ii) all employment contracts with any officer, consultant,
director or employee;
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(iii) all plans, contracts or arrangements providing for stock
options or stock purchases, bonuses, pensions, deferred compensation,
retirement payments, profit-sharing or the like;
(iv) all contracts for construction or for the purchase of
equipment, machinery and other items except those having a value per item
or require aggregate payments of less than $75,000;
(v) all contracts relating to the rental or use of
equipment, other personal property or fixtures (except personal property
leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than $75,000 and with terms of
less than one year);
(vi) all license agreements, either as licensor or licensee,
except licenses for computer software licensed in the ordinary course of
business;
(vii) all joint venture contracts and agreements involving a
sharing of profits;
(viii) all franchise agreements;
(ix) all distributor, sales agency and other similar
agreements;
(x) all loan or guaranty agreements, credit agreements,
notes or other evidences of indebtedness, indentures or instruments
evidencing Liens or secured transactions;
(xi) all real estate and easements and other rights in real
property, owned or leased by or to the Company or any of its
Subsidiaries; and
(xii) all other contracts, except those which: (i) are
cancelable on 30 days' or less notice without any penalty or other
financial obligation, or (ii) if not so cancelable, involve annual
aggregate payments by or to the Company or to any of its Subsidiaries of
$75,000 or less.
Except as set forth in Schedule 5.25, (i) each Contract was entered into in
the ordinary course of the Company's or its Subsidiary's, as applicable,
business, (ii) is in full force and effect on the date of this Agreement and
is valid, binding and enforceable in accordance with its terms, (iii) the
Company or any of its Subsidiaries, as applicable, is not in material breach
or default under any of the Contracts and has not received any notice or claim
of any such breach or default from any party, (iv) to the best knowledge of
the Company or any of its Subsidiaries, the relationship of the Company or any
of its Subsidiaries, as applicable, with the parties to the Contracts is good
and there has been no expression of any intention to terminate or materially
modify any such relationships, (v) the Company or any of its Subsidiaries has
no knowledge of any material breach or default under any Contract by any other
party thereto, (vi) no event or action has occurred, is pending or is
threatened, which, after the giving or receipt of notice, and/or passage of
time or otherwise, could constitute or result in any such material breach or
default by the Company or any of its Subsidiaries, as applicable,
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or any other party under any of the Contracts, and (vii) no material amount
claimed to be payable to the Company or any of its Subsidiaries, as
applicable, under any of the Contracts is being disputed by any party. Except
as set forth in Schedule 5.25, (i) for its services under any Contract, the
Company or its Subsidiary, as applicable, receives the compensation provided
under such Contract, without discount, offset or concessions of any kind, and
the Company or its Subsidiary, as applicable, has not proposed or agreed to
offer or accept any discount, offset or concession, and (ii) the payment
history of the parties under the Contracts is good as judged by industry
standards. The Company has delivered to the Purchasers true and complete
copies or descriptions of the Contracts required to be listed in Schedule
5.25.
(b) None of (i) the execution and delivery of this Agreement or
the other Transaction Documents, (ii) the consummation of any of the
transactions contemplated hereby or by the other Transaction Documents, or
(iii) compliance with the terms and provisions hereof or thereof, will result
in the creation or imposition of any Lien, other than Permitted Liens, upon
any of the Property of the Company, or conflict in any way with the provisions
of or result in a breach of or termination of or a default or acceleration of
any obligation under, or except as set forth on Schedule 5.25, require the
consent of any person pursuant to, any such Contract.
(c) There is no term or provision of any Contract to which the
Company is a party or by which it or any of its properties are bound, or of
any provision of any Law, judgment, writ or decree, applicable to or binding
upon the Company, any of its Subsidiaries, or their Properties, which have or
can reasonably be expected to have a Material Adverse Effect on the Company,
any of its Subsidiaries taken as a whole or any of their Properties.
5.26 Taxes. The Company and its Subsidiaries, and any predecessors
to the Company and any of its Subsidiaries, have filed or obtained extensions
of all federal, state, local and foreign income, excise, franchise, real
estate, sales and use and other tax returns heretofore required by Law to be
filed by it. All material taxes, including, without limitation, all federal,
state, county, local, foreign or other income, Property, sales, use,
franchise, value added, employees' income withholding, social security,
unemployment and other taxes, of any nature whatsoever which have become due
or payable by the Company or any of its Subsidiaries, or by any predecessors
thereto, including any fines or penalties with respect thereto or interest
thereon, whether disputed or not (collectively, "Taxes"), have been paid in
full or are adequately provided for in accordance with GAAP on the financial
statements of the applicable Person. All material deposits, Taxes and other
assessments and levies required by Law to be made, withheld, collected or
provided for by the Company or any of its Subsidiaries, or any predecessors
thereto, including deposits with respect to Taxes constituting employees'
income withholding taxes, have been duly made, withheld, collected or provided
for and have been paid over to the proper federal, state or local authority,
or are held by the applicable Person for such payment. No Liens arising from
or in connection with Taxes have been filed and are currently in effect
against the Company or any of its Subsidiaries, except for Liens for Taxes
which are not yet due. Except as set forth on Schedule 5.26 hereto, neither
the Company nor any of its Subsidiaries, nor any predecessor thereto, has
executed or filed with the IRS, or any other taxing authority, any agreement
or document extending, or having the effect of extending, the period for
assessment or collection of any Taxes. The federal income tax returns of the
Company and each of its Subsidiaries, and any predecessor thereto, have been
examined by the IRS, or the statute of limitations with respect to federal
income taxes has expired, for all tax years up to and including the fiscal
year ended December 31, 1993 and, except as set forth on Schedule 5.26, any
deficiencies
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have been paid in full or are being contested in good faith by appropriate
action and appropriate reserves therefor have been established on the
Company's or applicable Subsidiaries' books. Except as set forth on Schedule
5.26, neither the Company nor any of its Subsidiaries is a party to any tax
sharing agreement or arrangement. Except as set forth on Schedule 5.26, no
audits or investigations are pending or, to the knowledge of the Company,
threatened with respect to any tax returns or taxes of the Company or any of
its Subsidiaries, or any predecessor thereto.
5.27 Transactions with Affiliates; Arm's-Length Transactions;
Conflicts of Interest. Except as set forth on Schedule 5.27, there are no
material transactions, agreements or understandings, existing or presently
contemplated, between or among the Company or any of its Subsidiaries, and
their officers or directors or stockholders or any of their Affiliates or
associates. All transactions by the Company and its Subsidiaries have been
conducted on an arm's-length basis. Neither the elected officers of the
Company or any of its Subsidiaries nor the key employees of the Company or any
of its Subsidiaries, or their respective spouses, have (or had during the past
three fiscal years) any material direct or indirect ownership or profit
participation in outside business enterprises with which the Company or any of
its Subsidiaries had material purchases, sales or business dealings.
5.28 Limitation on Subsidiary Payment Restrictions. Except as set
forth on Schedule 5.28 hereto or as provided in the other Transaction
Documents, neither the Company nor any of its Subsidiaries is subject to any
consensual restriction on the ability of any such Subsidiary (i) to pay
dividends or make any other distribution on such Subsidiary's Capital Stock
to, or pay any indebtedness owing to, repurchase or redeem any of such
Subsidiary's Capital Stock from, the Company or any other Subsidiary of the
Company, (ii) to make any loans or advances to the Company or any other
Subsidiary of the Company, or (iii) to transfer any of its Property to the
Company or any other Subsidiary of the Company.
5.29 Notes. The Notes have been duly authorized by the Company for
issuance, and when executed and delivered by the Company to the Purchasers
against payment therefor in accordance with the provisions of the Note
Indenture, will be duly executed, issued and delivered, and will constitute
valid and legally binding obligations of the Company entitled to the benefits
provided by the Note Indenture and enforceable against the Company in
accordance with their terms. On the basis of the representations contained in
Section 6 hereof, the Indenture is not required to be qualified under the
Trust Indenture Act of 1940, as amended.
5.30 Solvency. After giving effect to the sale of the Securities and
the other transactions contemplated by the Transaction Documents, the Company
and its Subsidiaries on a consolidated basis will be, and the Company and each
Subsidiary will be, Solvent (as defined below). "Solvent" means, with respect
to the Company or any Subsidiary, that as of the date of determination (i) the
then fair saleable value of the Property of such entity is greater than the
then total amount of liabilities (including guaranties and other contingent
liabilities) of such entity, (ii) such entity has sufficient funds to pay such
entity's liability on such entity's existing debts as they become absolute and
matured, and (iii) such entity's Property is not an unreasonably small
capital.
5.31 RICO. To the best knowledge of the Company or any Subsidiary,
neither the Company nor any Subsidiary is engaged in or has engaged in any
course of conduct that could
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subject any of their respective Properties to any liens, seizures or other
forfeiture under any criminal law, racketeer influenced and corrupt
organizations laws, civil or criminal or other similar Laws.
5.32 Absence of Certain Practices. The Company, any of its
Subsidiaries, or any director, officer, agent, employee, consultant or other
Person acting on any of their behalf has not given or agreed to give any gift
or similar benefit of more than nominal value to any customer, supplier or
governmental employee or official or any other Person who is or may be in a
position to help or hinder the Company or any of its Subsidiaries in
connection with any proposed transaction involving the Company or any of its
Subsidiaries. The Company, any of its Subsidiaries, or any director, officer,
agent, employee, consultant or other Person acting on behalf of the Company or
any of its Subsidiaries has not (i) used any corporate or other funds for
unlawful contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to, or on behalf of,
government officials or others; (ii) accepted or received any unlawful
contributions, payments, gifts or expenditures; or (iii) has had any
transaction or payment which was not recorded in its accounting books and
records or disclosed on its financial statements.
5.33 No Other Business. The Company has not, and is not, engaged
in any material respect in any business other than (i) executive search, (ii)
temporary staffing, (iii) pay-rolling, (iv) contract staffing, (v)
outsourcing, (vi) human resources management services, (vii) information
systems and human resources consulting services, and (viii) strategic advisory
services.
5.34 Minute Books. The minute books of the Company and each of its
Subsidiaries contain a complete, true and correct summary of all meetings of,
and/or corporate action approved by, directors and stockholders since the time
of such entity's organization, and accurately reflect, in accordance with the
law of such entity's jurisdiction of organization, all transactions and other
corporate action referred to in such minutes.
5.35 Regulatory Requirements; Cessation of Direct Investment
Program. Notwithstanding anything else set forth herein to the contrary, in
the event of any reasonable determination in good faith by NationsBank
Corporation or any Affiliate thereof ("NationsBank"), that by reason of any
existing or future Law (whether or not having the force of law and whether or
not failure to comply therewith would be unlawful) (collectively, a
"Regulatory Requirement"), NationsBanc Montgomery Securities LLC or any
successor holder affiliated with NationsBank ("NationsBanc Montgomery") is
effectively restricted or prohibited from holding any of the Securities then
held by NationsBanc Montgomery, the Company shall use reasonable good faith
efforts to take such action as it may determine is reasonably necessary and
appropriate to permit NationsBanc Montgomery to transfer the Securities to
comply with such Regulatory Requirement. All such actions shall be taken at
the expense of NationsBanc Montgomery. NationsBanc Montgomery shall give
written notice to the Company and the other Purchasers of any reasonable
determination made by it hereunder and of the transfer it believes may be
necessary or appropriate to permit it to comply with such Regulatory
Requirement.
Notwithstanding anything else set forth herein to the contrary, in
the event NationsBanc Montgomery or any successor or other group of
NationsBank or its directly or indirectly wholly-owned Subsidiaries engaging
in substantially the same business, cease making direct mezzanine equity
investments and make a determination to liquidate all of their private equity
positions that can be liquidated, as set forth in a representation letter to
the Company, then the
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Company shall permit NationsBanc Montgomery to transfer its Securities,
subject to complying with applicable Laws. All such actions shall be taken at
the expense of NationsBanc Montgomery. NationsBanc Montgomery shall give
written notice to the Company and the other Purchasers of any determination by
it hereunder.
6. Purchase for Investment; Source of Funds.
(a) Each Purchaser represents for itself to the Company that,
(i) it is an accredited investor as defined in Regulation D under the
Securities Act, or (ii) by reason of its business and financial experience,
and the business and financial experience of those persons, if any, retained
by it to advise it with respect to its investment in the Securities, such
Purchaser together with such advisers have such knowledge, sophistication and
experience in business and financial matters as to be capable of evaluating
the merits and risk of the prospective investment, and that it is purchasing
the Securities for its own account or for one or more separate accounts
maintained by it or for the account of one or more institutional investors on
whose behalf such Purchaser has authority to make this representation for
investment and not with a view to the distribution thereof or with any present
intention of distributing or selling any of the Securities except in
compliance with the Securities Act and except to one or more such
institutional investors, provided that the disposition of such Purchaser's or
such investor's property shall at all times be within its control. Each
Purchaser understands and agrees that the Company's offer and sale of the
Securities have not been registered under the Securities Act and the
Securities may be resold (which resale is not now contemplated) only if
registered pursuant to the provisions thereunder or if an exemption from
registration is available.
(b) Each Purchaser represents for itself to the Company that in
purchasing the Preferred Stock hereunder, it (i) is acting individually, and
not as part of a "group" (within the meaning of Section 13(d) of the Exchange
Act), and (ii) shall not share with any other Purchaser any investment power
or voting power with respect to the Preferred Stock (or Common Stock issuable
upon conversion of such Preferred Stock.)
(c) Each Purchaser represents for itself to the Company that
it has full power and authority and has taken all action necessary to
authorize it to enter into and perform its obligations under this Agreement
and the other Transaction Documents. This Agreement is the legal, valid and
binding obligation of each Purchaser, and is enforceable against each
Purchaser in accordance with its terms.
(d) Each Purchaser acknowledges for itself that it has read the
Information Memorandum and has received all the information it has requested
from the Company and, relying on the truth, completeness and accuracy of such
information, such Purchaser believes such information is sufficient to make an
informed decision with respect to its purchase of the Securities.
7. Covenants of the Company. The Company covenants and agrees that from
the date hereof, unless the Purchasers, or the holders of the Preferred Stock,
as applicable, shall otherwise consent in writing, it will:
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7.1 Use of Proceeds. Use the net proceeds from the sale of the
Securities to (a) refinance existing indebtedness of the Company as set forth
in Section 5.8 hereof; (b) make Permitted Acquisitions; and (c) general
corporate purposes.
7.2 The Company's Board of Directors. On the Closing Date grant (i)
GarMark the right to designate one (1) voting Board of Directors member, and
each of GarMark and Moore the right to designate one (1) non-voting Board of
Directors observer, each of whom will be given notice of, and permitted to
attend, all meetings of the Company's Board of Directors, and (ii) GarMark the
right to designate one (1) voting committee member, and each of GarMark and
Moore one (1) non-voting committee observer, to each of the Company's
Compensation Committee, Stock Incentive Plan Committee, Finance Committee,
Audit Committee, and any other committee that is created or established after
the date hereof, each of whom will be given notice of, and permitted to
attend, all meetings of each such committee. On the Closing Date, the Company,
acting through its Board of Directors and in accordance with its Charter
Documents and applicable Law, shall (i) (A) increase the size of its Board of
Directors by one (1), (B) elect the person referred to hereinabove (or such
other person as may be selected by GarMark) to the newly created directorship
to hold office until his successor is elected at a special or annual meeting
of the stockholders and (C) in connection with any such subsequent election of
directors, nominate, recommend and do all other acts and things to cause
(including, without limitation, voting all shares for which the Company's
management or Board of Directors holds proxies (including undesignated
proxies) unless otherwise provided by the stockholders submitting such
proxies) the person referenced in the preceding clause (B) to be elected to
the Company's Board of Directors and (ii) increase the size of each of the
Compensation Committee, Stock Incentive Plan Committee, Finance Committee,
Audit Committee, and if any other committee is created or established after
the date hereof, of such committee, by one (1), and cause the person referred
to hereinabove (or such other person as may be selected by GarMark) to become
a member thereof. In the event any director, or member of a committee, elected
pursuant to this Section 7.2 shall cease to serve as a director or member, as
applicable, for any reason, the Company shall cause (subject to the provisions
of its Charter Documents and applicable Law) the vacancy resulting thereby to
be filled as promptly as practicable by a person selected by GarMark.
Notwithstanding any provision hereof, on the date, if any, that any Initial
Purchaser entitled to exercise the rights provided in this Section 7.2
beneficially owns less than 25% of the Common Stock that would be issuable to
such Initial Purchaser upon its conversion of the Preferred Stock acquired on
the Closing Date (assuming that the shares of the Preferred Stock would be
converted at a conversion price of $6.00 per share, subject to the adjustments
provided in the Certificate of Designations with respect to conversion price
and the number of shares issuable upon conversion), then the Company's
obligations set forth in this Section 7.2 with respect to such Initial
Purchaser shall cease and be of no further effect.
7.3 Publicly Available Information. File the reports required to be
filed by it under the Securities Act and the Exchange Act (or, if the Company
is not required to file such reports, it will, upon the request of any
Purchaser, make publicly available other information so long as necessary to
permit sales under Rule 144 or Rule 144A, as applicable, under the Securities
Act), and it will take such further action as any Purchaser may request, all
to the extent required from time to time to enable such Purchaser to sell the
Notes, the Preferred Stock and shares of Common Stock issuable upon conversion
thereof without registration under the Securities Act within the limitation of
the exemptions provided by (a) Rule 144 or Rule 144A under the Securities Act,
as either such Rule may be amended from time to time, or (b) any similar rule
or regulation hereafter adopted by the
Page 47 of 102 Pages
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Commission. Upon the request of any Purchaser, the Company will deliver to
such Purchaser a written statement as to whether it has complied with such
requirements.
7.4 Public Documents. For so long as the Company has any securities
registered under the Exchange Act, upon the filing with the Commission of any
financial statements, proxy or information statements, notices, regular or
special reports or registration statements (other than any registration
statements relating to employee benefit or dividend reinvestment plans), or
the issuance of any press release or other public announcement (each a "Public
Document"), the Company shall within five (5) Business Days of such filing or
issuance provide to each Purchaser a copy of such Public Document.
7.5 Information Relating to the Purchasers. From the date hereof, not
release any information relating to any Purchaser, or any of its Affiliates,
without such Person's prior written consent, unless otherwise required by
applicable Law. In addition, the Company shall, within a reasonable time
before the issuance of any press release or the making of any public statement
relating to any Purchaser or any of their affiliates, consult in good faith
with such Person regarding the contents thereof.
7.6 Notice Regarding Certain Corporate Actions. If, at any time, the
Company decides to take certain corporate action, including, but not limited
to, any Dilution Event or Change of Control, then the Company shall provide
each holder of Preferred Stock with written notice of such action at least 20
days prior to the record date for such action, and if there is no record date
for such action, then such written notice shall be provided at least 20 days
prior to the effective date of such action; provided, however, that any holder
may elect not to receive such notices upon the delivery of written notice to
the Company informing the Company of such election.
7.7 Access to Information. At any time permit, up to twice annually
with respect to each Purchaser, at the request upon reasonable notice, by any
Purchaser for access to during normal business hours, and information
regarding, the Company, any of its Subsidiaries or their Properties, books,
records and personnel, the Company, at its expense, will promptly provide such
access or information to such Purchaser; provided however, that following the
occurrence and during the continuation of any Default or any Event of Default,
such access shall be unlimited and shall continue to be at the expense of the
Company. In addition, each Purchaser shall be entitled to customary inspection
rights under the DGCL.
7.8 True Books and Records of the Company. Keep and maintain, or
cause to be kept and maintained, correct, true and complete books of record
and account in which full, complete, true and correct entries will be made of
all of its corporate and financial dealings and transactions, and set up on
its books such reserves as may be required by GAAP with respect to doubtful
accounts and all taxes, assessments, charges, levies and claims and with
respect to its business in general, and include such reserves in interim as
well as year-end financial statements, all in such manner and such form as are
generally maintained by public companies.
7.9 Officer's Knowledge of Default. Upon any Executive Officer of the
Company obtaining knowledge of the occurrence of any Default or Event of
Default under any Transaction Document, promptly to notify the Purchasers of
the nature thereof, the period of existence thereof, and what action the
Company proposes to take with respect thereto.
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7.10 Suits or Other Proceedings. Upon any Executive Officer of the
Company obtaining knowledge of any litigation or other proceedings being
instituted against the Company or any of its Subsidiaries, or any attachment,
levy, execution or other process being instituted against any Property of the
Company or any of its Subsidiaries, any or all of which make a claim or claims
in an aggregate amount greater than $500,000 not otherwise covered by
insurance, promptly to deliver to the Purchasers written notice thereof
stating the nature and status of such litigation, dispute, proceeding, levy,
execution or other process.
7.11 Hedging Obligations. Not incur any Hedging Obligations or enter
into any agreements, arrangements, undertakings, commitments, devices or
instruments relating to Hedging Obligations, except pursuant to Swap
Agreements in an aggregate notional amount not to exceed at any time the lower
of (i) $45,000,000, and (ii) 60% of the aggregate commitment under the Credit
Agreement, less any permanent reductions in such commitment.
7.12 Projections. Prepare all financial projections concerning the
Company to be provided, or made available, to the Purchasers, in good faith
based upon reasonable assumptions.
8. Restrictions on Transfer.
8.1 Restrictive Legends. Except as otherwise permitted by this Section
8, each Note and Preferred Stock certificate (or Common Stock certificate
issued on conversion thereof) issued pursuant to this Agreement shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH
ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT,
PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO THE
COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT IS AVAILABLE.
The Company shall maintain a copy of this Agreement and any amendments
thereto on file in its principal office, and will make such copy available
during normal business hours for inspection to any party thereto or will
provide such copy to any Purchaser upon its request.
Whenever the legend requirement imposed by this Section 8.1 shall
terminate, as hereinabove provided, the respective holders of Securities for
which such legend requirements have terminated shall be entitled to receive
from the Company, at the Company's expense, new Notes or new Preferred Stock
(or Common Stock) certificates, as applicable, without such legend.
Page 49 of 102 Pages
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8.2 Notice of the Proposed Transfer; Opinions of Counsel. Each Purchaser
of each Note and Preferred Stock certificate (or Common Stock certificate
issued on conversion thereof) bearing the restrictive legend set forth in
Section 8.1 above ("Restricted Security"), agrees that prior to any transfer
or attempted transfer of such Restricted Security, to give to the Company (a)
written notice describing the manner or circumstances of such transfer or
proposed transfer, and (b) upon reasonable request by the Company to such
transferring holder, an opinion of counsel, which is knowledgeable in
securities law matters (including in-house counsel), in form and substance
reasonably satisfactory to the Company, to the effect that the proposed
transfer of such Restricted Security may be effected without registration of
such Restricted Security under the Securities Act. If for any reason the
Company (after having been furnished with the opinion required to be furnished
pursuant to this Section 8.2) shall fail to notify such holder within 2 days
after such holder shall have delivered such opinion to the Company that, in
its or its counsel's opinion, the transfer may not be legally effective (the
"Illegal Transfer Notice"), such holders shall thereupon be entitled to
transfer the Restricted Security as proposed. If the holder of the Restricted
Security delivers to the Company an opinion of counsel (including in-house
counsel or regular counsel to such Purchaser or its investment adviser) in
form and substance reasonably satisfactory to the Company that subsequent
transfers of such Restricted Security will not require registration under the
Securities Act, or if the Company does not provide such Purchaser with an
Illegal Transfer Notice as set forth above, the Company will promptly after
such contemplated transfer deliver new certificates for such Restricted
Security which do not bear the Securities Act legend set forth in Section 8.1
above. The restrictions imposed by this Section 8 upon the transferability of
any particular Restricted Security shall cease and terminate (i) when such
Restricted Security has been sold pursuant to an effective registration
statement under the Securities Act, (ii) when such Restricted Security has
been transferred pursuant to Rule 144 or Rule 144A promulgated under the
Securities Act, or (iii) upon the date which is two (2) years after the later
of (A) the original issue date of the Restricted Security, and (B) the last
date on which the Company or any Affiliate of the Company was the owner of the
Restricted Security (or any predecessor Restricted Security). The holder of
any Restricted Security as to which such restrictions shall have terminated
shall be entitled to receive from the Company a new security of the same type
but not bearing the restrictive Securities Act legend set forth in Section 8.1
and not containing any other reference to the restrictions imposed by this
Section 8. Notwithstanding any of the foregoing, no opinion of counsel will be
required to be rendered pursuant to this Section 8.2 with respect to the
transfer of any Securities on which the restrictive legend has been removed in
accordance with this Section 8.2. As used in this Section 8.2, the term
"transfer" encompasses any sale, transfer or other disposition of any
Securities referred to herein.
9. Miscellaneous.
9.1 Indemnification: Expenses Etc..
(a) In addition to any and all obligations of the Company to
indemnify the Purchasers hereunder or under the Note Indenture or the other
Transaction Documents, the Company agrees, without limitation as to time, to
indemnify and hold harmless each Purchaser, its Affiliates and each of its and
their respective directors, officers, partners, principals, attorneys and
advisors (individually, an "Indemnified Party" and, collectively the
"Indemnified Parties") from and against any and all losses, claims, damages,
liabilities (or actions, suits or proceedings, including any inquiry or
investigation with respect thereto), costs (including the reasonable costs of
preparation and attorneys' fees) and expenses (including reasonable expenses
of investigation) (collectively,
Page 50 of 102 Pages
<PAGE>
"Losses") to which any Indemnified Party may become subject, insofar as such
Losses arise out of, in any way relate to, or result from (i) any breach of
any warranty, or the inaccuracy of any representation, as the case may be,
made by the Company, or the failure of the Company to fulfill any agreement or
covenant contained in this Agreement, the Note Indenture, the Certificate of
Designations, or any other Transaction Document, or (ii) in connection with
any proceeding against the Company or any Indemnified Party brought by any
third party arising out of or in connection with the Commitment Letter, this
Agreement or the other Transaction Documents or the transactions contemplated
hereby or thereby or any action taken in connection herewith or therewith (or
any other document or instrument executed herewith or pursuant hereto or
thereto), whether or not any Indemnified Party is a formal party to any such
proceeding; provided, however, that the Company shall not have any obligation
under this indemnity provision for liabilities determined in a judgment by a
court of competent jurisdiction to have resulted primarily from the gross
negligence or willful misconduct of any Indemnified Party. The Company agrees
promptly to reimburse any Indemnified Party for all such Losses as they are
incurred or suffered by such Indemnified Party. The foregoing is not intended
to indemnify or hold harmless any Indemnified Party on account of losses
arising from the limitation in value of the Preferred Stock or Notes due to
market factors, business developments or any causes other than the willful
misconduct or bad faith of the Company or any of its officers and directors.
Except as otherwise provided herein, the Company agrees (for the
benefit of each Purchaser) to pay, and to hold each Purchaser harmless from
and against, all costs and expenses (including, without limitation, reasonable
attorneys' fees, expenses and disbursements), if any, in connection with the
enforcement against the Company of this Agreement or any other Transaction
Document or any other agreement or instrument furnished pursuant hereto or
thereto or in connection herewith or therewith in any action in which any
Purchaser attempting to enforce any of the foregoing shall prevail or in any
action in which any Purchaser shall in good faith assert any provision of any
of the foregoing as a defense.
(b) If any Indemnified Party is entitled to indemnification
hereunder, such Indemnified Party shall give prompt notice to the Company of
any claim or of the commencement of any proceeding against the Company or any
Indemnified Party brought by any third party with respect to which such
Indemnified Party seeks indemnification pursuant hereto; provided, however,
that the failure to so notify the Company shall not relieve the Company from
any obligation or liability except to the extent the Company is prejudiced by
such failure. The Company shall have the right, exercisable by giving written
notice to an Indemnified Party promptly after the receipt of written notice
from such Indemnified Party of such claim or proceeding, to assume, at the
expense of the Company, the defense of any such claim or proceeding with
counsel reasonably satisfactory to such Indemnified Party. The Indemnified
Party or Parties will not be subject to any liability for any settlement made
without its or their consent (but such consent will not be unreasonably
withheld). The Company shall not consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by claimant or plaintiff to such Indemnified Party or Parties of a
release, in form and substance satisfactory to the Indemnified Party or
Parties, from all liability in respect of such claim, litigation or
proceeding.
(c) In addition to any other obligations of the Company to
indemnify the Purchasers herein or pursuant to any of the other Transaction
Documents or any other agreements or documents executed and delivered in
connection therewith, the Company will pay, and will hold
Page 51 of 102 Pages
<PAGE>
each Purchaser harmless from liability for the payment of all expenses arising
in connection with such transactions, including, without limitation: (a) all
document production and duplication charges and the reasonable fees, charges
and expenses of Purchaser's respective counsel in connection with the
transactions contemplated hereby (whether arising before or after the Closing
Date), and any subsequent proposed modification of, or proposed consent under,
this Agreement, the Note Indenture or the Certificate of Designations, whether
or not such proposed modification shall be effected or proposed consent
granted; (b) the costs of obtaining a private placement number from Standard &
Poor's Corporation for the Securities; (c) the costs and expenses, including
reasonable attorneys' fees, incurred by any Purchaser (x) in enforcing any
rights under this Agreement or in responding to any subpoena or other legal
process issued in connection with this Agreement or the transactions
contemplated hereby or thereby or by reason of such Purchaser's having
acquired any of the Securities, including without limitation costs and
expenses incurred by such Purchaser in any bankruptcy or similar case or (y)
in connection with the redemption or conversion, as the case may be, of the
Preferred Stock or the redemption, retirement, or defeasance of the Notes; (d)
the cost of delivering to such Purchaser's principal office, insured to its
satisfaction, the Securities delivered to such Purchaser hereunder and any
Securities delivered to such Purchaser upon any substitution of Securities
pursuant to Section 2.06 and Section 2.07 of the Note Indenture and of such
Purchaser's delivering any Securities, insured to its satisfaction, upon any
such substitution; and (e) the reasonable out-of-pocket expenses incurred by
such Purchaser in connection with such transactions and any such amendments or
waivers.
9.2 Survival of Representations and Warranties; Severability. All
representations and warranties contained in this Agreement or the Transaction
Documents or made in writing by or on behalf of the Company in connection with
the transactions contemplated by this Agreement or the Transaction Documents
shall survive, for a period of two years after the date hereof; provided
however the representations and warranties contained in Section 5.2, 5.4, 5.5,
5.6, 5.10, 5.11, 5.20, 5.26, and 5.27 shall survive indefinitely; provided
further, however that if prior to the expiration of the survival period set
forth hereinabove, the Company shall have been notified of a claim for
indemnity hereunder and such claim shall not have been finally resolved before
the expiration of such survival period, then any representation or warranty
that is the basis for such claim shall continue to survive and shall remain a
basis for indemnity as to such claim until such claim is finally resolved. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
9.3 Amendment and Waiver. This Agreement may be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may be given, provided that the same are in writing and
signed by the Purchasers and the Company.
9.4 Notices, Etc. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing and
shall be delivered personally (with written confirmation of receipt), sent by
telecopier (with written confirmation of receipt), mailed by registered or
certified mail, return receipt requested, or by a nationally recognized
overnight courier, postage prepaid, addressed, (a) if to any Purchaser, at
such address or telecopier number as is set forth next to such Purchaser's
name on the signature page hereto, or as any such Purchaser shall have
furnished to the Company in writing, or (b) if to any other holder of any
Security, at such
Page 52 of 102 Pages
<PAGE>
address or telecopier number as such other holder shall have furnished to the
Company in writing, or, until any such other holder so furnishes to the
Company an address or telecopier number, then to and at the address or
telecopier number of the last holder of such Security who has furnished an
address or telecopier number, to the Company, or (c) if to the Company, at 850
Third Avenue, New York, New York 10022, telecopier no: (212) 508-3507, to the
attention of Barry Roseman, President and Chief Operating Officer, or at such
other address or telecopier number, or to the attention of such other officer,
as the Company shall have furnished to the Purchasers and each such
shareholder in writing. This Agreement and the other Transaction Documents and
all documents delivered in connection herewith or therewith embody the entire
agreement and understanding between the Purchasers and the Company and
supersede all prior agreements and understandings relating to the subject
matter hereof.
9.5 Successors and Assigns. Whenever in this Agreement any of the
parties hereto are referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the respective parties which are contained in
this Agreement shall bind and inure to the benefit of the successors and
assigns of all other parties. The terms and provisions of this Agreement, the
Note Indenture and the other Transaction Documents shall inure to the benefit
of and shall be binding upon any assignee or transferee of any Purchaser, and
in the event of such transfer or assignment, the rights and privileges herein
conferred upon any such Purchaser shall automatically extend to and be vested
in, and become an obligation of, such transferee or assignee, all subject to
the terms and conditions hereof. In connection therewith, such transferee or
assignee may disclose all documents and information which such transferee or
assignee now or hereafter may have relating to the Securities, this Agreement,
the Note Indenture, the Transaction Documents, the Company, any other Persons
referred to herein or any of the business of any of the foregoing entities,
subject to Section 9.12 hereof.
9.6 Agreement and Action of the Purchasers. Upon any occasion
requiring, permitting or referencing an act or an approval, consent, waiver,
election or other action on the part of the holders of the Notes and/or the
holders of the Preferred Stock, as applicable, any such action shall be taken,
or be deemed to have been taken, upon (i) the affirmative vote of the Initial
Purchasers holding (A) at least 70% of the Notes and/or the Preferred Stock,
as applicable, or (B) two thirds of the Notes and/or the Preferred Stock, as
applicable, on and after the date upon which Moore owns less than 100% of the
Notes and/or the Preferred Stock, as applicable, acquired by it on the date
hereof, or (ii) in the event that each of the Initial Purchasers, other than
GarMark, shall own less than 50% of the Notes and/or the Preferred Stock, as
applicable, owned by such Initial Purchaser on the date hereof, the
affirmative vote of the holders of at least a majority of the Notes and/or the
Preferred Stock, as applicable.
9.7 Descriptive Headings. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
9.8 Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken is by the terms of this
Agreement required to be satisfactory to the Purchasers or to the holders of a
specified portion of the principal amount of any class of the Securities, the
determination of such satisfaction shall be made by the Purchasers or such
holders, as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
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9.9 GOVERNING LAW. THIS AGREEMENT AND THE SECURITIES SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
ANY CHOICE-OF-LAW PRINCIPLES THEREOF.
9.10 Service of Process. The Company (a) hereby irrevocably submits
itself to the jurisdiction of the state courts of the State of New York and to
the jurisdiction of the United States District Court for the Southern District
of New York for the purpose of any suit, action or other proceeding arising
out of or based upon this Agreement, the Note Indenture, the Securities, the
other Transaction Documents or the subject matter hereof or thereof brought by
any Purchaser or their successors or assigns and (b) hereby waives, and agrees
not to assert, by way of motion, as a defense, or otherwise, in any such suit,
action or proceeding, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune
from attachment or execution, that the suit, action or proceeding is brought
in an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be
enforced in or by such court, and (c) hereby waives any offsets or
counterclaims in any such action suit or proceeding (other than compulsory
counterclaims). The Company hereby consents to service of process by
registered mail at the address to which notices are to be given. The Company
agrees that its submission to jurisdiction and its consent to service of
process by mail is made for the express benefit of the Purchasers. Final
judgment against the Company in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions (a) by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any indebtedness or
liability of the Company therein described or (b) in any other manner provided
by or pursuant to the laws of such other jurisdiction; provided, however, that
any Purchaser may at its option bring suit or institute other judicial
proceedings against the Company or any of the Company's or its assets in any
state or federal court of the United States or in any country or place where
the Company or such assets may be found.
9.11 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
9.12 Disclosure to Other Persons. Each Purchaser agrees to keep
confidential any financial information delivered by the Company pursuant to
this Agreement (other than information that is publicly available) and such
other non-public proprietary information delivered by the Company that is
clearly designated in writing to be confidential; provided, however, that
nothing herein shall prevent any Purchaser from disclosing such information:
(i) to any of the other Purchasers, or to any prospective purchaser who agrees
in writing to be bound by this Section 9.12, (ii) to any Affiliate, director,
officer, principal, employee, agent, advisor and professional consultant of
any Purchaser, or of any prospective purchasers, in its capacity as such or
any actual purchaser, participant, assignee, or transferee of such Purchaser's
or prospective purchaser's rights under any Securities or any part thereof
that agrees in writing to be bound by this Section 9.12, (iii) upon order of
any court or administrative agency having jurisdiction over such party, (iv)
upon the request or demand of any regulatory agency or authority having
jurisdiction over such party, (v) which has been publicly disclosed, (vi)
which has been obtained from any Person that is not a party hereto or an
Affiliate of any such party, (vii) in connection with the exercise of any
remedy hereunder, (viii) to the certified public accountants for such
Purchaser or as required in summary financial or descriptive business
Page 54 of 102 Pages
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information disclosed by such Purchaser that is an investment fund as part of
its regular reports to its investors or partners, (ix) as required by Law, (x)
in connection with any litigation to which such Purchaser or any of its
Affiliates may be a party, or (xi) as otherwise expressly contemplated by any
order, request or demand or to obtain confidential treatment for any
disclosure pursuant to (iii) or (iv) above, the Purchasers will use reasonable
efforts to inform the Company of any such request for disclosure prior to
disclosure. Nothing in this Section 9.12 shall be construed to create to give
rise to any fiduciary duty on the part of Purchaser to the Company.
9.13 Acknowledgment by Purchasers. Each Purchaser acknowledges
that it is aware of the restrictions imposed by, and agrees to comply with,
all Laws regarding the use of material non-public information, including
without limitation, Laws restricting trading in the Company's securities while
in possession of such information.
9.14 No Adverse Interpretation of Other Agreements. This Agreement
shall not be used to interpret another agreement, indenture, loan or debt
agreement of the Company or any Subsidiary. Any such agreement, indenture,
loan or debt agreement shall not be used to interpret this Agreement.
9.15 WAIVER OF JURY TRIAL. THE COMPANY HEREBY WAIVES TRIAL BY JURY
IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE NOTE INDENTURE, THE
SECURITIES, ANY OTHER TRANSACTION DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT
DELIVERED PURSUANT TO THIS AGREEMENT, THE NOTE INDENTURE, THE SECURITIES OR
ANY OTHER TRANSACTION DOCUMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT, THEREOF, PROVIDED, HOWEVER, THAT WITH RESPECT TO
ANY COMPULSORY COUNTERCLAIM (I.E., A CLAIM BY THE COMPANY AGAINST ANY OF THE
PURCHASERS WHICH IF NOT BROUGHT IN SUCH ACTION WOULD RESULT IN THE COMPANY OR
BEING FOREVER BARRED FROM BRINGING SUCH CLAIM) THE COUNTERCLAIM IN ANY SUCH
LITIGATION.
SECURITIES PURCHASE AGREEMENT
(INCREASING RATE SENIOR SUBORDINATED NOTES AND
SERIES F CONVERTIBLE PREFERRED STOCK)
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Page 55 of 102 Pages
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
HEADWAY CORPORATE RESOURCES,
INC., a Delaware corporation
By: /s/ Philicia G. Levinson
-------------------------------
Name: Philicia G. Levinson
Title: Senior Vice President
Page 56 of 102 Pages
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SECURITIES PURCHASE AGREEMENT FOR
INCREASING RATE SENIOR SUBORDINATED NOTES AND
SERIES F CONVERTIBLE PREFERRED STOCK
PURCHASER SIGNATURE PAGE
<TABLE>
<CAPTION>
<S> <C> <C>
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of Securities
to be Purchased:
GARMARK PARTNERS, L.P. Aggregate principal Purchase
By: GarMark Associates, L.L.C. amount of Notes Price: $6,666,667
its general partner to be Purchased:
$6,666,667
By: /s/ Mark G. Solow
--------------------------
Name: Mark G. Solow
Title: Managing Principal
Address: 1325 Avenue of the Americas Aggregate Number of Purchase
26th Floor Shares of Series F Price: $13,333,333
New York, NY 10019 Convertible Stock to
be Purchased: 666.67
Telephone: (212) 713-8500
Telecopy: (212) 713-8531
WITH A COPY TO:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
Att: Scott M. Zimmerman, Esq.
Telephone: (212) 758-9500
Telecopy: (212) 758-9526 Total Purchase Price: $20,000,000
Tax I.D. Number: #06-1494345
(if acquired in the name of a
nominee, the taxpayer I.D.
number of such nominee)
Designated Bank:
Nominee (name in which the Fleet Bank
Securities are to be registered, ------------------------------
if different than name of Name
Purchaser): 011-900-571
------------------------------
ABA #
1185 Avenue of the Americas
___________________________________ ------------------------------
(Nominee's Name) Street Address
New York NY 10036
------------------------------
City State Zip Code
9402837568-00121 Mr. John Toohy (212) 819-5735
------------------------------
Account Number Attention
Page 57 of 102 Pages
</TABLE>
<PAGE>
SECURITIES PURCHASE AGREEMENT FOR
INCREASING RATE SENIOR SUBORDINATED NOTES AND
SERIES F CONVERTIBLE PREFERRED STOCK
PURCHASER SIGNATURE PAGE
<TABLE>
<CAPTION>
<S> <C> <C>
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of Securities
to be Purchased:
MOORE GLOBAL INVESTMENTS, LTD. Aggregate principal Purchase
By: Moore Capital Management, Inc. amount of Notes Price: $2,050,000
to be Purchased:
$2,050,000
By: /s/ Savvas Savvinidis
------------------------------
Name: Savvas Savvinidis
Title: Director of Operations
Address: c/o Cited Fund Services (Bahamas), Aggregate Number of Purchase
Ltd. Shares of Series F Price: $4,100,000
Bahamas Financial Center Convertible Stock to
Charlotte & Shirley Street be Purchased: 205
P.O. Box CB 13136
Nassau, Bahamas
Telephone: (242) 302-5918
Telecopy: (242) 356-0221
WITH A COPY TO: Moore Capital Management, Inc.
Address: 1251 Avenue of the Americas
New York, NY 10020
Telephone: (212) 782-7532
Telecopy: (212) 382-9895 Total Purchase Price: $6,150,000
Tax I.D. Number: N/A (Offshore)
(if acquired in the name of a
nominee, the taxpayer I.D.
number of such nominee)
Designated Bank:
Nominee (name in which the Chase Manhattan Bank, New York
Securities are to be registered, ----------------------------------
if different than name of Name
Purchaser): 021-000-021
----------------------------------
ABA #
----------------------------------
Moore Global Investments, Ltd. Street Address
- -------------------------------
(Nominee's Name) ----------------------------------
City State Zip Code
949-2-603056
----------------------------------
Account Number Attention
I/A/O Moore Global Investments, Ltd.
Page 58 of 102 Pages
</TABLE>
<PAGE>
SECURITIES PURCHASE AGREEMENT FOR
INCREASING RATE SENIOR SUBORDINATED NOTES AND
SERIES F CONVERTIBLE PREFERRED STOCK
PURCHASER SIGNATURE PAGE
<TABLE>
<CAPTION>
<S> <C> <C>
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of Securities
to be Purchased:
REMINGTON INVESTMENT STRATEGIES, Aggregate principal Purchase
L.P. amount of Notes Price: $450,000
By: Moore Capital Advisors, LLP to be Purchased:
its general partner $450,000
By: /s/ Savvas Savvinidis
------------------------------
Name: Savvas Savvinidis
Title: Director of Operations
Address: 1251 Avenue of the Americas Aggregate Number of Purchase
53rd Floor Shares of Series F Price: $900,000
New York, New York 10020 Convertible Stock to
be Purchased: 45
Telephone: (212) 782-7532
Telecopy: (212) 382-9895
WITH A COPY TO:
Address:
Telephone:
Telecopy: Total Purchase Price: $1,350,000
Tax I.D. Number: 13-3809579
(if acquired in the name of a
nominee, the taxpayer I.D.
number of such nominee)
Designated Bank:
Nominee (name in which the Chase Manhattan Bank, New York
Securities are to be registered, ---------------------------------
if different than name of Name
Purchaser): 021-000-021
----------------------------------
ABA #
---------------------------------
Remington Investment Strategies, L.P. Street Address
- -------------------------------------
(Nominee's Name) ----------------------------------
City State Zip Code
910-2-725455
----------------------------------
Account Number Attention
F/A/O Remington Investment Strategies
</TABLE>
Page 59 of 102 Pages
<PAGE>
SECURITIES PURCHASE AGREEMENT FOR
INCREASING RATE SENIOR SUBORDINATED NOTES AND
SERIES F CONVERTIBLE PREFERRED STOCK
PURCHASER SIGNATURE PAGE
<TABLE>
<CAPTION>
<S> <C> <C>
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of Securities
to be Purchased:
NATIONSBANC MONTGOMERY Aggregate principal Purchase
SECURITIES LLC amount of Notes Price: $833,333
to be Purchased:
$833,333
By: /s/ Lewis Coleman
---------------------------------
Name: Lewis Coleman
Title: Senior Managing Director
Address: c/o NationsBanc Montgomery Aggregate Number of Purchase
Securities LLC Shares of Series F Price: $1,666,667
600 Montgomery Street Convertible Stock to
San Francisco, CA 94111 be Purchased: 83.33
Telephone: (415) 627-2553
Telecopy: (415) 913-5552
Attn: Jack G. Levin
WITH A COPY TO:
Address:
Telephone:
Telecopy: Total Purchase Price: $2,500,000
Tax I.D. Number: 562058405
(if acquired in the name of a nominee, the
taxpayer I.D. number of such nominee)
Designated Bank:
Nominee (name in which the Citibank, NY
Securities are to be registered, ----------------------------------
if different than name of Name
Purchaser): 021 000 089
----------------------------------
___________________________________ ABA #
(Nominee's Name) 399 Park Avenue
----------------------------------
Street Address
New York, New York
----------------------------------
City State Zip Code
4061-5536 NationBanc Montgomery Securities LLC
-------------------------------
Account Number Attention
Reference: Headway Note-Interest Pymt
</TABLE>
Page 60 of 102 Pages
<PAGE>
Exhibit B
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES F CONVERTIBLE
PREFERRED STOCK OF HEADWAY CORPORATE RESOURCES, INC.
HEADWAY CORPORATE RESOURCES, INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY THAT:
A. Pursuant to authority conferred upon the Board of Directors
(the "Board") by the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation") and pursuant to the provisions of ss.151 of
the Delaware General Corporation Law, the Board, pursuant to a unanimous
written consent dated March 19, 1998, adopted the following resolution
providing for the designations, preferences and relative, participating,
optional and other rights, and the qualifications, limitations and
restrictions of the Series F Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation provides for two classes of
shares known as common stock, $0.0001 par value per share (the "Common
Stock"), and preferred stock, $0.0001 par value per share (the "Preferred
Stock"); and
WHEREAS, the Board is authorized by the Certificate of Incorporation
to provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of Delaware,
to establish from time to time the number of shares to be included in such
series and to fix the designations, preferences and rights of the shares of
each such series and the qualifications, limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board deems it advisable to,
and hereby does, designate a Series F Convertible Preferred Stock and fixes
and determines the preferences, rights, qualifications, limitations and
restrictions relating to the Series F Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series F Convertible Preferred Stock" (referred to herein as the
"Series F Stock").
2. Authorized Number. The number of shares constituting the Series F
Stock shall be 1,000.
3. Ranking. The Series F Stock shall rank, as to dividends and upon
Liquidation Payments (as defined in Section 5(a) hereof), senior and prior to
the Common Stock and to all other classes or series of stock issued by the
Corporation. (All equity securities of the Corporation to which the Series F
Stock ranks prior, whether with respect to dividends or upon liquidation,
dissolution, winding up or otherwise, including
Page 61 of 102 Pages
<PAGE>
the Common Stock are collectively referred to herein as "Junior Securities.")
The Corporation shall not have or create any class of stock ranking on parity
with, or senior to, the Series F Stock.
4. Dividends.
a. Dividend Accrual and Payment. From and after the date of issuance
of the Series F Stock (the "Original Issue Date" ), dividends shall accrue on
a daily basis on the shares of Series F Stock at the initial annual rate
(subject to reset in accordance with Section 4(e)) of 5.5% per share
(expressed as a percentage of the $20,000,000.00 per share liquidation
preference (the "Dividend Rate")). The holders of shares of Series F Stock
shall be entitled to receive such dividends when and as declared by the Board,
in cash, out of assets legally available for such purpose, quarterly in
arrears on the 30th day of March, June, September and December of each year
(each of such dates being a "Dividend Payment Date"), commencing June 30,
1998. Such dividends shall be paid to the holders of record at the close of
business on the date specified by the Board at the time such dividend is
declared, provided, however, that such date shall not be more than 60 nor less
than 10 days prior to the applicable Dividend Payment Date. Dividends on the
Series F Stock shall be cumulative so that if, for any dividend accrual
period, cash dividends at the rate hereinabove specified are not declared and
paid or set aside for payment, the amount of accrued but unpaid dividends
shall accumulate with interest at the then applicable Dividend Rate and shall
be added to the dividends payable for subsequent dividend accrual periods and
upon any redemption or conversion of shares of Series F Stock. If the Original
Issue Date is on a date which does not coincide with a Dividend Payment Date,
then the initial dividend accrual period applicable to such shares shall be
the period from the Original Issue Date through whichever of March, June,
September or December next occurs after the Original Issue Date. If the date
fixed for payment of a final liquidating distribution on any shares of Series
F Stock, or the date on which any shares of Series F Stock are redeemed or
converted into Common Stock does not coincide with a Dividend Payment Date,
then subject to the provisions hereof relating to such payment, redemption or
conversion, the final dividend accrual period applicable to such shares shall
be the period from whichever of March, June, September or December most
recently precedes the date of such payment, conversion or redemption through
the effective date of such payment, conversion or redemption. The rate at
which dividends are paid shall be adjusted for any combinations or divisions
or similar recapitalizations affecting the shares of Series F Stock. In
addition to the dividends provided for in this Section 4(a), holders of Series
F Stock shall be entitled to participate in extraordinary dividends in
accordance with the provisions of Section 7 hereof. So long as any shares of
Series F Stock are outstanding, (i) the amount of all dividends paid with
respect to the shares of Series F Stock pursuant to this Section 4(a) shall be
paid pro rata to the holders entitled thereto and (ii) holders of the shares
of Series F Stock shall be entitled to receive the dividends provided for in
this Section 4(a) in preference to and in priority over any dividends upon any
Junior Securities.
b. Dividend Limitation on Junior Securities. So long as any shares
of Series F Stock are outstanding, the Corporation shall not declare, pay or
set apart for payment, any dividend on any Junior Securities or make any
payment on account of, or set apart for payment, money for a sinking or other
similar fund for, the purchase, redemption or other retirement of, any Junior
Securities or any warrants, rights, calls or options exercisable or
exchangeable for or convertible into any Junior Securities, or make any
distribution in respect thereof, either directly or indirectly, and whether in
cash, obligations or shares of the Corporation or other property (other than
distributions or dividends in Junior Securities to the holder of Junior
Securities), unless prior to, or concurrently with, such declaration, payment,
setting apart for payment, purchase, redemption or distribution, as the case
may be, all accrued and unpaid dividends on the shares of Series F Stock not
paid on the dates provided for in Section 4(a) hereof shall have been paid in
full in cash.
c. Dividends on Fractional Shares. Each fractional share of Series
F Stock outstanding shall be entitled to a ratably proportionate amount of all
dividends accruing with respect to each outstanding share of Series F Stock
pursuant to Section 4(a) hereof, and all such dividends with respect to such
outstanding
Page 62 of 102 Pages
<PAGE>
fractional shares shall be fully cumulative and shall accrue (whether or not
declared), and shall be payable in the same manner and at such times as
provided for in Section 4(a) hereof with respect to dividends on each
outstanding share of Series F Stock.
d. Payments on Shares of Common Stock Subject to Restricted
Transferability. If, subsequent to the conversion of any shares of Series F
Stock into Common Stock (or other securities) pursuant to Section 6 hereof,
the shares of Common Stock (or other securities) into which such shares of
Series F Stock were converted are subject to a contractual or other
restriction, other than (x) restrictions created by the holder of such shares
of Common Stock not at the request of the Corporation, limiting the
transferability thereof, and (y) restrictions imposed by applicable federal
and state securities laws (such shares of Common Stock (or other securities)
which are so encumbered are herein referred to as the "Subject Shares" and the
limitation on the transferability thereof is referred to as the "Sale
Limitation"), then the Corporation shall pay to the holder of such Subject
Shares an amount in (i) cash, (ii) shares of the Series F Stock valued at the
liquidation preference thereof, or (iii) shares of the Common Stock valued at
the Market Price thereof on the date of payment, at the option of the holder
of such Series F Stock (such amount is referred to herein as the "Restriction
Fee") equal to the amount of dividends which would have accrued on the shares
of Series F Stock which were converted into the Subject Shares from the date
upon which the Subject Shares became subject to the Sale Limitation until the
date upon which the Sale Limitation was no longer in effect with respect to
the Subject Shares. The Restriction Fee shall be paid by the Corporation to
the holders entitled thereto on the date that dividends are payable, or would
have been payable, on the shares of Series F Stock.
e. Dividend Rate Adjustment. If either (x) the Conversion Price (as
defined below) is not adjusted on the second anniversary of the Original Issue
Date to $6.00 or (y) a Series F Stock Event of Default (as defined below) has
occurred prior thereto, then the Dividend Rate shall increase, as of such
second anniversary or the date of such Series F Stock Event of Default, as the
case may be, to, and shall thereafter be, 7.5% per annum. In addition, if all
of the outstanding shares of Series F Stock are not redeemed on or prior to
the eighth anniversary of the Original Issue Date, then the Dividend Rate
shall increase to 10% per annum commencing on such eighth anniversary, and
shall further increase by an additional 2% per year on each anniversary
thereafter, but in no event will the Dividend Rate exceed 20% per annum.
5. Liquidation.
a. Liquidation Procedure. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders
of the shares of Series F Stock shall be entitled, before any distribution or
payment is made upon any Junior Securities, to be paid an amount equal to (i)
$20,000,000 per share of Series F Stock, representing the liquidation
preference per share of the Series F Stock (as adjusted for any combinations,
divisions or similar recapitalizations affecting the shares of Series F Stock)
(the "Series F Issue Price"), plus (ii) all accrued and unpaid dividends on
the Series F Stock to such date (together with the Series F Issue Price, the
"Liquidation Payments"). If upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the assets to be
distributed among the holders of Series F Stock shall be insufficient to
permit payment in full to the holders of Series F Stock of the Liquidation
Payments, then the entire assets of the Corporation shall be distributed
ratably among such holders in proportion to the full respective distributive
amounts to which they are entitled.
b. Remaining Assets. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after the holders of
Series F Stock shall have been paid in full the Liquidation Payments, the
remaining assets of the Corporation may be distributed ratably per share in
order of preference to the holders of Junior Securities in accordance with
their terms.
Page 63 of 102 Pages
<PAGE>
c. Notice of Liquidation. Written notice of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, stating a payment date, the amount of the Liquidation Payments
and the place where said Liquidation Payments shall be payable, shall be given
by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to each holder of record of Series F Stock at his post office
addresses as shown by the records of the Corporation.
d. Fractional Shares. The Liquidation Payments with respect to each
outstanding fractional share of Series F Stock shall be equal to a ratably
proportionate amount of the Liquidation Payments with respect to each
outstanding share of Series F Stock.
6. Conversion.
The holders of the Series F Stock shall have the following conversion
rights:
a. Conversion. Subject to the limitations set forth below, the Series
F Stock shall be convertible at any time after the third month subsequent to
the Original Issue Date, unless previously redeemed, at the option of the
holder of record thereof, into the number of fully paid and nonassessable
shares of Common Stock equal to the quotient of (x) the aggregate liquidation
preference of the shares of Series F Stock being converted divided by (y) the
Conversion Price (as defined below) then in effect upon surrender to the
Corporation or its transfer agent of the certificate or certificates
representing the Series F Stock to be converted, as provided below, or if the
holder notifies the Corporation or its transfer agent that such certificate or
certificates have been lost, stolen or destroyed, upon the execution and
delivery of an agreement satisfactory to the Corporation to indemnify the
Corporation from any losses incurred by it in connection therewith; provided,
however, that, except to the extent provided by Regulation Y, or any successor
regulation ("Regulation Y"), promulgated under the Bank Holding Company Act of
1956, as amended, by the Board of Governors of the Federal Reserve System or
any successor thereto (the "Federal Reserve Board"), no shares of Series F
Stock originally issued by the Corporation to a Person subject to the
provision of Regulation Y shall be convertible by the original holder thereof
or any direct or indirect transferee thereof into shares of Common Stock, if,
after giving effect to such conversion, such Person, its Bank Holding Company
Affiliates (as hereinafter defined) and any direct or indirect transferee
thereof would beneficially own more than 4.9% of the total issued and
outstanding shares, interests, participations or other equivalents (however
designated) of voting capital stock of the Corporation, unless such shares of
Common Stock are being distributed, disposed of or sold in any one of the
following transactions:
(1) such shares of Common Stock are being sold in a public
offering registered under the Securities Act of 1933, as amended,
(or any successor provision thereto) (the "Securities Act") or a
public sale pursuant to Rule 144 and 144A promulgated thereunder or
any successor rule then in effect;
(2) such shares of Common Stock are being sold (including by
virtue of a merger, consolidation or similar transaction involving
the Corporation) to any Person or group of related persons for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), if, after such sale, such Person or
group of Persons in the aggregate would own or control securities of
the Corporation which possess in the aggregate the ordinary voting
power to elect a majority of the members of the corporation's Board
of Directors;
(3) such shares of Common Stock are being sold to a person or
group of related persons for purposes of Section 13(d) of the
Exchange Act, if, after such sale, such Person or group of Persons
in the aggregate would own, control or have the right to acquire
more than two percent (2%) of the outstanding securities of any
class of voting securities of the Corporation; or
Page 64 of 102 Pages
<PAGE>
(4) such shares of Common Stock are being sold in any other manner
permitted by the Federal Reserve Board.
As used herein, "Bank Holding Company Affiliates" means, with respect to a
Person subject to the provisions of Regulation Y, (i) if such Person is a bank
holding company, any company directly or indirectly controlled by such bank
holding company, and (ii) otherwise, the bank holding company that controls
such Person and any company (other than such Person) directly or indirectly
controlled by such bank holding company.
b. Conversion Price; Converted Shares. The initial conversion price
of the Series F Stock shall be $5.58 per share (the "Initial Conversion
Price"); provided, however, that if the average of the Market Prices (as
defined below) for the Common Stock for the 20 consecutive trading days
immediately preceding the second anniversary of the Original Issue Date (the
"Second Anniversary Price") is greater than $8.50, then the conversion price
shall thereafter be $6.00; provided further, however, that if the Second
Anniversary Price is equal to or less than $8.50, then the conversion price
shall be adjusted as of the second anniversary of the Original Issue Date to
be equal to $6.00 (the "Maximum Conversion Price") minus the product of (i)
0.75 and (ii) the difference between $8.50 and the Second Anniversary Price,
but in no event shall the adjusted conversion price be lower than the Initial
Conversion Price (the Initial Conversion Price, as it may be adjusted pursuant
to the terms of this Section 6(b) and Section 7, is referred to as the
"Conversion Price"); provided, further, however, that if shares of Series F
Stock are converted prior to the earlier to occur of (x) the second
anniversary of the Original Issue Date and (y) the occurrence of a Series F
Stock Event of Default, then the Conversion Price applicable to the shares of
Series F Stock so converted shall be $6.00 per share. Notwithstanding anything
to the contrary contained in the preceding sentence with respect to the
Conversion Price, if, at any time prior to the second anniversary of the
Original Issue Date, there is a Series F Stock Event of Default, then the
Initial Conversion Price shall not be adjusted pursuant to such sentence. The
Conversion Price also shall be subject to adjustment as provided in Section 7
below. If any fractional interest in a share of Common Stock would be
deliverable upon conversion of Series F Stock, the Corporation shall pay in
lieu of such fractional share an amount in cash equal to the Conversion Price
of such fractional share (computed to the nearest one hundredth of a share) in
effect at the close of business on the date of conversion. Any shares of
Series F Stock which have been converted shall be cancelled and all dividends
on converted shares shall cease to accrue and the certificates representing
shares of Series F Stock so converted shall represent the right to receive (i)
such number of shares of Common Stock into which such shares of Series F Stock
are convertible, plus (ii) cash payable for any fractional share, plus (iii)
all accrued but unpaid dividends relating to such shares, together with
interest thereon, through the date of conversion, plus, if applicable (iv) the
Restriction Fee. Amounts payable with respect to the foregoing clause (iii)
shall be paid, at the option of each holder, in cash or additional shares of
Common Stock valued at the Market Price thereof on the date of such payment.
Amounts payable with respect to the foregoing clause (iv) shall be paid in
accordance with the provisions of Section 4(d) hereof. Upon the conversion of
shares of Series F Stock as provided in this Section 6, the Corporation shall
promptly pay all then accrued but unpaid dividends to the holder of the Series
F Stock being converted. The Board shall at all times, so long as any shares
of Series F Stock remain outstanding, reserve a sufficient number of
authorized but unissued shares of Common Stock to be issued in satisfaction of
the conversion rights and privileges aforesaid.
As used herein, "Market Price" means, with respect to the
shares of Common Stock, (a) if the shares are listed or admitted for
trading on any national securities exchange or included in The Nasdaq
National Market or Nasdaq SmallCap Market, the last reported sales price
as reported on such exchange or Market; (b) if the shares are not listed
or admitted for trading on any national securities exchange or included
in The Nasdaq National Market or Nasdaq SmallCap Market, the average of
the last reported closing bid and asked quotation for the shares as
reported on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or a similar service if NASDAQ is not
reporting such information; (c) if the shares are not listed or admitted
for trading on any national securities exchange
Page 65 of 102 Pages
<PAGE>
exchange or included in The Nasdaq National Market or Nasdaq SmallCap
Market or quoted by NASDAQ or a similar service, the average of the last
reported bid and asked quotation for the shares as quoted by a market
maker in the shares (or if there is more than one market maker, the bid
and asked quotation shall be obtained from two market makers and the
average of the lowest bid and highest asked quotation). In the absence of
any available public quotations for the Common Stock, the Board shall
determine in good faith the fair value of the Common Stock, which
determination shall be set forth in a certificate by the Secretary of the
Corporation.
c. Mechanics of Conversion. In the case of a conversion, before any
holder of Series F Stock shall be entitled to convert the same into shares of
Common Stock, it shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or its transfer agent for the
Series F Stock, and shall give written notice to the Corporation of the
election to convert the same and shall state therein the name or names in
which the certificate of certificates for shares of Common Stock are to be
issued. The Corporation shall, as soon as practicable thereafter and in any
case within two (2) business days of the Corporation's receipt of the notice
of conversion, issue and deliver at such office to such holder of Series F
Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. A certificate or certificates will be issued
for the remaining shares of Series F Stock in any case in which fewer than all
of the shares of Series F Stock represented by a certificate are converted.
d. Issue Taxes. The Corporation shall pay all issue taxes, if any,
incurred in respect of the issue of shares of Common Stock on conversion. If a
holder of shares surrendered for conversion specifies that the shares of
Common Stock to be issued on conversion are to be issued in a name or names
other than the name or names in which such surrendered shares stand, then the
Corporation shall not be required to pay any transfer or other taxes incurred
by reason of the issuance of such shares of Common Stock to the name of
another, and if the appropriate transfer taxes shall not have been paid to the
Corporation or the transfer agent for the Series F Stock at the time of
surrender of the shares involved, the shares of Common Stock issued upon
conversion thereof may be registered in the name or names in which the
surrendered shares were registered, despite the instructions to the contrary.
e. Valid Issuance. All shares of Common Stock which may be issued in
connection with the conversion provisions set forth herein will, upon issuance
by the Corporation, be validly issued, fully paid and nonassessable, free from
preemptive rights and free from all taxes, liens or charges with respect
thereto created or imposed by the Corporation.
7. Adjustment of Conversion Price. The number and kind of securities
issuable upon the conversion of the Series F Stock and the Conversion Price
shall be subject to adjustment from time to time in accordance with the
following provisions:
a. Certain Definitions. For purposes of this Certificate:
(i) The term "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued, or deemed to be issued by the
Corporation pursuant to paragraph (h) of this Section 7, after the
Original Issue Date except:
(A) shares of Common Stock issuable upon conversion of, or
distributions with respect to, the Series F Stock now or
hereafter issued by the Corporation; and
(B) up to 1,000,000 shares of Common Stock (the "Maximum
Amount") issuable upon the exercise of stock options or other
awards made or denominated in
Page 66 of 102 Pages 65
<PAGE>
shares of Common Stock granted after the Original Issue Date
under the Corporation's 1993 Stock Incentive Plan, or any
successor plan, which stock options or other awards will be
issuable in aggregate amounts not to exceed one third of the
Maximum Amount (the "Maximum Annual Amount") in any of the
three (3) fiscal years commencing with the Company's 1998
fiscal year (provided that with respect to the 1998 fiscal
year, any options or awards granted before the Initial Issue
Date that are disclosed in the Securities Purchase Agreement
will not be included for the purpose of the limitations set
forth herein); provided that (x) no more than (i) 50% of the
Maximum Annual Amount may be granted to directors, officers,
employees or consultants of the Corporation who are, at the
time of such grant, and were for a period of ninety (90) days
prior thereto, employed or otherwise engaged or retained by the
Corporation or any of its Subsidiaries (collectively, "Eligible
Personnel"), (ii) no stock option grants or other awards shall
be made in any fiscal year to any Eligible Personnel unless the
Corporation's Stock Incentive Plan Committee (or any successor
thereto) approved each grant and award, based upon such
criteria as such Committee determines to be appropriate, which
criteria shall include the achievement by the Corporation, with
respect to the four (4) fiscal quarters preceding the fiscal
quarter in which such grant or award is made, of performance
goals adopted by the foregoing Committee (or the Board of
Directors, as applicable), and (iii) 50% of the Maximum Annual
Amount may be granted to prospective officers and employees of
the Corporation or its Subsidiaries in connection with
Permitted Acquisitions; and (y) the exercise price of each such
stock option and the exercise price for each other award made
or denominated in shares of Common Stock is no less than the
Market Value of the Common Stock on the date of the grant of
such stock option (the foregoing permitted options or other
awards are referred to herein as the "Management Options").
(ii) The term "Common Stock" shall mean (A) the Common Stock
and (B) the stock of the Corporation of any class, or series within
a class, whether now or hereafter authorized, which has the right to
participate in the distribution of either earnings or assets of the
Corporation without limit as to the amount or percentage.
(iii) The term "Convertible Securities" shall mean any evidence
of indebtedness, shares or other securities (other than the Series F
Stock) convertible into or exercisable or exchangeable for Common
Stock.
(iv) The term "Options" shall mean any and all rights, options
or warrants (other than the Management Options) to subscribe for,
purchase or otherwise in any manner acquire Common Stock or
Convertible Securities.
b. Reorganization, Reclassification. Subject to the provisions of
Sections 8(b) and 8(c) hereof, in the event of a reorganization, share
exchange, or reclassification, other than a change in par value, or from par
value to no par value, or from no par value to par value or a transaction
described in subsection (c) or (d) below, each share of Series F Stock shall,
after such reorganization, share exchange or reclassification, be convertible
at the option of the holder into the kind and number of shares of stock and/or
other securities, cash or other property which the holder of such share of
Series F Stock would have been entitled to receive if the holder had held the
Common Stock issuable upon conversion of such share of Series F Stock
immediately prior to such reorganization, share exchange or reclassification.
c. Consolidation, Merger. Subject to the provisions of Sections
8(b) and (c) hereof, in the event of a merger or consolidation to which the
Corporation is a party, each share of Series F Stock shall, after such merger
or consolidation, be convertible at the option of the holder into the kind and
number of shares
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of stock and/or other securities, cash or other property which the holder of
such share of Series F Stock would have been entitled to receive if the holder
had held the Common Stock issuable upon conversion of such share of Series F
Stock immediately prior to such consolidation or merger.
d. Subdivision or Combination of Shares. In case outstanding shares
of Common Stock shall be subdivided, the Conversion Price shall be
proportionately reduced as of the effective date of such subdivision, or as of
the date a record is taken of the holders of Common Stock for the purpose of
so subdividing, whichever is earlier. In case outstanding shares of Common
Stock shall be combined, the Conversion Price shall be proportionately
increased as of the effective date of such combination, or as of the date a
record is taken of the holders of Common Stock for the purpose of so
combining, whichever is earlier.
e. Stock Dividends. In case shares of Common Stock are issued as a
dividend or other distribution on the Common Stock (or such dividend is
declared), the Conversion Price shall be adjusted, as of the date a record is
taken of the holders of Common Stock for the purpose of receiving such
dividend or other distribution (or if no such record is taken, as at the
earliest of the date of such declaration, payment or other distribution), to
that price determined by multiplying the Conversion Price in effect
immediately prior to such declaration, payment or other distribution by a
fraction (i) the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the declaration or payment of such
dividend or other distribution, and (ii) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately after the
declaration or payment of such dividend or other distribution. In the event
that the Corporation shall declare or pay any dividend on the Common Stock
payable in any right to acquire Common Stock for no consideration, then the
Corporation shall be deemed to have made a dividend payable in Common Stock in
an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
f. Extraordinary Dividends. In case the Corporation shall fix a
record date for the making of a dividend or distribution to all holders of its
Common Stock of capital stock (other than Common Stock), evidence of
indebtedness, assets or cash, or rights, options or warrants to subscribe for
or other securities convertible into or exercisable or exchangeable for
capital stock (excluding those referred to in Section 7(h) and any cash
dividends, during any period of 365 consecutive days, not exceeding, in the
aggregate, the lesser of (i) five percent (5%) of the Corporation's aggregate
Consolidated Net Income (as defined in the Indenture under which the
Corporation issued its Increasing Rate Senior Subordinated Notes due 2006 (the
"Note Indenture")) per share of Common Stock, calculated on a fully diluted
basis, for the four (4) consecutive fiscal quarters most recently preceding
the declaration of the dividend or distribution and (ii) two percent (2%) of
the Market Price of the Common Stock as of the date of the declaration of the
dividend), then in each such case the Conversion Price shall be adjusted so
that after such record date, the Conversion Price shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on such record date by a fraction of which the numerator
shall be the Market Price per share of Common Stock on such record date less
the fair market value (as determined in good faith by the Board) of the
portion of the capital stock, rights, options, warrants, evidences of
indebtedness, assets or cash so distributed with respect to each share of
Common Stock and the denominator of which shall be the Market Price per share
of Common Stock on such record date. Such adjustment shall be made whenever
any Extraordinary Dividend is made, and shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such Extraordinary Dividend.
g. Issuance of Additional Shares of Common Stock. If the
Corporation shall issue any Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to paragraph
(h) below) after the Original Issue Date (other than as provided in the
foregoing subsections (b) through (f)), for no consideration or for a
consideration per share less than the greater of (x) the Conversion Price in
effect on the date of and immediately prior to such issue, and (y) the Market
Price
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in effect on the date of and immediately prior to such issue, then in such
event, the Conversion Price shall be reduced, concurrently with such issue, to
a price equal to the quotient obtained by dividing:
(A) an amount equal to (x) the total number of shares of
Common Stock outstanding immediately prior to such issuance or sale
multiplied by the greater of (i) the Conversion Price, and (ii) the
Market Price, in each case in effect immediately prior to such
issuance or sale, plus (y) the aggregate consideration received or
deemed to be received by the Corporation upon such issuance or sale,
by
(B) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
h. Deemed Issue of Additional Shares of Common Stock. If the
Corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a record date
for the determination of holders of any class of securities then entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) of Common
Stock issuable upon the exercise of such Options, or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of
such Convertible Securities, shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue of Options or Convertible Securities
or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(i) no further adjustments in the Conversion Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such
Options or the issue of Common Stock upon the conversion or
exchange of such Convertible Securities;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for
any increase or decrease in the consideration payable to the
Corporation, or increase or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the
original issuance of such Options or Convertible Securities (or
upon the occurrence of a record date with respect thereto), and
any subsequent adjustments based thereon, upon any such
increase or decrease becoming effective, shall be recomputed to
reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such
adjustment of the Conversion Price shall affect Common Stock
previously issued upon conversion of the Series F Stock);
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Conversion
Price computed upon the original issue of such Options or
Convertible Securities (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
(A) in the case of Options or Convertible
Securities, the only Additional Shares of Common Stock
issued were the shares of Common Stock, if any, actually
issued upon the exercise of such Options or the conversion
or exchange of such Convertible Securities and the
consideration received therefor was the consideration
actually received by the Corporation (x) for the issue of
all such Options, whether or not exercised, plus the
consideration actually received by the Corporation upon
exercise of the Options or (y) for
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the issue of all such Convertible Securities which were
actually converted or exchanged plus the additional
consideration, if any, actually received by the
Corporation upon the conversion or exchange of the
Convertible Securities; and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued at
the time of issue of such Options, and the consideration
received by the Corporation for the Additional Shares of
Common Stock deemed to have been then issued was the
consideration actually received by the Corporation for the
issue of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the
Corporation upon the issue of the Convertible Securities
with respect to which such Options were actually
exercised.
(iv) No readjustment pursuant to clause (ii) or (iii)
above shall have the effect of increasing the Conversion Price
to an amount which exceeds the lower of (x) the Conversion
Price on the original adjustment date or (y) the Conversion
Price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date and
such readjustment date.
(v) In the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the
expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause
(iii) above.
i. Determination of Consideration. For purposes of this Section 7,
the consideration received by the Corporation for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the aggregate amount
of cash received by the Corporation; and
(B) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of the issue, as
determined in good faith by the vote of a majority of the Board
or if the Board cannot reach such agreement, by a qualified
independent public accounting firm, other than the accounting
firm then engaged as the Corporation's independent auditors.
(ii) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to paragraph (h)
above, relating to Options and Convertible Securities shall be
determined by dividing:
(A) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein designed to protect against dilution) payable to the
Corporation upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, or in the case of
Options for Convertible
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<PAGE>
Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities, by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to
any provision contained therein designed to protect against
dilution) issuable upon the exercise of such Options or
conversion or exchange of such Convertible Securities.
j. Other Provisions Applicable to Adjustment Under this Section. The
following provisions will be applicable to the adjustments in Conversion Price
as provided in this Section 7:
(i) Treasury Shares. The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then directly
or indirectly owned or held by or for the account of the
Corporation.
(ii) Other Action Affecting Common Stock. If the Corporation shall
take any action affecting the outstanding number of shares of Common
Stock other than an action described in any of the foregoing
subsections 7(b) to 7(h) hereof, inclusive, which would have an
inequitable effect on the holders of Series F Stock, then the
Conversion Price shall be adjusted in such manner and at such time
as the Board on the advice of the Corporation's independent public
accountants may in good faith determine to be equitable in the
circumstances.
(iii) Minimum Adjustment. No adjustment of the Conversion Price
shall be made if the amount of any such adjustment would be an
amount less than one percent (1%) of the Conversion Price then in
effect, but any such amount shall be carried forward and an
adjustment in respect thereof shall be made at the time of and
together with any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall
aggregate an increase or decrease of one percent (1%) or more.
(iv) Certain Adjustments. The Conversion Price shall not be
adjusted upward except in the event of a combination of the
outstanding shares of Common Stock into a smaller number of shares
of Common Stock or in the event of a readjustment of the Conversion
Price pursuant to Section 7(h)(ii) or (iii).
k. Dilution Event. Each of Section 7(b), (c), (d), (e), (f) and (g)
are herein referred to as a "Dilution Event." Notwithstanding the foregoing
sentence, any exercise of any Options or Convertible Securities that are (x)
outstanding as of the Original Issue Date and (y) disclosed in Schedule 5.6 to
the Securities Purchase Agreement (as defined in the Note Indenture) shall not
be deemed a Dilution Event.
l. Notices of Adjustments. Whenever the Conversion Price is adjusted
as herein provided, an officer of the Corporation shall compute the adjusted
Conversion Price in accordance with the foregoing provisions and shall prepare
a written certificate setting forth such adjusted Conversion Price and showing
in detail the facts upon which such adjustment is based, and such written
instrument shall promptly be delivered to the recordholders of the Series F
Stock.
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8. Redemption.
a. Redemption by the Corporation. The Corporation shall have no
rights to redeem the Series F Stock or to cause the sale by the holders of
such Series F Stock prior to the third anniversary of the Original Issue Date
and other than as specifically provided herein. If (x) after the third and
prior to the fifth anniversary of the Original Issue Date, the average of the
Market Prices for the Common Stock for 20 consecutive trading days (the first
day of which was after the third anniversary of the Original Issue Date) is at
least $10.00, or (y) after the fifth anniversary of the Original Issue Date,
the average of the Market Prices for the Common Stock for 20 consecutive
trading days (the first day of which was after the fifth anniversary of the
Original Issue Date) is at least $10.9375, the Series F Stock may be redeemed
in whole, but not in part, at a price per share equal to 100% of the Series F
Stock Issue Price plus all accrued and unpaid dividends to the date of
redemption (such date being referred to herein as the "Redemption Date");
provided, however, that the Corporation may only effect a redemption of the
Series F Stock pursuant to this Section 8 if at, and immediately subsequent
to, the Redemption Date, the Common Stock into which the Series F Stock is
convertible could be offered and sold by the holders thereof without
compliance with the registration requirements of Section 5 of the Securities
Act or if the offer and sale of the Common Stock into which the Series F Stock
is convertible is covered by a registration statement which has been filed
with and declared effective by the Securities and Exchange Commission, and
which remains effective through the Redemption Date, and in each case without
being subject to any other legal or contractual restriction on
transferability, including without limitation, limitations under paragraph
(e)(i) of Rule 144 promulgated under the Securities Act. At any time after the
eighth anniversary of the Original Issue Date, the Corporation may redeem the
Series F Stock in whole, but not in part, at a price per share equal to 100%
of the Series F Stock Issue Price, plus all accrued and unpaid dividends to
the Redemption Date, provided that the conditions set forth in the proviso to
the previous sentence are satisfied.
b. Redemption Upon the Occurrence of an Event of Default. Upon the
occurrence of any Series F Stock Event of Default, other than a Bankruptcy
Event of Default (as defined below), (x) the Initial Purchaser or Initial
Purchasers (as defined in the Securities Purchase Agreement) holding at least
30% of the outstanding shares of Series F Stock, or (y) in the event that each
of the Initial Purchasers, other than GarMark Partners, L.P. (collectively
"GarMark"), shall own less than 100% of the Series F Stock owned by such
Initial Purchaser on the Original Issue Date, then the holder or holders of at
least 35% of the outstanding shares of Series F Stock, shall have the right to
require (by written notice delivered to the Corporation (the "Holders'
Redemption Demand") within 60 days after such holder or holders' receipt of
the Event of Default Notice (as defined below)) the Corporation to redeem no
later than 30 days after the Corporation's receipt of the Holders' Redemption
Demand all or any portion of the Series F Stock owned by such holder or
holders at a price per share equal to 102% of the Series F Stock Issue Price,
plus all accrued and unpaid dividends on the shares of Series F Stock to be so
redeemed to the Redemption Date. The Corporation will give written notice of
such election to the other holders of Series F Stock, which notice shall (i)
state the Redemption Date, which date should be not later than 30 days after
the date of the Holders' Redemption Demand, and (ii) be given at least 10 days
prior to such Redemption Date. Upon the giving of such notice, each holder of
the Series F Stock may demand redemption of all or any portion of such
holder's Series F Stock by mailing written notice thereof to the Corporation
prior to the Redemption Date. The Corporation will redeem all shares of Series
F Stock as to which rights under this paragraph have been exercised within 30
days after the date of the Holders' Redemption Demand. Each holder of Series F
Stock shall also have any other rights that such holder may have been afforded
under any contract or agreement at any time and any other rights that such
holder may have under any law.
c. Redemption on Bankruptcy Event of Default or Change in Control.
Upon the occurrence of any Bankruptcy Event of Default or in the event of a
Change of Control (as defined below), any holder of Series F Stock shall have
the right to require (by delivery of a Holders' Redemption Demand) the
Corporation
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<PAGE>
to redeem within 60 days after such holder or holders' receipt of the Event of
Default Notice or Change of Control Notice (as defined below), as the case may
be, all or any portion of the Series F Stock owned by such holder at a price
per share equal to 102% of the Series F Stock Issue Price plus an amount equal
to all accrued and unpaid dividends on the shares of Series F Stock to be so
redeemed to the Redemption Date. The Corporation will redeem all shares of
Series F Stock as to which rights under this paragraph have been exercised
within 30 days after the date of the Holders' Redemption Demand. Each holder
of Series F Stock shall also have any other rights that such holder may have
been afforded under any contract or agreement at any time and any other rights
that such holder may have under any law.
As used herein, a "Change of Control" means a change of control of
the Corporation of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Exchange Act, whether or not the Corporation is then subject to such
reporting requirement; provided, that, without limitation, such a Change
of Control shall be deemed to have occurred if:
(i) any "person" (as defined in Sections 13(d) and 14(d) of the
Exchange Act) or "group" (as defined in Section 13(d) of the
Exchange Act) other than Permitted Holders (as defined in the Note
Indenture) is or becomes the "beneficial owner" (as defined in Rule
13(d)(3) of the Exchange Act), directly or indirectly, of securities
of the Corporation representing thirty percent (30%) or more of the
combined voting power of the Corporation's then outstanding
securities; provided, however, that no Change of Control shall be
deemed to have occurred if prior to the acquisition of such thirty
percent (30%) of the combined voting power of the Corporation's then
outstanding securities, a majority of the Continuing Directors (as
defined below) approves such acquisition; or
(ii) if there shall cease to be a majority of the Board comprised
of Continuing Directors; or
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least
eighty percent (80%) of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) if any recapitalization event occurs as a result of which the
holders of voting securities of the Corporation outstanding
immediately prior thereto do not continue to hold at least eighty
percent (80%) of the combined voting power of the voting securities
of the Corporation immediately after such recapitalization event; or
(v) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets; or
(vi) a majority of the "named executive officers" set forth in the
Corporation's most recent Proxy Statement or Annual Report on Form
10-K or Form 10-KSB, as the case may be (excluding Edward E.
Furash), cease to occupy such positions within a period of 365
consecutive days.
Page 73 of 102 Pages
<PAGE>
As used herein, "Continuing Directors" means individuals who
constitute the Board as of the Original Issue Date and any new
director(s) whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election
was previously so approved.
d. Option to Convert in Lieu of Redemption. Notwithstanding anything
to the contrary contained herein, any holder of shares of Series F Stock that
does not want the Corporation to redeem the shares of Series F Stock called by
the Corporation for redemption shall have the prior right to convert all or
any portion of its shares of Series F Stock into Common Stock at the
then-applicable Conversion Price.
e. Redemption Procedure. On or prior to the Redemption Date, the
Corporation shall deposit the Series F Stock Issue Price plus an amount equal
to all accrued and unpaid dividends on all outstanding shares of Series F
Stock to be so redeemed to the Redemption Date (the "Redemption Price") with a
bank or trust corporation having aggregate capital and surplus in excess of
$500,000,000 as a trust fund for the benefit of the holders of the shares of
Series F Stock, with irrevocable instructions and authority to the bank or
trust corporation to pay the Redemption Price for such shares to their
respective holders on or after the Redemption Date upon receipt of the
certificate or certificates of the shares of Series F Stock to be redeemed.
From and after the Redemption Date, unless there shall have been a default in
payment of the Redemption Price, all rights of the holders of shares of Series
F Stock as holders of Series F Stock (except the right to receive the
Redemption Price upon surrender of their certificate or certificates) shall
cease as to those shares of Series F Stock redeemed, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If on the Redemption Date the funds of
the Corporation legally available for redemption of shares of Series F Stock
are insufficient to redeem the total number of shares of Series F Stock to be
redeemed on such date, then the Corporation will use those funds which are
legally available therefor to redeem the maximum possible number of shares of
Series F Stock ratably among the holders of such shares to be redeemed based
upon their holdings of Series F Stock. Payments shall first be applied against
accrued and unpaid dividends and thereafter against the remainder of the
Redemption Price. The shares of Series F Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein. At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of shares of Series F Stock such funds will
immediately be used to redeem the balance of the shares of Series F Stock to
be redeemed. No dividends or other distributions shall be declared or paid on,
nor shall the Corporation redeem, purchase or acquire any shares of, the
Common Stock or any other class or series of stock of the Corporation unless
the Redemption Price of all shares elected to be redeemed shall have been paid
in full. Until the Redemption Price for a share of Series F Stock elected to
be redeemed shall have been paid in full, such share of Series F Stock shall
remain outstanding for all purposes and entitle the holder thereof to all the
rights and privileges provided herein, including, without limitation, that
dividends and interest thereon shall continue to accrue and, if unpaid prior
to the date such shares are redeemed, shall be included as part of the
Redemption Price as provided in this Section 8(e).
f. Events of Default. A "Series F Stock Event of Default" occurs if:
(i) the Corporation has breached any material covenant, obligation
or agreement set forth in this Certificate, the Securities Purchase
Agreement (as defined in the Note Indenture), the Registration
Rights Agreement (as defined in the Note Indenture) or any other
agreement executed in connection with the Financing (as defined in
the Note Indenture) and such breach continues for a period of thirty
(30) days; or
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(ii) the Corporation defaults in the payment of any dividend on
the Series F Stock as and when due and payable, and such default
continues for a period of fifteen (15) days; or
(iii) the Corporation defaults in making any redemption payment
that it is obligated to make hereunder; whether or not such payment
is legally permissible or conflicts with any other agreement to
which the Corporation or any of its Subsidiaries (as defined in the
Note Indenture) is a party or by which any of its or their
respective assets are bound; or
(iv) any representation or warranty contained in the Securities
Purchase Agreement, the Registration Rights Agreement or any other
agreement executed in connection with the Financing, or any writing
furnished by the Corporation or any of its Subsidiaries to any
holder of the Series F Stock, contains any untrue statement of a
material fact or omits to state a material fact necessary in order
to make the statements made, in the light of the circumstances under
which they were made, not misleading; or
(v) an Event of Default (as defined in the Credit Agreement) under
the Credit Agreement (as defined in the Note Indenture) has occurred
and is continuing; or
(vi) an Event of Default (as defined in the Note Indenture) under
the Note Indenture has occurred and is continuing; or
(vii) the Corporation or any of its Subsidiaries has breached any
material contract to which it or any of its Subsidiaries is a party,
or by which any of its or their respective assets are bound, except
a breach that would not have a material adverse effect on the
business, operations, prospects, assets or condition (financial or
otherwise) on the Corporation or any of its Material Subsidiaries
(as defined below); or
(viii) any judgments, orders or decrees for the payment of money
in excess of $2,500,000, either individually or in an aggregate
amount, shall be entered against the Corporation or any of its
Subsidiaries or any of their respective properties and shall not be
discharged and there shall have been a period of thirty (30) days
during which a stay of enforcement of such judgment or order, by
reason of pending appeal or otherwise, shall not be in effect; or
(ix) the Corporation or any of its Subsidiaries which would be a
"significant subsidiary" pursuant to Article 1-02 of Regulation S-X
("Material Subsidiary") pursuant to or within the meaning of any law
under Title 11 of the U.S. Code or any similar Federal, state or
foreign law for the relief of debtors ("Bankruptcy Law"):
(A) commences a voluntary case or proceeding with respect to
itself,
(B) consents to the entry of an order for relief against it
in an involuntary case or proceeding,
(C) consents to the appointment of a receiver, trustee,
assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law ("Custodian") of it or for all or any
material part of its property,
(D) makes a general assignment for the benefit of its
creditors,
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(E) consents to or acquiesces in the institution of
bankruptcy or insolvency proceedings against it,
(F) shall generally not pay its debts when such debts become
due or shall admit in writing its inability to pay its debts
generally, or
(G) takes any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing;
or
(x) a court of competent jurisdiction enters a decree, judgment or
order under any Bankruptcy Law that:
(A) is for relief against the Corporation or any Material
Subsidiary of the Corporation in an involuntary case or
proceeding,
(B) appoints a Custodian of the Corporation or any Material
Subsidiary of the Corporation for all or substantially all of
its properties, or
(C) orders the winding-up or liquidation of the Corporation
or any Material Subsidiary of the Corporation, and in each case
the order or decree remains unstayed and in effect for sixty
(60) days.
Each of the foregoing events in clause (ix) and (x) are referred to
herein as a "Bankruptcy Event of Default."
If an Event of Default occurs and is continuing, in addition to
any other notices required pursuant to this Certificate or the Financing
Documents (as defined in the Note Indenture), the Corporation must,
within ten (10) days after the occurrence of such Event of Default, give
to the holders of the Series F Stock notice of such Event of Default,
including a reasonably detailed description of the events causing such
Event of Default, and the actions proposed to be taken by the
Corporation in response thereto (an "Event of Default Notice").
9. Notices of Record Dates and Effective Dates. In case: (a) the
Corporation shall declare a dividend (or any other distribution) on the Common
Stock payable otherwise than in shares of Common Stock; or (b) the Corporation
shall authorize the granting to the holders of Common Stock of rights to
subscribe for or purchase any shares of capital stock of any class or any
other rights; or (c) of any reorganization, share exchange or reclassification
of the capital stock of the Corporation (other than a subdivision or
combination of outstanding shares of Common Stock), or of any consolidation or
merger to which the Corporation is party or of the sale, lease or exchange of
all or substantially all of the property of the Corporation; or (d) of the
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation; then the Corporation shall cause to be mailed to the
recordholders of the Series F Stock at least 20 days prior to the applicable
record date or effective date hereinafter specified, a notice stating (i) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights, or, if a record is not to be taken, the date as of
which the holders of record of Common Stock to be entitled to such dividend,
distribution or rights are to be determined or (ii) the date on which such
reclassification, reorganization, share exchange, consolidation, merger, sale,
lease, exchange, dissolution, liquidation or winding up is expected to become
effective or be consummated, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such
reclassification, reorganization share exchange, consolidation, liquidation,
merger, sale, lease, exchange, dissolution, liquidation or winding up.
page 76 of 102 Pages
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10. Preemptive Rights.
a. For so long as any shares of Series F Stock are outstanding, prior
to seeking financing in one or a series of related transactions that would
aggregate more than $1,000,000 in any consecutive twelve month period from any
Person (as defined below) consisting of any issuance by the Corporation or any
Affiliate (as defined below) thereof of any shares of Common Stock or
Preferred Stock, including securities convertible into, or exercisable or
exchangeable for, any shares of Common Stock or Preferred Stock (other than
(i) to fund the lesser of $2,000,000 or 20% of the consideration payable in
connection with a Permitted Acquisition (as defined in the Note Indenture)
provided, however, that the per share price paid in connection with such
Permitted Acquisition is at least equal to the greater of (x) the Market Price
of the Common Stock on the Business Day immediately preceding the day on which
the Permitted Acquisition is consummated, and (y) the Maximum Conversion Price
(a "Permitted Acquisition Equity Financing"), (ii) which is made pursuant to
an underwritten public offering pursuant to a registration statement declared
effective by the Securities and Exchange Commission, (iii) upon the exercise
of the Management Options or (iv) upon the exercise, in accordance with the
currently existing terms thereof, of the Corporation's Options as set forth on
Schedule 5.6 to the Securities Purchase Agreement) (the "Equity Financing,"
and the securities to be issued in connection therewith, the "Equity
Securities"), the Corporation shall first give to each holder of Series F
Stock the opportunity (such opportunity being herein referred to as the
"Preemptive Right") to purchase (on the same terms as such Equity Securities
are proposed to be sold) the same proportion of such Equity Securities
proposed to be sold by the Corporation as equals such holder's percentage of
the outstanding Series F Stock held by such holder on the day preceding the
date of the Preemptive Notice (as defined herein). Notwithstanding any
provision hereof, on the date, if any, that the Initial Purchasers
beneficially own, in the aggregate, less than 30% of the Series F Stock, the
Corporation's obligations set forth in this Section 10 shall cease and be of
no further effect.
b. At least thirty (30) days prior to the issuance by the
Corporation of any Equity Securities, the Corporation shall give written
notice thereof (the "Preemptive Notice") to each holder of Series F Stock. The
Preemptive Notice shall specify (i) the name and address of the bona fide
investor to whom the Corporation proposes to issue or sell Equity Securities,
(ii) the total amount of capital to be raised by the Corporation pursuant to
the issuance or sale of Equity Securities, (iii) the number of such Equity
Securities proposed to be issued or sold, (iv) the price and other terms of
their proposed issuance or sale, (v) the number of such Equity Securities
which such holder is entitled to purchase (determined as provided in
subsection (a) above), and (vi) the period during which such holder may elect
to purchase such Equity Securities, which period shall extend for at least
thirty (30) days following the receipt by such holder of the Preemptive Notice
(the "Preemptive Acceptance Period"). Each holder of Series F Stock who
desires to purchase Equity Securities shall notify the Corporation within the
Preemptive Acceptance Period of the number of Equity Securities he wishes to
purchase, as well as the number, if any, of additional Equity Securities he
would be willing to purchase in the event that all of the Equity Securities
subject to the Preemptive Right are not subscribed for by the other holders of
Series F Stock.
c. During the Preemptive Acceptance Period, except as required by
law, the Corporation and each holder of Series F Stock shall not discuss the
proposed Equity Financing with any other person, other than officers,
directors and employees of the Corporation.
d. In the event a holder of Series F Stock declines to subscribe for
all or any part of its pro rata portion of any Equity Securities which are
subject to the Preemptive Right (the "Declining Preemptive Purchaser") during
the Preemptive Acceptance Period, then the other holders of Series F Stock
shall have the right to subscribe for all (or any declined part) of the
Declining Preemptive Purchaser's pro rata portion of such Equity Securities
(to be divided among the other holders of Series F Stock desiring to exercise
such right on a ratable basis).
page 77 of 102 pages
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e. After the conclusion of the Preemptive Acceptance Period, any
Equity Securities which none of the holders elect to purchase in accordance
with the provisions of this Section 10, may be sold by the Corporation, within
a period of four (4) months after the expiration of the Preemptive Acceptance
Period, to any other person or persons at not less than the price and upon
other terms and conditions not less favorable to the Corporation than those
set forth in the Preemptive Notice.
"Affiliate" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or any other entity or organization including a government or political
subdivision or any agency or instrumentality thereof ("Person") (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control, with such Person; or (ii) which
beneficially owns or holds ten percent (10%) or more of the voting power (or
in the case of a Person which is not a corporation, 10% or more of the equity
or other ownership interest) of such Person; or (iii) ten percent (10%) or
more of the voting power (or in the case of a Person which is not a
corporation, ten percent (10%) or more of the equity or other ownership
interest) of which is beneficially owned or held by such Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting power by contract or otherwise.
11. Voting Rights.
a. General. Except as otherwise expressly provided herein or as
provided by any applicable law, the Series F Stock shall be non-voting. In
addition to the rights otherwise provided for herein or by law, so long as any
shares of Series F Stock are outstanding, the Corporation will not, and it
will cause its Subsidiaries not to, without the affirmative vote, or the
written consent pursuant to Section 228 of the Delaware General Corporation
Law, of (x) (1) the Initial Purchasers holding at least (A) 70% of the
outstanding Series F Stock (or such greater number as may be required by law)
or (B) two thirds of the outstanding Series F Stock (or such greater number as
may be required by law) on and after the date upon which Moore Global
Investments, Ltd. and Remington Investment Strategies, L.P. and any of their
Affiliates (collectively "Moore"), own less than 100% of the shares of Series
F Stock acquired by them on the Original Issue Date, or (2) in the event that
each of the Initial Purchasers, other than GarMark, shall own less than 50% of
the Series F Stock owned by such Initial Purchaser on the Original Issue Date,
then the holders of at least a majority (or such greater number as may be
required by law) of the Series F Stock, voting separately as a class; and (y)
so long as Moore, shall own 100% of the shares of Series F Stock acquired by
them on the Original Issue Date, the approval of Moore with respect to the
items enumerated in clauses (i), (iv), (v), (vi), (viii), (ix), (x), (xiv),
(xv), (xvi) and (xviii) below, such approval not to be unreasonably withheld:
(i) grant or issue any Options, other than the Management Options
or Convertible Securities, to any officers, directors, employees or
consultants of the Corporation or any of its Affiliates;
(ii) incur Indebtedness (as defined in the Note Indenture) in
excess of the amounts permitted to be incurred pursuant to the Note
Indenture;
(iii) retire, redeem, purchase or acquire any Junior Securities or
any interest therein;
(iv) effect or permit to occur any Change of Control enumerated in
clauses (i), (iii), (iv), (v) or (vi), or facilitate any Change of
Control enumerated in clause (ii), of the definition of Change of Control
contained herein;
Page 78 of 102 Pages
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(v) effect any material change in the nature of the business
conducted as of the Original Issue Date by the Corporation or any of its
Subsidiaries;
(vi) enter into any Affiliate Transaction (as defined in the Note
Indenture);
(vii) effect, or agree to effect, any acquisitions the purchase
price for which (or any portion thereof) consists of equity securities of
the Corporation or Convertible Securities in an amount in excess of the
amount of Permitted Acquisition Equity Financing;
(viii) amend, waive or repeal any provisions of, or add any
provision to, (x) this Certificate or (y) any provision of the
Corporation's Certificate of Incorporation or any other certificate of
designation filed with the Secretary of State of Delaware by the
Corporation with respect to its preferred stock;
(ix) increase the authorized number of shares of Series F Stock or
reclassify the shares of Series F Stock;
(x) amend, waive or repeal any provisions of, or add any
provision to, the Corporation's By-laws (the "By-laws") in any manner
that would have an adverse effect on the holders of the Series F Stock,
notwithstanding, without limitation, the provisions of Article IV,
Section 3 of the By-Laws as such provision pertains to Moore;
(xi) sell, convey, transfer, assign or otherwise dispose of any
Subsidiary of the Corporation or any division, operating unit or other
business unit that, on a pro forma basis, constitutes more than 20% of
the pro forma Consolidated EBITDA (as defined in the Note Indenture) of
the Corporation;
(xii) sell any Common Stock (other than as permitted pursuant to
the terms of Section 10(a)) at a cash purchase price below the greater of
(x) $8.50, and (y) the Market Price on the date of such sale;
(xiii) enter, or permit any of its Subsidiaries to enter, into any
agreement, contract, binding commitment or other arrangement providing
for any Permitted Acquisition in which the aggregate consideration,
including the estimated amounts, as determined in good faith by the Board
of Directors of the Company, of any contingent consideration payable by
the Company in connection with such Permitted Acquisition is, or may be,
greater than $7,500,000;
(xiv) sell any Common Stock or other Convertible Securities in
connection with a Permitted Acquisition in an amount in excess of, or on
terms other than, a Permitted Acquisition Equity Financing;
(xv) enter into any agreement, indenture or other instrument which
contains any provisions restricting the Corporation's obligation to pay
dividends on, make liquidation payments in respect of, or make
redemptions of the Series F Stock in accordance herewith;
(xvi) dissolve the Corporation;
(xvii) terminate or change the Corporation's independent auditors;
Page 79 of 102 Pages
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(xviii) (x) commence any material action, suit or proceeding, or
(y) settle, compromise or waive any material right with respect to or
release any part of, any material action, suit, proceeding, investigation
or claim;
(xix) replace, renew, refinance, extend, prepay, redeem, defease
or otherwise retire any material Indebtedness (as defined in the Note
Indenture) other than as permitted pursuant to the Note Indenture;
(xx) incur, or suffer to exist, any Lien, other than Permitted
Liens (as defined in the Note Indenture), with respect to any material
Property (as defined in the Note Indenture); or
(xxi) increase, decrease or otherwise amend the size, or
requirements for election or appointment to or service on, the Board of
Directors (other than as provided herein).
b. Appointment of Board of Director Observers. On the Original Issue
Date, (i) GarMark shall have the right to designate one (1) voting Board
member, and each of GarMark and Moore shall have the right to designate one
(1) non-voting Board observer, each of whom will be given notice of, and
permitted to attend, all meetings of the Board, and (ii) GarMark shall have
the right to designate one (1) voting committee member, and each of GarMark
and Moore shall have the right to designate one (1) non-voting committee
observer, to each of the Corporation's Compensation Committee, Stock Incentive
Plan Committee, Finance Committee, Audit Committee, and any other committee
that is created or established after the date hereof, each of whom will be
given notice of, and permitted to attend, all meetings of each such committee.
On the Original Issue Date, the Corporation acting through its Board and in
accordance with its Charter Documents (as defined in the Securities Purchase
Agreement) and applicable Law (as defined in the Securities Purchase
Agreement), shall (i) (A) increase the size of its Board by one (1), (B) elect
the person referred to hereinabove (or such other person as may be selected by
GarMark) to the newly created directorship to hold office until his successor
is elected at a special or annual meeting of the stockholders, and (C) in
connection with any such subsequent election of directors, nominate, recommend
and do all other acts and things to cause (including, without limitation,
voting all shares for which the Corporation's management or Board holds
proxies (including undesignated proxies) unless otherwise provided by the
stockholders submitting such proxies) the person referenced in the preceding
clause (B) to be elected to the Board, and (ii) increase the size of each of
the Compensation Committee, Stock Incentive Plan Committee, Finance Committee,
Audit Committee, and if any other committee is created or established after
the date hereof, of such committee, by one (1), and cause the person referred
to hereinabove (or such other person as may be selected by GarMark) to become
a member thereof. In the event any director, or member of a committee, elected
pursuant to this Section 11(b) shall cease to serve as a director or member,
as applicable, for any reason, the Corporation shall cause (subject to the
provisions of its Charter Documents and applicable Law) the vacancy resulting
thereby to be filled as promptly as practicable by a person selected by
GarMark. Notwithstanding any provision hereof, on the date, if any, that any
Initial Purchaser entitled to exercise the rights provided in this Section
11(b) beneficially owns less than 25% of the Common Stock that would be
issuable to such Initial Purchaser upon its conversion of the Series F Stock
acquired on the Original Issue Date (assuming that the shares of Series F
Stock would be converted at a conversion price of $6.00 per share, subject to
the adjustments provided herein with respect to conversion price and the
number of shares issuable upon conversion), the Corporation's obligations set
forth in this Section 11(b) with respect to such Initial Purchaser shall cease
and be of no further effect.
Page 80 of 102 Pages
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c. Election of Board of Directors.
(i) If at any time or times any dividend payable on the Series F
Stock shall be in arrears and unpaid for four (4) consecutive quarterly
periods (each a "Dividend Payment Default") or if the Corporation shall
have failed to discharge any obligation pursuant to a request for
redemption pursuant to Section 8(b) (the "Redemption Obligation") (each
of the foregoing a "Triggering Event"), then the number of directors
constituting the Board, without further action, shall be increased by
such number (rounded up to the nearest whole number) as is necessary such
that subsequent to such occurrence the number of directors nominated and
elected by the holders of the Series F Stock, as set forth herein, is at
least one third of the entire Board and the holders of the Series F Stock
shall have the exclusive right, voting separately as a class, to nominate
and elect the directors (the "New Directors") of the Corporation to fill
such newly created directorships (which New Directors shall be
apportioned among Class 1, Class 2 and Class 3 in accordance with Article
V of the Certificate of Incorporation and Section 3 of the By-laws and in
a manner that provides the New Directors with the longest tenure of the
Board), the remaining directors to be elected by the other class or
classes of stock entitled to vote therefor, at each meeting of
stockholders held for the purpose of electing directors;
(ii) Whenever such voting right shall have vested, such right may
be exercised at a special meeting of the holders of the Series F Stock
called as hereinafter provided, at any annual meeting of stockholders
held for the purpose of electing directors or by the written consent of
the holders of Series F Stock pursuant to Section 228 of the Delaware
General Corporation Law. Such voting right shall continue until such time
as all cumulative dividends accumulated on the Series F Stock shall have
been paid in full or the Corporation shall have fulfilled its Redemption
Obligation, as the case may be, at which time such voting right of the
holders of Series F Stock shall terminate, but such voting right shall
again vest in the event of each and every subsequent failure of the
Corporation to pay dividends for the requisite number of periods or to
discharge any Redemption Obligation as described above.
(iii) At any time when such voting right shall have vested in the
holders of Series F Stock and if such right shall not already have been
initially exercised, a proper officer of the Corporation shall, upon the
written request of any holder of record of Series F Stock then
outstanding, call a special meeting of holders of Series F Stock. Such
meeting shall be held at the earliest practicable date upon the notice
required for annual meetings of stockholders. If such meeting shall not
be called within 30 days after such written request, then the holders of
record of 10% of the shares of Series F Stock then outstanding may
designate in writing a holder of Series F Stock to call such meeting at
the expense of the Corporation, and such meeting may be called by such
person so designated upon the notice required for annual meetings of
stockholders. Any holder of Series F Stock which would be entitled to
vote at such meeting shall have access to the stock books of the
Corporation for the purpose of causing a meeting of stockholders to be
called pursuant to the provisions of this paragraph. Notwithstanding the
provisions of this paragraph, however, no such special meeting shall be
called during a period within 90 days immediately preceding the date
fixed for the next annual meeting of stockholders.
(iv) At any meeting at which the holders of Series F Stock shall
have the right to elect New Directors as provided herein, the presence in
person or by proxy of the holders of at least a majority of the then
outstanding shares of Series F Stock shall be required and be sufficient
to constitute a quorum. At any such meeting or adjournment thereof, the
absence of a quorum of the holders of Series F Stock shall not prevent
the election of directors other than the New
Page 81 of 102 Pages
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Directors and the absence of a quorum or quorums of the holders of
capital stock entitled to elect such other directors shall not prevent
the election of any New Directors.
(v) For so long as the aforesaid voting rights are vested in the
holders of Series F Stock, the term of office of the New Directors shall
terminate upon the election of their successors by the holders of Series
F Stock. Upon any termination of the aforesaid voting rights in
accordance with Section 11(c)(ii), the term of office of all New
Directors shall thereupon terminate and upon such termination the number
of directors constituting the Board shall, without further action, be
reduced by the number of such New Directors.
(vi) In the case of any vacancy occurring among the New Directors,
the New Directors who shall have been so elected (even if there is a sole
remaining New Director) may appoint a successor to hold office until his
successor is elected at an annual or a special meeting of the
stockholders. If all New Directors shall cease to serve as directors
before their terms shall expire, the holders of Series F Stock then
outstanding may elect successors to hold office until each of their
successors are elected at an annual or a special meeting of the
stockholders.
(vii) For the duration of any Triggering Event, (x) Moore or any
of its Affiliates, shall have the right to designate one (1) Series F
Nominee (as defined below) and (y) GarMark shall have the right to
designate the remaining Series F Nominee(s) to be elected by the holders
of the Series F Stock; provided that in the event that Moore shall own
less than 100% of the Series F Stock owned by it on the Original Issue
Date, then the holders of at least a majority of the Series F Stock shall
have the right to designate all of the Corporation's New Director
nominees for election to the Board. The nominees so designated are herein
referred to as the "Series F Nominees." In furtherance of the foregoing,
the Corporation, acting through its Board and in accordance with its
Certificate of Incorporation, By-laws and applicable law, shall recommend
in the proxy statement for each annual or special meeting of stockholders
at which any New Director shall be elected, and shall recommend at each
such stockholders' meeting, as part of the management or Board slate for
election to the Board, the Series F Nominees.
(viii) So long as any shares of Series F Stock are outstanding,
the Corporation shall take such action as may be necessary so that its
By-laws shall contain provisions ensuring that the number of directors of
the Corporation shall at all times be such that the exercise, by the
holders of the Series F Stock, of the right to elect any New Directors
will not contravene any provisions of the Certificate of Incorporation or
By-laws.
(d) Provisions with respect to Regulation Y. Notwithstanding any
other provisions to the contrary set forth in this Section 11, no Person
subject to the provisions of Regulation Y promulgated under the Bank Holding
Company Act of 1956, as amended, by the Federal Reserve Board, holding shares
of Series F Preferred Stock shall be entitled to exercise any of the rights
granted to the Series F Stock pursuant to this Section 11 if the exercise of
such right(s) would cause such Person not to be in compliance with Regulation
Y.
12. Shares to be Retired. All shares of the Series F Stock redeemed,
converted, exchanged or purchased by the Corporation shall be retired and
canceled and shall not be restored to the status of authorized but unissued
shares of Preferred Stock and may not thereafter be reissued.
13. Public Documents. For so long as the Corporation has any securities
registered under the Exchange Act, upon the filing with the Securities and
Exchange Commission of any financial statements, proxy or information
statements, notices, reports or registration statements (other than any
registration
Page 82 of 102 Pages
<PAGE>
statements relating to employee benefit or dividend reinvestment plans), or
the issuance of any press release or other public announcement (each a "Public
Document"), the Corporation shall, within five (5) business days, provide to
each holder of Series F Stock a copy of such Public Document.
14. Notice Regarding Certain Corporate Actions. If, at any time, the
Corporation decides to take certain corporate action, including, but not
limited to, any Dilution Event or Change of Control (a "Change of Control
Notice"), then the Corporation shall provide each holder of Series F Stock
with written notice of such action at least 20 days prior to the record date
for such action, and if there is no record date for such action, then such
written notice shall be provided at least 20 days prior to the effective date
of such action; provided that any holder of Series F Stock may elect not to
receive any such notices by providing the Corporation with written notice of
such election.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
19th day of March, 1998.
HEADWAY CORPORATE RESOURCES, INC.
By: /s/ Barry S. Roseman
----------------------------------
Name: Barry S. Roseman
Title: President
Page 83 of 102 Pages
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Exhibit C
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
EACH OF THE PURCHASERS REFERRED TO HEREIN
AND
HEADWAY CORPORATE RESOURCES, INC.
Dated as of March 19, 1998
Page 84 of 102 Pages
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of March 19, 1998, (the
"Agreement") by and among GarMark Partners, L.P. ("GarMark"), Moore Global
Investments, Ltd. ("MGI"), Remington Investment Strategies, L.P. ("Remington",
and together with MGI "Moore") and NationsBanc Montgomery Securities LLC
("NationsBanc," and together with GarMark and Moore, the "Buyer") and Headway
Corporate Resources, Inc., a Delaware corporation (the "Company").
WHEREAS, the Buyer and the Company have entered into a
Securities Purchase Agreement (the "Securities Purchase Agreement") dated as
of the date hereof pursuant to which each of GarMark, Moore and NationsBanc
have agreed to purchase, subject to the terms and conditions contained
therein, securities of the Company, which securities are exchangeable or
exercisable for or convertible into shares of Common Stock of the Company; and
WHEREAS, it is a condition precedent to the purchase of such
securities that the Company provide for the registration of the Common Stock
of the Company issuable on the exchange, exercise or conversion of the
purchased securities.
NOW, THEREFORE, in consideration on the foregoing premises and
for other good and valuable consideration, the adequacy and receipt of which
are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms shall have the
meanings ascribed to them below:
"Business Day" means any day other than a day on which banks
are authorized or required to be closed in the State of New York.
"Commission" means the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.
"Common Stock" means the common stock, par value $.0001 per
share, of Headway Corporate Resources, Inc., as it may exist from time to
time.
"Convertible Preferred Stock" means the Company's Series F
Convertible Preferred Stock, par value $.0001 per share.
"Demand Registration" means a Demand Registration as defined in
Section 2.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Page 85 of 102 Pages
<PAGE>
"Holder" means any person who now holds or shall hereafter
acquire and hold Registrable Securities.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or other agency or political subdivision thereof.
"Piggy-Back Registration" means a Piggy-Back Registration as
defined in Section 2.2.
"Preferred Stock Event of Default" means a Preferred Stock
Event of Default as defined in the Series F Certificate of Designations.
"Prospectus" means the prospectus included in any Registration
Statement (including without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the securities covered
by such Registration Statement, and all other amendments and supplements to
the prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
prospectus.
"Records" means the records of the Company as set forth in
Section 3.1.
"Registrable Securities" means the shares of Common Stock
issued or issuable upon conversion of the Convertible Preferred Stock, until
(i) a Registration Statement covering such shares of Common Stock has been
declared effective by the Commission and such shares of Common Stock have been
disposed of pursuant to such effective Registration Statement, or (ii) such
shares of Common Stock are sold under circumstances in which all of the
applicable conditions of Rule 144 (or any similar provisions then in force)
under the Securities Act are met, or (iii) such shares of Common Stock have
been otherwise transferred and the Company has delivered a new certificate or
other evidence of ownership for such Common Stock not bearing a restrictive
legend and not subject to any stop transfer or similar restrictive order and
all of such Common Stock may be resold by the person receiving such
certificate without complying with the registration requirements of the
Securities Act.
"Registration Statement" means any registration statement of
the Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.
"Required Holders" means (i) the Initial Holders (as defined in
the Securities Purchase Agreement) of at least (A) 70% of the Registrable
Securities or (B) two thirds of the Registrable Securities on and after the
date upon which Moore owns less than 100% of the Registrable Securities
acquired by it on the date hereof, or (ii) in the event that each of the
Initial Holders, other than GarMark, shall own less than 50% of the
Registrable Securities owned by such Initial Holder on the date hereof, then
such term shall mean the Holders of a majority of the Registrable Securities.
"Securities Act" means the Securities Act of 1933 or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Page 86 of 102 Pages
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"Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a Registration Statement under the Securities Act.
"Selling Holders Counsel" means the counsel selected to
represent the Selling Holders as set forth in Section 3.1
"Series F Certificate of Designations" means the Certificate of
Designations under which the terms, powers, designations, preferences, rights,
qualifications, restrictions and limitations of the Convertible Preferred
Stock were established.
"Target Effective Date" means the date a Registration Statement
is required to be declared effective by the Commission as set forth in Section
3.1.
"Target Effective Period" means the period a Registration
Statement is required to be effective as set forth in Section 2.1.
"Target Filing Date" means the date a Registration Statement is
required to be filed with the Commission as set forth in Section 3.1.
"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal in an underwritten offering and not as
part of such dealer's market-making activities.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1 Demand Registration.
(a) Request for Registration. At any time commencing on the 8
month anniversary of the date hereof and from time to time thereafter any
Holder or Holders may make written requests (individually, a "Request") on the
Company for the registration of the offer and sale of the Registrable
Securities under the Securities Act (such registration being hereinafter
referred to as a "Demand Registration"); provided, however, that if any
Preferred Stock Event of Default has occurred before the 8 month anniversary
of the date hereof, the Holders shall, at any time, be entitled to exercise
Requests for Demand Registrations. The Company shall not effect a Demand
Registration unless the Request is made by Holders who, alone or together with
other Holders making the Request, hold in the aggregate not less than 35% of
the outstanding Registrable Securities; provided, however, that for so long as
Moore shall own at least 50% of the Registrable Securities acquired by it on
the date hereof, Moore shall have the right to make a Request for one (1) such
Demand Registration. Subject to the penultimate sentence of Section 2.1(b),
the Company shall have no obligation to effect more than four Demand
Registrations. Any Request will specify the number of Registrable Securities
proposed to be sold and the intended method(s) of disposition thereof and
shall also state the firm intent of the Holder to offer Registrable Securities
for sale. The Company shall give written notice of such Request within 10 days
after the receipt thereof to all other Holders. Within 20 days after receipt
of such notice by any such Holder, such Holder may request in writing that all
or any portion of its Registrable Securities be included in such Registration
Statement and the Company shall include in the Registration Statement for such
Demand Registration the Registrable Securities of all Holders that requested
to be so included. Each such request by such other Holders shall specify the
number of Registrable Securities
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proposed to be sold and the intended method(s) of disposition thereof and
shall also state the firm intent of the Holder to offer Registrable Securities
for sale.
(b) Effective Registration. A registration will not be deemed
to have been effected as a Demand Registration unless the Registration
Statement relating thereto has been declared effective by the Commission and
the Company has complied in all material respects with its obligations under
this Agreement with respect thereto; provided that if, after the Registration
Statement has become effective, the offering and/or sale of Registrable
Securities pursuant to such Registration Statement is or becomes the subject
of any stop order, injunction or other order or requirement of the Commission
or any other governmental or administrative agency, or if any court or other
governmental or quasi-governmental agency prevents or otherwise limits the
offer and/or sale of the Registrable Securities pursuant to the Registration
Statement, other than in each case primarily as a result of acts or omissions
of the Holder or any agent thereof, such registration will be deemed not to
have been effected. If (i) a registration requested pursuant to this Section
2.1 is deemed not to have been effected or (ii) the Registration Statement
relating to a Demand Registration requested pursuant to this Section 2.1 does
not remain effective for a period of at least 270 consecutive days beyond the
effective date thereof or, with respect to an underwritten offering of
Registrable Securities, until 45 days after the commencement of the
distribution by the Holders of the Registrable Securities included in such
Registration Statement (such periods being referred to herein as the "Target
Effective Periods"), then the Company shall continue to be obligated to effect
such Registration pursuant to this Section 2.1. The Holders shall be permitted
to withdraw all or any part of the Registrable Securities from a Registration
Statement at any time prior to the effective date of such Demand Registration
Statement; provided that in the event of such withdrawal, such Holders shall
be responsible for the fees and expenses referred to in Section 3.3(viii)
hereof incurred by such Holders with respect to such Demand Registration prior
to such withdrawal.
(c) Selection of Underwriter. If the Required Holders
participating in a Demand Registration so elect, the offering of such
Registrable Securities pursuant to such Demand Registration shall be in the
form of an underwritten offering. The Holders making such Demand Registration
shall select, subject to the approval of the Company, which approval will not
be unreasonably withheld, one or more nationally recognized firms of
investment bankers to act as the lead managing Underwriter or Underwriters in
connection with such offering and shall select any additional investment
bankers and managers to be used in connection with the offering.
SECTION 2.2 Piggy-Back Registration. If at any time the Company
proposes to file a Registration Statement under the Securities Act with
respect to an offering by the Company for its own account or for the account
of any of its respective security holders (other than (x) a Registration
Statement on Form S-8 (or any substitute form that may be adopted by the
Commission), (y) a Registration Statement on Form S-4 (or any substitute form
that may be adopted by the Commission); provided that such Registration
Statement on Form S-4 does not include any securities other than the
securities to be issued by the Company in connection with a transaction that
is referenced in clauses (1) through (3) of the General Instructions A.1. of
Form S-4 (as such General Instructions are currently in effect), or (z) a
Registration Statement pursuant to a Demand Registration pursuant to Section
2.1), then the Company shall give written notice of such proposed filing to
the Holders as soon as practicable (but in no event less than 30 days before
the anticipated filing date), and such notice shall offer such Holders the
opportunity to register such number of Registrable Securities as each such
Holder may request (which request shall specify the Registrable Securities
intended to be disposed of by such Holder and the intended method(s) of
distribution thereof and shall also state the firm intent of the Holder to
offer Registrable Securities for sale) (a "Piggy-Back Registration"). The
Company shall use all reasonable efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back
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Registration to be included on the same terms and conditions as any similar
securities of the Company or any other security holder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. Any Holder shall
have the right to withdraw its request for inclusion of its Registrable
Securities in any Registration Statement pursuant to this Section 2.2 by
giving written notice to the Company of its request to withdraw, provided that
in the event of such withdrawal (other than pursuant to Section 2.3(c)
hereof), such Holder shall be responsible for the fees and expenses referred
to in Section 3.3(viii) hereof incurred by such Holder prior to such
withdrawal relating to such Registration Statement. The Company may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective.
No registration effected under this Section 2.2, and no failure
to effect a registration under this Section 2.2, shall relieve the Company of
its obligation to effect a registration upon the request of Holders pursuant
to Section 2.1, and no failure to effect a registration under this Section 2.2
and to complete the sale of Registrable Securities in connection therewith
shall relieve the Company of any other obligation under this Agreement
(including, without limitation, the Company's obligations under Sections 3.2
and 4.1).
SECTION 2.3 Reduction of Offering.
(a) Demand Registration. The Company may include in a Demand
Registration pursuant to Section 2.1 securities of the same class as the
Registrable Securities for the account of the Company and any other Persons
who hold securities of the same class as the Registrable Securities on the
same terms and conditions as the Registrable Securities to be included
therein; provided, however, that (i) if the managing Underwriter or
Underwriters of any underwritten offering described in Section 2.1 have
informed the Company in writing that it is their opinion that the total number
of Registrable Securities, and securities of the same class as the Registrable
Securities which Holders, the Company and any other Persons desiring to
participate in such registration intend to include in such offering is such as
to materially and adversely affect the success of such offering, then the
number of shares to be offered for the account of the Company and for the
account of all such other Persons (other than the Holders) participating in
such registration shall be reduced or limited pro rata in proportion to the
respective number of shares requested to be registered to the extent necessary
to reduce the total number of shares requested to be included in such offering
to the number of shares, if any, recommended by such managing Underwriter or
Underwriters, and (ii) if the offering is not underwritten, no other Person,
including the Company, shall be permitted to offer securities under any such
Demand Registration unless the Required Holders participating in the offering
consent to the inclusion of such shares therein.
(b) Piggy-Back Registration. Notwithstanding anything contained
herein, if the managing Underwriter or Underwriters of any underwritten
offering described in Section 2.2 have informed, in writing, the Holders
requesting inclusion in such offering that it is their opinion that the total
number of shares which the Company, Holders and any other Persons holding
securities of the same class as the Registrable Securities desiring to
participate in such registration intend to include in such offering is such as
to materially and adversely affect the success of such offering, then, the
Company will include in such registration (x) first, the shares offered by the
holders of securities who demanded such registration ("Demand Holders"), if
any, (y) then, if additional shares may be included in such registration
without materially and adversely affecting the success of such offering, all
the shares the Company offered for its own account, if any, and (z) then, if
additional shares may be included in such registration without materially and
adversely affecting the success of such offering, the number of shares offered
by the Holders and such other holders of securities of the same class as the
Registrable Securities whose piggy-back registration rights may not be reduced
without violating their contractual rights (provided such contractual rights
were in existence prior to the date of this
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Agreement), on a pro rata basis in proportion to the relative number of
Registrable Securities of the holders (including the Holders) participating in
such registration.
(ii) If the managing Underwriter or Underwriters of any
underwritten offering described in Section 2.2 notify the Holders requesting
inclusion in such offering that the kind of securities that the Holders, the
Company and any other Persons desiring to participate in such registration
intend to include in such offering is such as to materially and adversely
affect the success of such offering, (x) the Registrable Securities to be
included in such offering shall be reduced as described in clause (i) above or
(y) if such reduction would, in the judgment of the managing Underwriter or
Underwriters, be insufficient to substantially eliminate the adverse effect
that inclusion of the Registrable Securities requested to be included would
have on such offering, such Registrable Securities will be excluded from such
offering.
(c) If, as a result of the proration provisions of this Section
2.3, any Holder shall not be entitled to include all Registrable Securities in
a Demand Registration or Piggy-Back Registration that such Holder has
requested to be included, such Holder may elect to withdraw his request to
include Registrable Securities in such registration; provided, however that if
a Holder withdraws his request pursuant to this Paragraph 2.3(c) such Holder
shall not be responsible for the fees and expenses referred to in Section
3.3(viii) hereof.
2.4 Subsequent Registration Rights. From and after the date of
this Agreement, the Company shall not, without the prior written consent of
the Required Holders, enter into any other agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder (a) to include such securities in any
registration filed under Section 2.2 or 2.3(b) hereof, unless under the terms
of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
its securities will not reduce the amount of the Registrable Securities of the
Holders which is included or (b) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of the dates set forth in subsection 3.1(a).
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1 Filings; Information. Whenever the Company is
required to effect or cause the registration of the offer and sale of
Registrable Securities pursuant to Section 2.1 or 2.2 hereof, the Company will
use its best efforts to effect the registration of the offer and the sale of
such Registrable Securities in accordance with the intended method(s) of
disposition thereof as quickly as practicable, and in connection with any such
request:
(a) The Company promptly will prepare and file with the
Commission a Registration Statement with respect to the offer and sale of such
securities and use its best efforts to cause such Registration Statement to
become and remain effective until the completion of the distribution
contemplated thereby; provided, however, the Company shall not be required to
keep such Registration Statement effective for more than 270 days (or such
shorter period which will terminate when all Registrable Securities covered by
such Registration Statement have been sold, but not prior to the expiration of
the applicable period referred to in Section 4(3) of the Securities Act and
Rule 174 thereunder, if applicable); provided, further, that with respect to a
Demand Registration, the Company shall file with the Commission a Registration
Statement as soon as is practicable after the date of the Request and in any
event no later than 60 days after the date of the Request for the Demand
Registration (the "Target Filing Date") and shall cause such Registration
Statement to be declared effective as soon as is practicable after the date of
filing and in any event no later than 120 days
Page 90 of 102 pages
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after the date of such Request (the "Target Effective Date"); provided,
further however, that with respect to a Request for Demand Registration made
prior to the first anniversary of the date hereof, other than with respect to
a Request for Demand Registration made subsequent to a Preferred Stock Event
of Default, the Company shall not be obligated to cause such Registration
Statement to be declared effective prior to the first anniversary of the date
hereof.
(b) The Company promptly will prepare and file with the
Commission such amendments and post-effective amendments to the Registration
Statement as may be necessary to keep such Registration Statement effective
for as long as such registration is required to remain effective pursuant to
the terms hereof; cause the Prospectus to be supplemented by any required
Prospectus supplement, and, as so supplemented, to be filed pursuant to Rule
424 under the Securities Act; and comply with the provisions of the Securities
Act applicable to it with respect to the disposition of all Registrable
Securities covered by such Registration Statement during the applicable period
in accordance with the intended methods of disposition by the Selling Holders
set forth in such Registration Statement or supplement to the Prospectus.
(c) The Company, at least ten (10) Business Days prior to
filing a Registration Statement or at least five (5) Business Days prior to
filing a Prospectus or any amendment or supplement to such Registration
Statement or Prospectus, will furnish to (i) each Selling Holder, (ii) not
more than one counsel representing all Selling Holders ("Selling Holders
Counsel"), to be selected by a majority-in-interest of such Selling Holders,
and (iii) each Underwriter, if any, of the Registrable Securities covered by
such Registration Statement copies of such Registration Statement as proposed
to be filed, together with exhibits thereto, which documents will be subject
to review and approval by each of the foregoing within five (5) Business Days
after delivery (except that such review and approval of any Prospectus or any
amendment or supplement to such Registration Statement or Prospectus must be
within three (3) Business Days after delivery), and thereafter, furnish to
such Selling Holders, Selling Holders Counsel and Underwriters, if any, such
number of conformed copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto and documents
incorporated by reference therein), the Prospectus included in such
Registration Statement (including each preliminary Prospectus) and such other
documents or information as such Selling Holders, Selling Holders Counsel or
Underwriters may reasonably request in order to facilitate the disposition of
the Registrable Securities (it being understood that the Company consents to
the use of the Prospectus and any amendment or supplement thereto by each
Selling Holder and the Underwriters, if any, in connection with the offering
and sale of the Registrable Securities covered by such Prospectus or any
amendment or supplement thereto).
(d) The Company promptly will notify each Selling Holder of
(and in any event within 24 hours of the receipt of) any stop order issued or
threatened by the Commission and take all reasonable actions required to
prevent the entry of such stop order or to remove it at the earliest possible
moment if entered.
(e) On or prior to the date on which the Registration Statement
is declared effective, use its best efforts to register or qualify such
Registrable Securities under such other securities or "blue sky" laws of such
jurisdictions as any Selling Holder, Selling Holders Counsel or Underwriter
requests and do any and all other acts and things which may be necessary or
advisable to enable such Selling Holder to consummate the disposition in such
jurisdictions of such Registrable Securities owned by such Selling Holder; use
its best efforts to keep each such registration or qualification (or exemption
therefrom) effective during the period which the Registration Statement is
required to be kept effective; and use its best efforts to do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided that the Company will not be required to (A)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify
page 91 of 102 Pages
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but for this paragraph (e), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(f) The Company will notify each Selling Holder, Selling
Holders Counsel and any Underwriter promptly (and in any event within 24
hours) and (if requested by any such Person) confirm such notice in writing,
(i) when a Prospectus or any Prospectus supplement or post-effective amendment
has been filed and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission or any other federal or state governmental authority
for amendments or supplements to a Registration Statement or Prospectus or for
additional information to be included in any Registration Statement or
Prospectus or otherwise, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of a Registration Statement or the
initiation or threatening of any proceedings for that purpose, (iv) of the
issuance by any state securities commission or other regulatory authority of
any order suspending the qualification or exemption from qualification of any
of the Registrable Securities under state securities or "blue sky" laws or the
initiation of any proceedings for that purpose, and (v) of the happening of
any event which makes any statement made in a Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
by reference therein untrue or which requires the making of any changes in
such Registration Statement, Prospectus or documents so that they will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements in the
Registration Statement and Prospectus not misleading in light of the
circumstances in which they were made; and, as promptly as practicable
thereafter, prepare and file with the Commission and furnish a supplement or
amendment to such Prospectus so that, as thereafter deliverable to the buyers
of such Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(g) The Company will make generally available an earnings
statement satisfying the provisions of Section 11(a) of the Securities Act no
later than 90 days after the end of the 12-month period beginning with the
first day of the Company's first fiscal quarter commencing after the effective
date of a Registration Statement, which earnings statement shall cover said
12-month period, and which requirement will be deemed to be satisfied if the
Company timely files complete and accurate information on Forms 10-Q, 10-K and
8-K under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and otherwise complies with Rule 158 under the Securities Act.
(h) If requested by the managing Underwriter or Underwriters,
Selling Holders Counsel, or any Selling Holder, the Company will, unless
otherwise advised by counsel, promptly incorporate in a Prospectus supplement
or post-effective amendment such information as the managing Underwriter or
Underwriters requests, or Selling Holders Counsel requests, to be included
therein, including, without limitation, with respect to the Registrable
Securities being sold by such Selling Holder to such Underwriter or
Underwriters, the purchase price being paid therefor by such Underwriter or
Underwriters and with respect to any other terms of the underwritten offering
of the Registrable Securities to be sold in such offering, and promptly make
all required filings of such Prospectus supplement or post-effective
amendment.
(i) The Company will enter into customary agreements reasonably
satisfactory to the Company (including, if applicable, an underwriting
agreement in customary form and which is reasonably satisfactory to the
Company) and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities (the
Selling Holders, at their option, may require that any or all of the
representations, warranties and covenants of the Company to or for the benefit
of such Underwriters also be made to and for the benefit of such Selling
Holders).
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(j) The Company will make available to each Selling Holder (and
will deliver to their counsel) and each Underwriter, if any, subject to
restrictions imposed by the United States federal government or any agency or
instrumentality thereof, copies of all correspondence between the Commission
and the Company, its counsel or auditors and will also make available for
inspection at reasonable times at the Company's offices by any Selling Holder
of such Registrable Securities, any Underwriter participating in any
disposition pursuant to such Registration Statement and any attorney,
accountant or other professional retained by any such Selling Holder or
Underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers and employees
to supply all information reasonably requested by any Inspectors in connection
with such registration statement.
(k) In connection with an underwritten offering, the Company
will participate, to the extent reasonably requested by the managing
Underwriter or Underwriters for the offering or the Selling Holders, in
reasonable and customary efforts to sell the securities under the offering,
including, without limitation, participating in "road shows."
(l) The Company, during the period when the Prospectus is
required to be delivered under the Securities Act, promptly will file all
documents required to be filed with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act.
(m) The Company, if requested by Selling Holders, shall cause
its outside legal counsel to deliver an opinion relating to the Registrable
Securities, in customary form to such Selling Holders and any Underwriter
therefor, cause its officers to execute and deliver all customary documents
and certificates requested by any Underwriters of the Registrable Securities,
and cause its independent public accountants to provide to such Selling
Holders and any Underwriters therefor one or more comfort letters in customary
form.
The Company may require each Selling Holder to promptly furnish
in writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration including, without limitation, all such information as may be
requested by the Commission or the National Association of Securities Dealers,
Inc.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 3.1(f) hereof, such Selling Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such Selling Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
3.1(f) hereof, and, if so directed by the Company, such Selling Holder will
deliver to the Company all copies, other than permanent file copies then in
such Selling Holder's possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event the
Company shall give such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective (including the
period referred to in Section 3.1(a) hereof) by the number of days during the
period from and including the date of the giving of notice pursuant to Section
3.1(f) hereof to the date when the Company shall make available to the Selling
Holders covered by such Registration Statement a Prospectus supplemented or
amended to conform with the requirements of Section 3.1(f) hereof.
SECTION 3.2. Liquidated Damages. If the Registration Statement
with respect to a Demand Registration is not filed on or before the Target
Filing Date, the Company shall pay liquidated
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damages to each Selling Holder in an amount equal to $.10 per 100 Registrable
Securities per week beginning on the Target Filing Date. If the Registration
Statement with respect to a Demand Registration is filed but has not become
effective on or before the Target Effective Date, the Company shall pay
liquidated damages to each Selling Holder in an amount equal to $.10 per 100
Registrable Securities per week beginning on the Target Effective Date. The
weekly liquidated damages associated with a late filing or a late declaration
of effectiveness shall increase by an amount equal to $.05 per 100 Registrable
Securities 90 days after the Target Filing Date or the Target Effective Date,
as the case may be, and shall thereafter increase by an amount equal to $.05
per 100 Registrable Securities at the end of each subsequent 90 day period for
so long as the Registration Statement with respect to a Demand Registration is
not filed or declared effective, as the case may be. If a stop order is
imposed or if for any other reason the effectiveness of the Registration
Statement with respect to a Demand Registration is suspended for a period in
excess of 10 consecutive days during the Target Effective Period, then the
Company shall pay liquidated damages to each Holder of Registrable Securities
in an amount equal to $.10 per 100 Registrable Securities per week beginning
on the day that is 10 consecutive days after the imposition of such stop order
or other suspension of effectiveness. The weekly liquidated damages associated
with a suspension of the effectiveness of the Registration Statement with
respect to a Demand Registration shall increase by an amount equal to $.05 per
100 Registrable Securities 90 days after the stop order was imposed or the
Registration Statement with respect to a Demand Registration was otherwise
suspended, and shall thereafter increase by an amount equal to $.05 per 100
Registrable Securities at the end of each subsequent 90 day period for so long
as the effectiveness remains suspended. Liquidated damages shall be deemed to
commence accruing on the day in which the event triggering such liquidated
damages occurs (the "Trigger Date").
The Company shall pay the liquidated damages due with respect
to the Registrable Securities as additional amounts to the Selling Holders
quarterly on each dividend payment date (as provided in the Series F
Certificate of Designations), in Federal or other immediately available funds.
Liquidated damages not previously paid, if any, shall be payable on each such
dividend payment date, and the liquidated damages shall be paid to the record
holders of Registrable Securities (as of the record date with respect to each
applicable dividend payment date) entitled to receive such liquidated damages.
The liquidated damages to be paid to Selling Holders pursuant
to this Section 3.2 shall cease to accrue, (i) with respect to the liquidated
damages for failure to file on or prior to the Target Filing Date, on the day
the Registration Statement is filed, (ii) with respect to the liquidated
damages for failure to have the Registration Statement declared effective on
or prior to the Target Effective Date, on the day after the Registration
Statement is declared effective, or (iii) with respect to the liquidated
damages for the suspension of effectiveness, on the day after the
reinstatement of effectiveness of the Registration Statement.
SECTION 3.3. Registration Expenses. The Company shall pay all
expenses incident to the Company's performance of or compliance with this
Agreement including, without limitation: (i) all registration and filing fees,
(ii) the fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) all printing, messenger
and delivery expenses, (iv) the Company's internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), (v) the fees and expenses incurred in
connection with the listing or quotation, as appropriate, of the Registrable
Securities, (vi) the fees and disbursements of counsel for the Company and the
fees and expenses for independent certified public accountants retained by the
Company (including the expenses of any special audit or cold comfort letters),
(vii) the fees and expenses of any special experts retained by the Company in
connection with such registration, and (viii) the fees and expenses of Selling
Holders Counsel. The Company shall have no obligation to pay any underwriting
fees, discounts or commissions attributable to the sale of
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Registrable Securities and any of the expenses incurred by Selling Holders
which are not payable by the Company, such costs to be borne by the Selling
Holder or Selling Holders.
ARTICLE IV.
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1. Indemnification by the Company. The Company agrees
to indemnify and hold harmless, to the fullest extent permitted by law, each
Selling Holder, its partners, officers, directors, employees, advisors and
agents, and each Person, if any, who controls such Selling Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
together with the partners, officers, directors, employees and agents of such
controlling Person (collectively, the "Controlling Persons"), from and against
any loss, claim, damage, liability, attorneys' fees, cost or expense and costs
and expenses of investigating and defending any such claim (collectively, the
"Damages") and any action in respect thereof to which such Selling Holder, its
partners, officers, directors, employees, advisors and agents, and any such
Controlling Person may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such Damages (or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus or any preliminary Prospectus, or arise out of, or are based upon,
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based upon information furnished in writing to
the Company by a Selling Holder expressly for use therein, and shall reimburse
each Selling Holder, its partners, officers, directors, employees, advisors
and agents, and each such Controlling Person for any legal and other expenses
reasonably incurred by that Selling Holder, its partners, officers, directors,
employees, advisors and agents, or any such Controlling Person in
investigating or defending or preparing to defend against any such Damages or
proceedings; provided, however, that the Company shall not be liable to any
Selling Holder or other indemnitee to the extent that any such Damages arise
out of or are based upon an untrue statement or omission made in any
preliminary Prospectus if (i) such Selling Holder failed to send or deliver a
copy of the final Prospectus with or prior to the delivery of written
confirmation of the sale by such Selling Holder to the Person asserting the
claim from which such Damages arise in any case where such delivery of the
Prospectus (as amended or supplemented) is required by the Securities Act, and
(ii) the final Prospectus would have corrected such untrue statement or such
omission, where such failure to deliver the Prospectus was not a result of
non-compliance by the Company under Section 3.1(f) of this Agreement. The
Company also agrees to indemnify any Underwriters of the Registrable
Securities, their officers and directors and each Person who controls such
Underwriters on substantially the same basis as that of the indemnification of
the Selling Holders provided in this Section 4.1.
SECTION 4.2. Indemnification by Selling Holders. Each Selling
Holder agrees, severally but not jointly, to indemnify and hold harmless the
Company, its officers, directors, employees, advisors and agents and each
Person, if any, who controls the Company within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, together with the
partners, officers, directors, employees, advisors and agents of such
controlling Person, to the same extent as the foregoing indemnity from the
Company to such Selling Holder, but only with reference to information related
to such Selling Holder, or its plan of distribution, furnished in writing by
such Selling Holder expressly for use in any Registration Statement or
Prospectus, or any amendment or supplement thereto, or any preliminary
Prospectus; provided, however, that such Selling Holder shall not be liable in
any such case to the extent that prior to the filing of any such Registration
Statement or Prospectus or amendment or supplement thereto, such Selling
Holder has furnished in writing to the Company information expressly for use
in such Registration Statement or Prospectus or any
Page 95 of 102 Pages
<PAGE>
amendment or supplement thereto which corrected or made not misleading
information previously furnished to the Company. In no event shall the
liability of any Selling Holder be greater in amount than the dollar amount of
the proceeds received by such Selling Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation. In case any action
or proceeding shall be brought against the Company or its officers, directors,
employees, advisors or agents or any such controlling Person or its officers,
directors, employees or agents, in respect of which indemnity may be sought
against such Selling Holder, such Selling Holder shall have the rights and
duties given to the Company, and the Company or its officers, directors,
employees or agents, or such controlling Person, or its officers, directors,
employees, advisors or agents, shall have the rights and duties given to such
Selling Holder, by the preceding paragraph.
SECTION 4.3 Conduct of Indemnification Proceedings. Promptly
after receipt by any person in respect of which indemnity may be sought
pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of notice of any claim
or the commencement of any action, the Indemnified Party shall, if a claim in
respect thereof is to be made against the Person against whom such indemnity
may be sought (an "Indemnifying Party"), notify the Indemnifying Party in
writing of the claim or the commencement of such action; provided that the
failure to notify the Indemnifying Party shall not relieve it from any
liability which it may have to an Indemnified Party otherwise than under
Section 4.1 or 4.2 except to the extent of any actual prejudice resulting
therefrom. If any such claim or action shall be brought against an Indemnified
Party, and it shall notify the Indemnifying Party thereof, the Indemnifying
Party shall be entitled to participate therein, and, to the extent that it
wishes, jointly with any other similarly notified Indemnifying Party, to
assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Party. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defense of such claim or action, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
or other expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation;
provided that the Indemnified Party shall have the right to employ separate
counsel to represent the Indemnified Party and its controlling Persons who may
be subject to liability arising out of any claim in respect of which indemnity
may be sought by the Indemnified Party against the Indemnifying Party, but the
fees and expenses of such counsel shall be for the account of such Indemnified
Party unless (i) the Indemnifying Party and the Indemnified Party shall have
mutually agreed to the retention of such counsel or (ii) in the opinion of
counsel to such Indemnified Party, representation of both parties by the same
counsel would be inappropriate due to actual or potential conflicts of
interest between them, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such claim or action or separate
but substantially similar or related claims or actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all Indemnified
Parties. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any claim or pending or threatened
proceeding in respect of which the Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified
Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such claim or proceeding.
Whether or not the defense of any claim or action is assumed by the
Indemnifying Party, such Indemnifying Party will not be subject to any
liability for any settlement made without its consent, which consent will not
be unreasonably withheld.
SECTION 4.4. Contribution. If the indemnification provided for
in this Article 4 is unavailable to the Indemnified Parties in respect of any
Damages referred to herein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Damages in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Selling Holders on the other from the offering
of
Page 96 of 102 Pages
<PAGE>
the Registrable Securities, or if such allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits but also the relative fault of the Company on the one hand
and the Selling Holders on the other in connection with the statements or
omissions which resulted in such Damages, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand
and of each Selling Holder on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Selling Holders agree that it would not be
just and equitable if contribution pursuant to this Section 4.4 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 the
immediately preceding paragraph. The amount paid or payable by an Indemnified
Party as a result of the Damages referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no Selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Selling Holder were offered
to the public exceeds the amount of any damages which such Selling Holder has
otherwise paid 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. Each Selling Holder's obligations to contribute pursuant to
this Section 4.4 is several in the proportion that the proceeds of the
offering received by such Selling Holder bears to the total proceeds of the
offering received by all the Selling Holders and not joint.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. Participation in Underwritten Registrations. No
Person may participate in any underwritten registration hereunder unless such
Person (a) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements, and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and
these registration rights.
SECTION 5.2 Rule 144. The Company agrees and will use its best
efforts to file any reports required to be filed by it under the Securities
Act and the Exchange Act (or, if the Company is not required to file such
reports, it will, upon the request of any Holder, make publicly available
other information as long as necessary to permit sales under Rule 144 under
the Securities Act) and that it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
Holders to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such Rules may be amended from time to time,
or (b) any similar rule or regulation hereafter adopted by the Commission.
Upon the request of any Holder, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
Page 97 of 102 Pages
<PAGE>
SECTION 5.3. Amendment and Modification. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a writing
executed by the party against whom the enforcement of such waiver is sought.
This Agreement may not be amended, modified or supplemented other than by a
written instrument signed by the Required Holders; provided, however, that
without the consent of all the Holders, no amendment or modification which
materially and adversely affects the ability of such Holders to have the offer
and sale of securities registered hereunder may be effected. No course of
dealing between or among any Persons having any interest in this Agreement
will be deemed effective to modify, amend or discharge any part of this
Agreement or any rights or obligations of any Person under or by reason of
this Agreement.
SECTION 5.4 Successors and Assigns; Third Party Beneficiaries;
Entire Agreement. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto, each subsequent
Holder and their respective successors and assigns and executors,
administrators and heirs. Holders are intended third party beneficiaries of
this Agreement and this Agreement may be enforced by such Holders. This
Agreement sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
SECTION 5.5. Headings. Subject headings are included for
convenience only and shall not affect the interpretation of any provisions of
this Agreement.
SECTION 5.6. Notices. Any notice, demand, request, waiver, or
other communication under this Agreement shall be in writing and shall be
deemed to have been duly given on the date of service if personally served or
sent by telecopy, on the business day after notice is delivered to a courier
or mailed by express mail if sent by courier delivery service or express mail
for next day delivery and on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid and addressed as follows:
If to the Company to:
Barry S. Roseman
President and Chief Executive Officer
Headway Corporate Resources, Inc.
850 Third Avenue
New York, New York 10022
Fax: (212) 508-3540
Phone: (212) 508-3500
If to a Holder, to the Holder at the most current address given
by such Holder to the Company in writing, and to:
E. Garrett Bewkes, III
GarMark Partners, L.P.
c/o GarMark Advisors, L.L.C.
1325 Avenue of the Americas
26th Floor
New York, NY 10019
Page 98 of 102 Pages
<PAGE>
Fax: (212) 713-8539
Phone: (212) 713-8500
SECTION 5.7. Governing Law; Forum; Process. This Agreement
shall be construed in accordance with, and governed by, the laws of the State
of New York as applied to contracts made and to be performed entirely in the
State of New York without regard to principles of conflicts of law. Each of
the parties hereto hereby irrevocably and unconditionally submits to the
exclusive jurisdiction of any court of the State of New York or any federal
court sitting in the State of New York for purposes of any suit, action or
other proceeding arising out of this Agreement (and agrees not to commence any
action, suit or proceedings relating hereto except in such courts). Each of
the parties hereto agrees that service of any process, summons, notice or
document by U.S. registered mail at its address set forth herein shall be
effective service of process for any action, suit or proceeding brought
against it in any such court. Each of the parties hereto hereby irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement, which is brought by or
against it, in the courts of the State of New York or any federal court
sitting in the State of New York and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 5.8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall constitute a single agreement.
SECTION 5.9. Severability. In the event that any one or more of
the immaterial provisions contained in this Agreement shall for any reason be
held to be invalid, illegal or unenforceable, the same shall not affect any
other provision of this Agreement, but this Agreement shall be construed in a
manner which, as nearly as possible, reflects the original intent of the
parties.
SECTION 5.10. No Prejudice. The terms of this Agreement shall
not be construed in favor of or against any party on account of its
participation in the preparation hereof.
SECTION 5.11. Words in Singular and Plural Form. Words used in
the singular form in this Agreement shall be deemed to import the plural, and
vice versa, as the sense may require.
SECTION 5.12. Remedy for Breach. The Company hereby
acknowledges that in the event of any breach or threatened breach by the
Company of any of the provisions of this Agreement, the Holder would have no
adequate remedy at law and could suffer substantial and irreparable damage.
Accordingly, the Company hereby agrees that, in such event, the Holder shall
be entitled, without the necessity of proving damages or posting bond, and
notwithstanding any election by any Holder to claim damages, to obtain a
temporary and/or permanent injunction, without proving a breach therefor, to
restrain any such breach or threatened breach or to obtain specific
performance of any such provisions, all without prejudice to any and all other
remedies which any Holder may have at law or in equity.
Page 99 of 102 Pagers
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
HEADWAY CORPORATE RESOURCES, INC.
By: /s/ Philicia G. Levinson
---------------------------------------
Name: Philicia G. Levinson
Title: Senior Vice President
GARMARK PARTNERS, L.P.
By: GarMark Associates, L.L.C.
its general partner
By: /s/ Mark G. Solow
---------------------------------------
Name: Mark G. Solow
Title: Managing Principal
Address for Notices:
c/o GarMark Advisors, L.L.C.
1325 Avenue of the Americas, 26th Floor
New York, NY 10019
Fax: (212) 713-8539
Tel: (212) 713-8500
MOORE GLOBAL INVESTMENTS, LTD.
By: Moore Capital Management, Inc.
By: /s/ Savvas Savvinidis
----------------------------------------
Name: Savvas Savvinidis
Title: Director of Operations
Address for Notices:
1251 Avenue of the Americas
New York, NY 10020
Fax: (212) 382-9852
Tel: (212) 782-7532
Page 100 of 102 Pages
<PAGE>
REMINGTON INVESTMENT STRATEGIES,
L.P.
By: Moore Capital Advisors LLC
By: /s/ Savvas Savvinidis
Name: Savvas Savvinidis
Title: Director of Operations
Address for Notices:
1251 Avenue of the Americas
New York, NY 10020
Fax: (212) 382-9852
Tel: (212) 782-7532
NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ Lewis Coleman
Name: Lewis Coleman
Title: Senior Managing Director
Address for Notices:
NationsBanc Montgomery Securities LLC
600 Montgomery Street
San Francisco, CA 94111
Fax: (415) 913-5552
Tel: (415) 627-2553
Attn: Jack G. Levin
Page 101 of 102 Pages
<PAGE>
Exhibit D
AGREEMENT OF JOINT FILING
In accordance with Rule 13d-1(f) under the Securities Exchange
Act of 1934, as amended, the undersigned hereby agree to the joint filing with
all other Reporting Persons (as such term is defined in the Schedule 13D
referred to below)of a statement on Schedule 13D or any amendments thereto,
with respect to the Common Stock, $0.0001 par value of Headway Corporate
Resources, Inc., and that this Agreement be included as an attachment to such
filing.
This Agreement may be executed in any number of counterparts
each of which shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same Agreement.
IN WITNESS WHEREOF, the undersigned hereby execute this
Agreement on the 24th day of April, 1998.
GARMARK PARTNERS, L.P.
By: GarMark Associates, L.L.C.
its general partner
By: /s/ E. Garrett Bewkes, III
---------------------------
Name: E. Garrett Bewkes, III
Title:
GARMARK ASSOCIATES, L.L.C.
By: /s/ E. Garrett Bewkes, III
---------------------------
Name: E. Garrett Bewkes, III
Title:
/s/ E. Garrett Bewkes, III
--------------------------
E. GARRETT BEWKES, III
/s/ Mark G. Solow
--------------------------
MARK G. SOLOW
Page 102 of 102 Pages
