UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 28,
1997
MERIDIAN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
33-75594 (Commision File Number)
Indiana (State or other jurisdiction of incorporation or organization)
35-1894846 (I.R.S. Employer Identification No.)
8250 Haverstick Road, Suite 110
Indianapolis, Indiana
46240-2401
(Address of principal executive offices)
46240-2401
(Zip Code)
(317) 722-2000
(Registrant's telephone number)
MERIDIAN FINANCIAL CORPORATION
Indianapolis, Indiana
Current Report on Form 8-K
Item 1. Changes in Control of Registrant
On March 28, 1997, Meridian Financial Corporation (the
"Company") entered into a Securities Purchase Agreement (the
"Purchase Agreement") with Inroads Capital Partners, L.P.
("Inroads"), Mesirow Capital Partners VII, an Illinois
Limited Partnership ("Mesirow"), Edgewater Private Equity
Fund II, L.P. (the latter three parties being the
"Purchasers"), Michael F. McCoy ("McCoy") and William L.
Wildman ("Wildman") pursuant to which the Purchasers have
purchased from the Company a total of 3,000 shares of the
Company's Series C Convertible Preferred Stock (the
"Preferred Shares") and $500,000 aggregate principal amount
of 10% Subordinated Notes due March 31, 2002 (The "Notes").
The aggregate purchase price for the Preferred Shares was
$3,000,000 and the aggregate purchase price for the Notes
was $500,000. Subject to certain conditions, the Purchasers
are obligated under the Purchase Agreement to purchase an
additional $3,000,000 aggregate principal amount of Notes.
The Preferred Shares are convertible into Common Shares of
the Company at any time. The conversion ratio initially is
one-for-one, but is subject to adjustment under certain
circumstances. In general, the Preferred Shares have full
voting rights (voting together with the Common Shares) on
all actions submitted to a vote of the Company's
shareholders. Each Preferred Share initially entitles the
holder thereof to one vote on each matter submitted, but the
number of votes is subject to adjustment on the same basis
as the conversion ratio.
The Company's outstanding capital stock consists of 1,000
Common Shares (with full voting rights), 525 of which are
owned by McCoy, 1,000 shares of Series A Preferred Stock
(without voting rights), and the Preferred Shares. A
portion of the proceeds of the sale of the Preferred Shares
was used to redeem all of the Company's outstanding Series B
Preferred Stock and warrants to purchase Common Shares
(which were owned by the holders of the Series B Preferred
Stock). The holders of the Series B Preferred Stock had
limited voting rights, including the right to elect one
director.
As a result of the issuance of the preferred Shares and the
redemption of the Series B preferred Stock, the Purchasers
collectively are entitled to exercise 75% of the voting
power of the Company under ordinary circumstances. Prior to
the issuance of the Preferred Shares, McCoy was entitled to
exercise a majority of the voting power of the Company under
ordinary circumstances.
In connection with the issuance of the Preferred Shares, the
Company also entered into a Voting Agreement with the
Purchasers, McCoy and Wildman under which the parties agreed
to cooperate to cause the Company's Board of Directors to
consist of five members, one of whom would be designated by
Inroads, one of whom would be designated by Mesirow, one of
whom would be designated by the holders of two-thirds of the
voting power of the Company exercisable by the Purchasers,
and two of whom would be designated by McCoy. The rights of
the parties to designate directors terminate under certain
circumstances.
The Company and the Purchasers also entered into a
Registration Rights Agreement entitling the Purchasers,
under certain circumstances, to demand or otherwise
participate in a public offering of the Company's equity
securities.
Also in connection with the issuance of the Preferred,
Shares, the Company, the Purchasers and McCoy entered into
an Executive Share Agreement pursuant to which the
Purchasers are obligated, subject to certain conditions, to
transfer, for no consideration other than the fulfillment of
such conditions, to McCoy and/or such other officers,
directors, employees or consultants of the Company as he
designates, up to 8% of the Preferred Shares purchased by
each Purchaser.
Item 7. Financial Statements and Exhibits
[C] Exhibits. The following exhibits are filed as part of
this report:
Exhibit
Number Description
2 Securities Purchase Agreement, dated as of March
28, 1997
4(a) Terms of the Company's Series C Convertible
Preferred Stock
4(b) Form of 10% Subordinated Promissory Note Due
March 31, 2002
99(a) Voting Agreement, dated as of March 28, 1997
99(b) Registration Rights Agreement, dated as of
March 28, 1997
99(c) Executive Share Agreement, dated as of
March 28, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
MERIDIAN FINANCIAL CORPORATION
Date April 14, 1997
By: /s/ Gerald W. Gerichs
(Gerald W. Gerichs, Vice President,
Secretary and Treasurer)
MERIDIAN FINANCIAL CORPORATION
SECURITIES PURCHASE AGREEMENT
Dated as of March 28, 1997
3,000 Shares Series C Convertible Preferred Stock
$3,500,000 10.0% Subordinated Notes
Table of Contents
ARTICLE I. PURCHASE OF THE PURCHASED SECURITIES 1
SECTION 1.01 Purchase and Sale of Preferred Shares 1
SECTION 1.02 Purchase and Sale of Notes 1
SECTION 1.03 Closing 1
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE EXECUTIVE SHAREHOLDERS 2
SECTION 2.01 Organization, Qualifications and Corporate Power
2
SECTION 2.02 Authorization of Agreements, Etc. 2
SECTION 2.03 Validity 3
SECTION 2.04 Approvals, Consents, Etc. 3
SECTION 2.05 Authorized Capital Stock 3
SECTION 2.06 Financial Statements 5
SECTION 2.07 Events Subsequent to the Date of the
December
Balance Sheet 5
SECTION 2.08 Litigation; Compliance with Law 7
SECTION 2.09 Proprietary Information of Third Parties 7
SECTION 2.10 Intellectual Properties. 8
SECTION 2.11 Title to Properties 8
SECTION 2.12 Leasehold Interests 8
SECTION 2.13 Insurance 9
SECTION 2.14 Taxes 9
SECTION 2.15 Lease Agreements 10
SECTION 2.16 Other Agreements 11
SECTION 2.17 Assumptions, Guaranties, Etc. of
Indebtedness of
other Persons 12
SECTION 2.18 Disclosure 13
SECTION 2.19 SEC Documents 13
SECTION 2.20 Brokers 13
SECTION 2.21 Transactions with Affiliates 13
SECTION 2.22 Related Entities 14
SECTION 2.23 Employees 14
SECTION 2.24 U.S. Real Property Holding Corporation 14
SECTION 2.25 Environmental Protection 14
SECTION 2.26 ERISA 15
SECTION 2.27 Illegal Payments 16
SECTION 2.28 Interest in Competitors, Etc 16
SECTION 2.29 Books and Records 16
SECTION 2.30 Federal Reserve Regulations 16
SECTION 2.3 Limitation Regarding Executive Shareholders
16
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS 17
SECTION 3.01 Authorization of Agreements, Etc 17
SECTION 3.02 Validity 17
SECTION 3.03 Investment Representations 17
ARTICLE IV. PRE-CLOSING COVENANTS OF THE COMPANY 18
SECTION 4.01 Access to Information 18
SECTION 4.02 Conduct of Business 18
SECTION 4.03 Negative Covenants 18
SECTION 4.04 Additional Financial Information 19
SECTION 4.05 Consents 19
SECTION 4.06 Consummation of Transactions 19
ARTICLE V. CONDITIONS 19
SECTION 5.01 Conditions to Purchaser's Obligations 19
SECTION 5.02 Conditions to Obligations of the Company
and the
Executive
Shareholders. 21
ARTICLE VI. COVENANTS OF THE COMPANY 21
SECTION 6.01 Financial Statements, Reports, Etc. 21
SECTION 6.02 Right of Participation 23
SECTION 6.03 Corporate Existence 24
SECTION 6.04 Properties, Business, Insurance 24
SECTION 6.05 "Key Person" Insurance 24
SECTION 6.06 Inspection, Consultation and Advice 24
SECTION 6.07 Restrictive Agreements Prohibited 24
SECTION 6.08 Transactions with Affiliates 24
SECTION 6.09 Use of Proceeds 25
SECTION 6.10 Board of Directors Meetings 25
SECTION 6.11 By-laws 25
SECTION 6.12 Compliance with Laws 25
SECTION 6.13 Keeping of Records and Books of Account 25
SECTION 6.14 Change in Business or Plan 25
SECTION 6.15 Disposal of Property 25
SECTION 6.16 Payment of Obligations 26
SECTION 6.17 Dividends and Similar Transactions 26
SECTION 6.18 Rule 144A Information 26
SECTION 6.19 Salary and Bonus Plan 27
SECTION 6.20 Termination of Covenants27
ARTICLE VII. COVENANTS OF THE EXECUTIVE SHAREHOLDERS 27
SECTION 7.01 Transfers of Shares 27
SECTION 7.02 Certain Restrictive Covenants 27
SECTION 7.03 Devotion of Time 30
SECTION 7.04 Related Entities 30
ARTICLE VIII. PURCHASES OF ADDITIONAL NOTES 30
SECTION 8.01 Purchase Request 30
SECTION 8.02 Conditions Precedent 31
ARTICLE IX. MISCELLANEOUS 32
SECTION 9.01 Fees and Expenses 32
SECTION 9.02 Survival of Agreements 32
SECTION 9.03 Parties in Interest 32
SECTION 9.04 Notices 32
SECTION 9.05 Assignment 33
SECTION 9.06 Remedies 33
SECTION 9.07 Waiver 33
SECTION 9.08 Governing Law 33
SECTION 9.09 Entire Agreement 34
SECTION 9.10 Counterparts 34
SECTION 9.11 Amendments 34
SECTION 9.12 Severability 34
SECTION 9.13 Headings 34
SECTION 9.14 Certain Defined Terms 34
SECTION 9.15 Required Vote 35
SECTION 9.16 Obligations Several 35
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT A Terms of Series C Preferred Stock
EXHIBIT B Form of Note
EXHIBIT C Form of Opinion of Counsel to the Company
EXHIBIT D Form of Voting Agreement
EXHIBIT E Form of Registration Rights Agreement
EXHIBIT F Form of Executive Share Agreement
SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Fee Allocation
This SECURITIES PURCHASE AGREEMENT, dated as of March 28,
1997 (this "Agreement"), is among Meridian Financial
Corporation, an Indiana corporation (the "Company"), the
several purchasers named on Schedule I (individually a
"Purchaser" and collectively the "Purchasers"), Michael F.
McCoy ("McCoy") and William L. Wildman ("Wildman"; together
with McCoy, the "Executive Shareholders").
WHEREAS, the Company wishes to issue and sell to the
Purchasers (a) an aggregate of 3,000 shares of Series C
Convertible Preferred Stock, $1,000 liquidation preference,
of the Company (the "Preferred Shares") and (b) an aggregate
principal amount of up to $3,500,000 of 10% subordinated
notes due March 31, 2002 of the Company (the "Notes"); and
WHEREAS, the Purchasers, severally, wish to purchase the
Preferred Shares and the Notes (collectively, the "Purchased
Securities") on the terms and subject to the conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and the
mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE .
PURCHASE OF THE PURCHASED SECURITIES
SECTION .Purchase and Sale of Preferred Shares. Subject to
the terms and
conditions hereof and on the basis of the representations and
warranties set forth herein, the
Company agrees to issue and sell to each Purchaser, and each
Purchaser hereby agrees to
purchase from the Company, the number of Preferred Shares set
forth opposite the name of
such Purchaser under the heading "Number of Preferred Shares
to be Purchased" on
Schedule I, at the aggregate purchase price set forth
opposite the name of such Purchaser
under the heading "Aggregate Purchase Price for Preferred
Shares" on Schedule I. The
Company shall amend its articles of incorporation (the
"Charter") prior to the Closing Date
(as defined in Section 1.03) to authorize for issuance the
Preferred Shares, with the terms
set forth on Exhibit A.
SECTION .Purchase and Sale of Notes. Subject to the terms
and conditions
hereof and on the basis of the representations and warranties
set forth herein, the Company
agrees to issue and sell to each Purchaser, and each
Purchaser hereby agrees to purchase
from the Company, (a) at the Closing (as defined in Section
1.03), the aggregate principal
amount of Notes set forth opposite the name of such Purchaser
under the heading "Closing
Notes" on Schedule I (each, a "Closing Note" and
collectively, the "Closing Notes") and
(b) following the Closing, and subject to the provisions of
Article VIII, the aggregate
principal amount of Notes set forth opposite the name of such
Purchaser under the heading
"Additional Notes" on Schedule I (each, an "Additional Note"
and collectively, the
"Additional Notes"). The Company shall authorize the Notes
for issuance and sale to
Purchasers in accordance with this Agreement. All Notes
shall be dated the date of their
issue and shall be in the form of Exhibit B.
SECTION .Closing. The closing for the purchase and sale of
the Preferred
Shares and the Closing Notes (the "Closing") shall take place
at the offices of Altheimer &
Gray, 10 South Wacker Drive, Suite 4000, Chicago, IL 60606,
at 10:00 a.m., Chicago
time, on March 28, 1997, or at such other location, date and
time as may be agreed upon
between the Purchasers and the Company (such date being
referred to herein as the
"Closing Date"). At the Closing, the Company shall issue and
deliver to each Purchaser (a)
a stock certificate or certificates in definitive form,
registered in the name of such
Purchaser, representing the Preferred Shares being purchased
by such Purchaser at the
Closing and (b) the Closing Notes being purchased by such
Purchaser, executed by the
Company. As payment in full for the Preferred Shares and the
Closing Notes being
purchased by it under this Agreement, against delivery of the
stock certificate or certificates
and Closing Notes as aforesaid, at the Closing each Purchaser
shall transfer to the account
of the Company by wire transfer the amount set forth opposite
the name of such Purchaser
under the heading "Aggregate Closing Date Purchase Price" on
Schedule I.
ARTICLE .
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE EXECUTIVE SHAREHOLDERS
The Company and each Executive Shareholder, jointly and
severally, represent and warrant to the Purchasers that,
except as set forth in the Disclosure Schedule attached as
Schedule II (the "Disclosure Schedule"):
SECTION .Organization, Qualifications and Corporate Power.
()The Company is a corporation duly incorporated and validly
existing under the laws of the State of Indiana and is duly
licensed or qualified to transact business as a foreign
corporation and is in good standing (i) in each jurisdiction
in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires
such licensing or qualification, except where the failure to
be so qualified would not have a material adverse effect on
the Company, and (ii) in each jurisdiction in which either
the principal place of business of any lessee of Leased
Equipment (as defined in Section 2.15) or any Leased
Equipment is located. The Disclosure Schedule sets forth a
list of all jurisdictions in which the Company is qualified
to transact business. The Company has the corporate power
and authority (i) to own and hold its properties and to carry
on its business as now conducted and as proposed to be
conducted, (ii) to execute, deliver and perform its
obligations under this Agreement and each instrument or
document to be executed or delivered by it pursuant to this
Agreement (each, a "Company Ancillary Document"), (iii) to
issue, sell and deliver the Preferred Shares and the Notes
and (iv) to issue and deliver the Common Shares, without par
value, of the Company ("Common Stock") issuable upon
conversion of the Preferred Shares (the "Conversion Shares").
Each of the Executive Shareholders has full capacity to
execute, deliver and perform his obligations under this
Agreement and each instrument or document to be executed or
delivered by him pursuant to this Agreement (each, an
"Executive Shareholder Ancillary Document").
()The Company does not (i) own of record or beneficially,
directly or indirectly, any shares of capital stock or
securities convertible into capital stock of any other
corporation or any participating interest in any partnership,
joint venture or other non-corporate business enterprise or
(ii) control, directly or indirectly, any entity.
SECTION .Authorization of Agreements, Etc.
()The execution and delivery by the Company of this Agreement
and each Company Ancillary Document, the performance by the
Company of its obligations hereunder and thereunder, the
issuance, sale and delivery of the Preferred Shares and the
Notes and the issuance and delivery of the Conversion Shares
have been duly authorized by all requisite corporate action
and will not violate any provision of law, any order of any
court or other agency of government, the Charter or the By-
laws of the Company, as amended (the "By-laws"), or any
provision of any indenture, agreement or other instrument to
which the Company or any of its properties or assets is
bound, or conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under
any such indenture, agreement or other instrument, or result
in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature upon any of
the properties or assets of the Company.
()When issued in accordance with this Agreement, the
Preferred Shares will be validly issued, fully paid and
nonassessable shares of Series C Convertible Preferred Stock
and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through
the Company except as set forth in any instrument or document
to be executed or delivered by the Purchasers pursuant to
this Agreement (each, a "Purchaser Ancillary Document"). The
Conversion Shares have been duly reserved for issuance upon
conversion of the Preferred Shares and, when issued upon
conversion of the Preferred Shares, will be validly issued,
fully paid and nonassessable shares of Common Stock and will
be free and clear of all liens, charges, restrictions, claims
and encumbrances imposed by or through the Company except as
set forth in any Purchaser Ancillary Document. Neither the
issuance, sale or delivery of the Preferred Shares or the
Notes nor the issuance or delivery of the Conversion Shares
is subject to any preemptive right of shareholders of the
Company or to any right of first refusal or other right in
favor of any person.
SECTION .Validity. This Agreement has been duly executed and
delivered by the Company and each of the Executive
Shareholders and constitutes the legal, valid and binding
obligation of the Company and each of the Executive
Shareholders, enforceable against each such party in
accordance with its terms. Each Company Ancillary Document
and Executive Shareholder Ancillary Document, when executed
and delivered in accordance with this Agreement, will
constitute the legal, valid and binding obligation of the
Company or the Executive Shareholders, as the case may be,
enforceable against such party in accordance with its terms.
SECTION .Approvals, Consents, Etc. Subject to the accuracy
of the representations and warranties of the Purchasers set
forth in Article III, no registration or filing with, or
consent or approval of or other action by, any Federal, state
or other governmental agency or instrumentality or other
person is or will be necessary for the valid execution,
delivery and performance by the Company or the Executive
Shareholders of this Agreement, any Company Ancillary
Document or any Executive Shareholder Ancillary Document, the
issuance, sale and delivery of the Preferred Shares or the
Notes or, upon conversion of the Preferred Shares, the
issuance and delivery of the Conversion Shares, other than
(a) filings pursuant to state securities laws (all of which
filings have been made by the Company, other than those which
are required to be made after the Closing and which will be
duly made on a timely basis) in connection with the sale of
the Preferred Shares and the Notes, (b) with respect to the
Registration Rights Agreement (as defined in Section
5.01(i)), the registration of the securities covered thereby
with the Securities and Exchange Commission (the "SEC") and
filings pursuant to state securities laws and (c) a filing
with the Indiana Secretary of State to amend the Charter to
designate the terms of the Preferred Shares..
SECTION .Authorized Capital Stock.
()The authorized capital stock of the Company consists of (i)
10,000 Special Shares, without par value (the "Preferred
Stock"), of which 1,000 shares have been designated Series A
Preferred Stock, 1,500 shares have been designated Series B
Preferred Stock and 3,000 shares have been designated Series
C Convertible Preferred Stock and (ii) 10,000 shares of
Common Stock. Except for the Series B Preferred Stock, all
of which will be redeemed on the Closing Date, no shares of
Common Stock or Preferred Stock have been reacquired by the
Company and are held in its treasury. There are no
restrictions on the transfer of shares of capital stock of
the Company other than those imposed by the Charter and By-
laws, applicable Federal and state securities laws, the
Restrictive Stock Transfer Agreements described in the
Disclosure Schedule executed by certain holders of Common
Stock and/or Series A Preferred Stock, those restrictions
applicable to the Series B Preferred Stock as set forth in
the Charter, and those restrictions on transfer expressly set
forth in this Agreement, the Company Ancillary Documents, the
Purchaser Ancillary Documents and the Executive Shareholder
Ancillary Documents. To the knowledge of the Company and the
Executive Shareholders, other than as provided in the
preceding sentence, there are no agreements, understandings,
trusts or other collaborative arrangements concerning the
voting or transfer of shares of capital stock of the Company.
The shareholders of record and holders of subscriptions,
warrants, options, convertible securities and other rights
(contingent or other) to purchase or otherwise acquire from
the Company equity securities of the Company, and the number
of shares of capital stock and the number of such
subscriptions, warrants, options, convertible securities and
other such rights held by each such holder, are as set forth
in the Disclosure Schedule. The designations, powers,
preferences, rights, qualifications, limitations and
restrictions of each class and series of authorized capital
stock of the Company are as set forth in the Charter, a copy
of which is included in the Disclosure Schedule, and all such
designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and
enforceable and in accordance with all applicable laws. The
Company is not in arrears with respect to dividends payable
under the terms of any series of Preferred Stock. Except as
provided in this Agreement or as set forth in the Disclosure
Schedule, (i) no person owns of record any shares of capital
stock of the Company, (ii) no subscription, warrant, option,
convertible security or other right (contingent or other) to
purchase or otherwise acquire from the Company equity
securities of the Company is authorized or outstanding and
(iii) there is no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible securities or
other such rights or, except for the redemption of the Series
B Preferred Stock and the warrants issued to the holders
thereof, to distribute to holders of any of its equity
securities any evidence of indebtedness or asset in respect
of such equity securities. All of the outstanding securities
of the Company were issued in compliance with all applicable
Federal and state securities laws. The offering of the
shares of Series A Preferred Stock and shares of Common Stock
referenced in the Blue Sky Memorandum dated November 29, 1993
of Baker & Daniels, counsel to the Company, as supplemented
by the Supplemental Blue Sky Memorandum, dated December 17,
1993, a copy of which is included in the Disclosure Schedule
(the "Blue Sky Memorandum"), was conducted as described in
the Blue Sky Memorandum, all facts assumed in the Blue Sky
Memorandum relating to the Company were true as of any
relevant time and, to the knowledge of the Company and the
Executive Shareholders, all facts assumed in the Blue Sky
Memorandum other than those relating to the Company were true
as of any relevant time .
()The Disclosure Schedule contains the form of redemption
agreement (the "Series B Redemption Agreement") to be entered
into between the Company and each holder of Series B
Preferred Stock or related warrants to purchase Common Stock
(the "Series B Holders") with respect to the redemption on or
prior to the Closing of all of the outstanding shares of
Series B Preferred Stock and such warrants. Upon the
redemption by the Company of the Series B Preferred Stock
and related warrants in accordance with the terms of the
Series B Redemption Agreement, (i) all of the outstanding
shares of Series B Preferred Stock and all of such warrants
shall be canceled and shall no longer be outstanding and (ii)
the Company shall have no liability (and no Series B Holder
or any other person shall have any claim of any kind against
the Company) with respect to or arising out of the ownership
at any time of any shares of Series B Preferred Stock or such
warrants.
SECTION .Financial Statements.
()The Company has furnished to the Purchasers: (i) the
audited balance sheet of the Company as of September 30,
1996, and the related audited statements of operations,
shareholders' equity and cash flows of the Company for the
year ended September 30, 1996 (the "Audited Financial
Information") and (ii) the unaudited balance sheet of the
Company as of December 31, 1996, and the related unaudited
statements of earnings (loss) and cash flows of the Company
for the three months ended December 31, 1996 (the "Unaudited
Financial Information"; the Audited Financial Information and
the Unaudited Financial Information being collectively
referred to herein as the "Financial Information"). The
Financial Information has been prepared in accordance with
generally accepted accounting principles consistently applied
and fairly presents the financial position of the Company as
of the respective dates thereof and the results of its
operations and cash
flows for the respective periods covered thereby.
()As of December 31, 1996, to the knowledge of the Company
and the Executive Shareholders, the Company had no contingent
or unasserted liabilities which, in the aggregate, could have
a material adverse effect on the Company or its business,
which were not disclosed in the balance sheet of the Company
included in the Unaudited Financial Information (the
"December Balance Sheet").
SECTION .Events Subsequent to the Date of the December
Balance Sheet. Since December 31, 1996, the Company has only
conducted its business in the usual and ordinary course and
consistent with the past practices of the Company, and,
whether or not in the ordinary course of its business, has
not:
()incurred any material fixed or contingent obligation,
liability or commitment except (i) trade or business
obligations incurred in the ordinary course of the Company's
business, none of which is materially adverse or was entered
into for an inadequate consideration or with any shareholder
or any affiliate of any shareholder, (ii) obligations under
Lease Agreements (as defined in Section 2.15) (x) entered
into in the ordinary course of business and (y) which have
not been entered into with any shareholder of the Company or
any affiliate of any such shareholder, (iii) obligations
under this Agreement and the Company Ancillary Documents and
(iv) the obligation to redeem the Series B Preferred Stock
and related warrants pursuant to the Series B Redemption
Agreements,
()discharged or satisfied any lien or encumbrance or paid any
fixed or contingent obligation, liability or commitment,
except (i) current obligations, liabilities or commitments
reflected or reserved against in the December Balance Sheet
and (ii) current obligations, liabilities or commitments
incurred in the ordinary course of business since December
31, 1996,
()transferred, leased, licensed, sold or otherwise conveyed,
or agreed or committed to convey, any of its material assets
or properties, except (i) equipment of the type leased by the
Company in the ordinary course of business pursuant to Lease
Agreements entered into in the ordinary course of business on
the Standard Forms (as defined in Section 2.15), (ii) Lease
Agreements sold in the ordinary course of business and (iii)
collateral assignments of Lease Agreements and pledges of
other assets to Texas Commerce Bank National Association, as
trustee (the "Trustee"), pursuant to the Indenture of Trust
dated as of December 15, 1993, between the Company and the
Trustee, as amended by the First Supplemental Indenture,
dated as of February 15, 1994, between the Company and the
Trustee (as so amended, the "Bond Indenture"),
()waived, released, canceled or compromised any material
debt, claim or right,
()made or entered into any contracts or commitments to make
any capital expenditures (it being understood that capital
expenditures do not include the purchase of or commitment to
purchase, in the ordinary course of business, equipment to be
leased to third parties pursuant to Lease Agreements),
whether or not in the ordinary course of business, that
requires payment by the Company of (i) in excess of ten
thousand dollars ($10,000) with respect to any single
expenditure (or group of related expenditures) or (ii) in
excess of twenty thousand dollars ($20,000) in the aggregate
for all capital expenditures,
()sold, assigned, transferred or granted any right under or
with respect to any licenses, agreements or Intellectual
Property (as defined in Section 2.10),()made or granted any
general wage or salary increase (including any increase
pursuant to any bonus, pension, profit-sharing or other plan
or commitment), paid or agreed to pay any bonus, engaged any
new employee at an annual rate of compensation in excess of
twenty-five thousand dollars ($25,000) or entered into any
employment agreement with any officer or employee,
()declared, set aside or paid any dividend or other
distribution (whether in cash, shares of capital stock or
other securities, property or any combination thereof) in
respect of the capital stock of the Company, other than
dividends on outstanding shares of Preferred Stock in
accordance with the Charter,
()redeemed, repurchased or otherwise acquired any of its
capital stock or other securities, or, except as contemplated
by this Agreement with respect to shares of Series B
Preferred Stock and the related warrants, entered into any
agreement to do so,
()suffered any material adverse change in, or any event or
events which, individually or in the aggregate, have had or
could reasonably be expected to have a material adverse
effect on its properties, business, condition (financial or
otherwise), results of operations or prospects,
() incurred damage to or destruction of any of its assets by
fire, storm or other like or unlike casualty, whether or not
covered by insurance,
()made any increase in or commitment to increase or adopt any
additional employee benefits, or
()entered into any transaction not in the ordinary course of
business, except transactions (none of which are materially
adverse, or could result in any material liability, to the
Company) relating to foreclosure by the Company under its
mortgage and security interests pertaining to Old Indiana
Limited Liability Company (the "Old Indiana Foreclosure").
SECTION .Litigation; Compliance with Law.
()There is no material claim, action, suit, proceeding,
arbitration, investigation, hearing or notice of hearing,
pending or, to the knowledge of the Company or the Executive
Shareholders, threatened, by or before any court or
governmental or administrative agency or authority or private
arbitration tribunal, by, against or involving the Company or
its properties, assets, business or personnel, nor, to the
knowledge of the Company or the Executive Shareholders, are
there any facts that could give rise to any such claim,
action, suit, proceeding, arbitration, investigation or
hearing, except with respect to the Old Indiana Foreclosure.
Neither the Company nor any of its officers, directors or
employees is a party to, or bound by, any material judgment,
writ, injunction, order, award or decree (or agreement
entered into in any governmental, judicial or arbitration
proceeding) with respect to or affecting the properties,
assets, business or personnel of the Company, except with
respect to the Old Indiana Foreclosure. Neither the Company
nor any of its officers, directors or employees has been
permanently or temporarily enjoined or barred by order,
judgment or decree of any court or other tribunal or any
governmental agency or self-regulatory body from engaging in,
or continuing any conduct or practice in connection with, the
business of the Company.
()The Company has all necessary permits, licenses and other
authorizations required to conduct its business as conducted
and as proposed to be conducted, and the Company has been
operating its business pursuant to and in compliance with the
terms of all such permits, licenses and other authorizations,
except for such permits, licenses and authorizations the
failure of which to have or operate in compliance with would
not have a material adverse effect on the Company. There is
no existing law, rule, regulation or order, and the Company
and the Executive Shareholders are not aware of any proposed
law, rule, regulation or order, whether Federal, state or
local, which would prohibit or restrict the Company from, or
otherwise materially adversely affect the Company in,
conducting its business in any jurisdiction in which it is
now conducting business or in which it proposes to conduct
business.
()The Company is not in violation of, and, to the knowledge
of the Company and the Executive Shareholders, there is no
basis for any claim that the Company is in violation of, any
federal, state, local or foreign law, ordinance, rule,
regulation, order or decree currently in effect or, to the
knowledge of the Company and the Executive Shareholders,
proposed to be adopted, the violation of which would have a
material adverse effect on the Company. The Company has not
received notice from any governmental authority alleging
noncompliance with, or any affirmative obligation to correct,
either immediately or over a period of time, any state of
facts under any law, ordinance, rule, regulation, order or
decree, and, to the knowledge of the Company and the
Executive Shareholders, there is no basis for the allegation
of any such noncompliance.
SECTION .Proprietary Information of Third Parties. To the
knowledge of the Company and the Executive Shareholders, no
third party has claimed or has reason to claim that any
person employed by the Company has (a) violated or may be
violating any of the terms or conditions of his employment,
non-competition or nondisclosure agreement with such third
party, (b) disclosed or may be disclosing or utilized or may
be utilizing any trade secret or proprietary information or
documentation of such third party or (c) interfered or may be
interfering in the employment relationship between such third
party and any of its present or former employees. No third
party has requested information from the Company which
suggests that such a claim might be contemplated. To the
knowledge of the Company or the Executive Shareholders, none
of the execution or delivery of this Agreement, or the
carrying on of the business of the Company as officers,
employees or agents by any officer, director or key employee
of the Company, or the conduct or proposed conduct of the
business of the Company, will conflict with or result in a
breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or
instrument under which any such person is obligated.
SECTION .Intellectual Properties. The Company owns or
possesses adequate licenses or other valid rights to use,
without the making of any payment to others (or the
obligation to grant rights to others in exchange), all of the
Intellectual Property used in the conduct of its businesses.
The conduct of the business of the Company as currently being
conducted or as presently proposed to be conducted does not
and will not infringe, conflict with, misappropriate or
otherwise misuse any rights to Intellectual Property of
others. The validity of and title to the Intellectual
Property owned by or licensed to the Company has not been
questioned in any litigation to which the Company is a party,
nor, to the knowledge of the Company and the Executive
Shareholders, is any such litigation threatened. Neither the
Company nor either Executive Shareholder knows of any
unauthorized use, infringement, misappropriation or other
misuse by others of any Intellectual Property owned by or
licensed to the Company. "Intellectual Property" means (a)
all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements
thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and
reexaminations thereof, (b) all trademarks, service marks,
trade dress, logos, slogans, trade names, and corporate
names, together with all translations, adaptations,
derivations and combinations thereof and including all
goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (d) all
trade secrets and confidential business information
(including ideas, research, know-how, technical data,
customer lists, franchisor data, underwriting procedures and
business and marketing plans and proposals), (e) all computer
software (including data and related documentation), (f) all
other proprietary rights and (g) all copies and tangible
embodiments thereof (in whatever form or medium).
SECTION .Title to Properties. The Company has good, clear
and marketable title to its properties and assets reflected
on the December Balance Sheet or acquired by it since the
date of the December Balance Sheet (other than properties and
assets disposed of in the ordinary course of business since
the date of the December Balance Sheet), and all such
properties and assets are free and clear of mortgages,
pledges, security interests, liens, charges, claims,
restrictions and other encumbrances (including without
limitation, easements and licenses), except for liens for
current taxes not yet due and payable and minor imperfections
of title, if any, not material in nature or amount and not
materially detracting from the value or impairing the use of
the property subject thereto or impairing the operations or
proposed operations of the Company, and except for liens and
encumbrances granted pursuant to the Bond Indenture or to
third party lenders to the Company pursuant to financing
arrangements disclosed in the Disclosure Schedule ("Financing
Liens").
SECTION .Leasehold Interests. Each lease or agreement to
which the Company is a party under which it is a lessee of
any property, real or personal, is a valid and subsisting
agreement, duly authorized and entered into, without any
default of the Company thereunder and, to the knowledge of
the Company and the Executive Shareholders, without any
default thereunder of any other party thereto. No event has
occurred and is continuing which, with due notice or lapse of
time or both, would constitute a default or event of default
by the Company under any such lease or agreement or, to the
knowledge of the Company or the Executive Shareholders, by
any other party thereto. The Company's possession of such
property has not been disturbed and, to the knowledge of the
Company and the Executive Shareholders, no claim has been
asserted against the Company adverse to its rights in such
leasehold interests. The Company does not own any real
property.
SECTION .Insurance.
()The Disclosure Schedule sets forth a list of all insurance
policies and fidelity and surety bonds owned by the Company
or naming the Company as an insured (except for insurance
policies of lessees under Lease Agreements, which policies
name the Company as an additional insured), covering the
physical properties, assets, business and employees of the
Company, and sets forth with respect to each such policy:
the annual premium, expiration date, name and address of
agent, and a brief description of coverage. There are no
disputes with underwriters under any such insurance policies,
and all premiums due and payable thereunder have been paid.
Except as set forth in the Disclosure Schedule: (i) there
are no pending or threatened terminations, non-renewals or
premium increases with respect to any such policies or bonds;
(ii) neither the Company nor the Executive Shareholders has
knowledge of any conditions or circumstances that might
result in such termination or increase; (iii) no insurance
policies, other than workers compensation policies, are
subject to any retrospective premium adjustment; (iv) all
information supplied by the Company in applications for such
policies is true and correct in all material respects, and
the Company has complied with all reporting requirements
under such policies; and (v) the physical properties, assets
and business operations of the Company are in substantial
compliance with all conditions contained in such policies or
bonds.
()There are no material outstanding or unsatisfied
requirements or recommendations by any insurance company that
issued a policy with respect to any of the properties,
assets, business or employees of the Company or by any
governmental authority requiring or recommending any repairs
or other work to be done on or with respect to, or requiring
or recommending any equipment or facilities to be installed
on or in connection with, the properties or assets of the
Company or requiring or recommending any material change in
the business operations of the Company.
SECTION .Taxes. The Company has filed all tax returns,
Federal, state and local, required to be filed by it, and the
Company has paid all taxes shown to be due by such returns as
well as all other taxes, assessments and governmental charges
which have become due or payable, including without
limitation all taxes which the Company is obligated to
withhold from amounts owing to employees, creditors and third
parties, except to the extent any such taxes are being
contested in good faith by the Company and are described in
the Disclosure Schedule. The Company has established
adequate reserves for all taxes accrued but not yet payable.
The Federal income tax returns of the Company have never been
audited by the Internal Revenue Service. No deficiency
assessment with respect to or proposed adjustment of the
Company's Federal, state, county or local taxes is pending
or, to the knowledge of the Company and the Executive
Shareholders, threatened. There is no tax lien, whether
imposed by any Federal, state, county or local taxing
authority, outstanding against the assets, properties or
business of the Company. Neither the Company nor any of its
present or former shareholders has ever filed an election
pursuant to Section 1362 of the Internal Revenue Code of
1986, as amended (the "Code"), that the Company be taxed as
an S corporation.
SECTION .Lease Agreements.
() Attached to the Disclosure Schedule are copies of the
Company's standard forms (the "Standard Forms") of agreements
for the lease of equipment by the Company in the ordinary
course of its business ("Lease Agreements").
()Attached to the Disclosure Schedule is a copy of the
Company's
most recent Active Lease Report, which sets forth a true and
accurate description of each Lease Agreement in effect as of
the date thereof.
()The Company has good title to all Lease Agreements and
equipment that is subject to any Lease Agreement (the "Leased
Equipment"), in each case, free and clear of all mortgages,
liens, encumbrances, security interests, adverse claims,
contracts of sale, restrictions on use or transfer or other
defects of title granted by the Company, except (i) security
interests granted to the Company, (ii) the rights of lessees
of Leased Equipment as set forth on the Standard Forms, (iii)
artisans' or landlords' liens, (iv) defects in title that
individually would not result in a loss and (v) Financing
Liens.
()Each Lease Agreement and all instruments granted to the
Company as security for the performance of any lessee or
obligor under such Lease Agreement (i) were entered into in
bona fide transactions for valuable consideration and (ii) to
the knowledge of the Company and the Executive Shareholders,
constitute the valid and binding obligations of each lessee
or obligor thereunder, enforceable against each such party in
accordance with their respective terms.
()Each Lease Agreement, together with its related documents
retained together with such Lease Agreement in the records of
the Company, constitutes the sole
and entire agreement between the lessee or other obligor
thereunder and the Company
respecting the Leased Equipment subject to such Lease
Agreement.
()The Company has a valid and perfected first priority
security interest in all Leased Equipment, and all filings
that are necessary or prudent to perfect the Company's
security or other interest in Leased Equipment, have been
duly and timely made.
()There has not occurred any default by the Company under any
Lease Agreement, or any event which, with the passage of time
or at the election of the lessee or other obligor thereunder,
would become a default by the Company thereunder.
()To the knowledge of the Company and the Executive
Shareholders, there has not occurred any material default by
any lessee or other obligor under any Lease Agreement. For
purposes of this Section 2.15(h), a "material default" is a
default which would cause the Company, consistent with
prudent business practices, to consider declaring a default
under the applicable Lease Agreement.
() Except as set forth in the Disclosure Schedule, the
Company has not rewritten or amended any Lease Agreement
following (or in contemplation of) any event which
constituted a default or, with the passage of time or at the
election of the Company, would have become a default by the
lessee or other obligor thereunder.
() All payments under Lease Agreements, as shown on the
records of the Company, were made on or about the dates
indicated in such records and were made by the persons shown
as indebted or obligated with respect to such Lease
Agreements.
()To the knowledge of the Company and the Executive
Shareholders, there are no claims or defenses of any lessee
or other obligor with respect to any Lease Agreement that is
in monetary default, including set-offs, counterclaims, right
of cancellation, lack of consideration, fraud, forgery or
alteration.
()The Company is not a party to any Lease Agreement with any
affiliate of the Company or of any director, officer,
employee, agent or shareholder of the Company.
() No consent is required to be obtained by the Company from
any lessee or other obligor with respect to any Lease
Agreement in connection with the execution, delivery and
performance by the Company of this Agreement or the
consummation of the transactions contemplated hereby.
()The Disclosure Schedule sets forth a list of each Lease
Agreement where any amount required to be paid to the Company
by the lessee or other obligor thereunder is past due, in
accordance with the terms of such Lease Agreement, for a
period of more than 30 days.
()The Company does not purchase equipment that is not, or
does not become, at the time of such purchase, subject to a
valid Lease Agreement.
The Company has made available to the Purchasers, prior to
the date of this Agreement, true and complete copies of all
Lease Agreements, and all amendments and exhibits thereto.
SECTION .Other Agreements. The Company is not a party to or
otherwise bound by any written or oral:
()agreement for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in
excess of its normal operating requirements;
()bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or
other plan, agreement or understanding pursuant to which
benefits are provided to any employee of the Company (other
than group insurance plans applicable to employees
generally);
()agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or
security interest on, any asset of the Company, including,
without limitation, any factoring agreement or agreement for
the sale or assignment of Lease Agreements or accounts
receivable;
()Lease Agreement, other than Lease Agreements entered into
in the ordinary course of business on the Standard Forms
(without any material modification of such Standard Forms);
()assignment, license, royalty agreement or other agreement
with respect to any Intellectual Property;
()agreement respecting the terms of employment of any
manager, employee, director, officer, consultant or
management company;
()agreement or commitment for the incurrence of any capital
expenditures or the acquisition or construction of any fixed
asset (excluding Leased Equipment) that requires payment of
more than ten thousand dollars ($10,000) in any one case or
twenty thousand dollars ($20,000) in the aggregate for all
such expenditures;
()agreement or commitment for the purchase or provision of
any products or services from or to any of its present or
former affiliates;
()agreement or commitment with any sales agent or
representative;
()contract or agreement limiting the freedom of the Company
or any of its directors, officers, employees or agents to
engage in or compete in any line of business or with any
person or in any area or to use or disclose any information;
()agreement, statute or regulation giving any person the
right to renegotiate or require a reduction in price or
refund of any payments previously made;
()contract or agreement granting any person any right to
purchase any rights, assets or property of the Company, other
than this Agreement; or
()agreement or commitment with any manufacturer or
distributor of equipment of the type leased by the Company in
the ordinary course of its business.
The Company has delivered or made available to the
Purchasers, prior to the date of this Agreement, true and
complete copies of such contracts, agreements, commitments,
indentures, leases, mortgages, arrangements and other
instruments and all amendments and exhibits thereto (or, if
they be oral, true and complete written summaries thereof)
required to be set forth in the Disclosure Schedule pursuant
to this Section 2.16 (collectively, the "Commitments"). Each
of the Commitments is valid, in full force and effect and
enforceable in accordance with its terms, and the Company
has, in all material respects, fulfilled, or taken all action
reasonably necessary to enable it to fulfill when due, all of
its obligations thereunder. There has not occurred any
default by the Company, or any event which, with the passage
of time or at the election of any person other than the
Company, would become a default under any of the Commitments,
nor has there occurred, to the knowledge of the Company or
the Executive Shareholders, any default by others or any
event which, with the passage of time or at the election of
the Company, would become a default under any of the
Commitments. Neither the Company nor any other party is in
arrears in respect of the performance or satisfaction of the
terms or conditions on its part to be performed or satisfied
under any of the Commitments, and no waiver or indulgence has
been granted by any of the parties thereto.
SECTION .Assumptions, Guaranties, Etc. of Indebtedness of
other Persons. The Company has not assumed, guaranteed,
endorsed or otherwise become directly or contingently liable
on any indebtedness of any other person (including, without
limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to
supply funds to or otherwise invest in the debtor, or
otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
SECTION .Disclosure. Neither this Agreement, the Disclosure
Schedule, any Company Ancillary Document, any Executive
Shareholder Ancillary Document, nor the financial projections
and business plan included in the Disclosure Schedule (such
financial projections and business plan collectively, the
"Business Plan"), contains an untrue statement of a material
fact or omits a material fact necessary to make the
statements contained herein or therein not misleading. There
is no fact which the Company has not disclosed to the
Purchasers and of which the Company or either Executive
Shareholder is aware which materially and adversely affects
or could reasonably be expected to materially and adversely
affect the business, prospects, financial condition,
operations, property or affairs of the Company. The
financial projections and other estimates contained in the
Business Plan were prepared by the Company based on the
Company's experience in the industry and on assumptions of
fact and opinions as to future events which the Company and
the Executive Shareholders, at the date of the issuance of
the Business Plan, believed to be reasonable. As of the date
hereof no facts have come to the attention of the Company or
either Executive Shareholder which would, in its or his
opinion, require the Company to revise or amplify the
assumptions underlying such projections and other estimates
or the conclusions derived therefrom.
SECTION .SEC Documents. The Company has filed all documents
required to be filed by it with the SEC. As of their
respective dates, all documents filed by the Company with the
SEC (the "Company SEC Documents") complied in all material
respects with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as the case may
be, and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial
statements of the Company included in the Company SEC
Documents complied as to form in all material respects with
the applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited
statements, as permitted by Form 10-QSB of the SEC) applied
on a consistent basis during the periods involved and fairly
present the financial position of the Company as at the
respective dates thereof and the results of operations and
cash flows for the respective periods then ended (subject, in
the case of the unaudited statements, to normal year-end
audit adjustments and to any other adjustments described
therein).
SECTION .Brokers. Except for the fee payable pursuant to
Section 9.01(b) and a fee of $150,000 payable to Deloitte &
Touche, LLP (of which $100,000 is payable at the Closing and
$50,000 will be payable on the Purchase Date (as defined in
Section 8.01), if any), the Company has no contract,
arrangement or understanding with any broker, finder or
similar agent with respect to the transactions contemplated
by this Agreement.
SECTION .Transactions with Affiliates. Except for employment
arrangements currently in effect between the Company and its
officers and employees with respect to their employment by
the Company in such capacities, no director, officer,
employee or shareholder of the Company, or member of the
family of any such person, or any corporation, partnership,
trust or other entity in which any such person, or any member
of the family of any such person, has a substantial interest
or is an officer, director, trustee, partner or holder of
more than 5% of the outstanding equity thereof, is a party to
any transaction with the Company, including any contract,
agreement or other arrangement providing for the employment
of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to any such
person or firm.
SECTION .Related Entities. The Disclosure Schedule sets
forth a list of all persons, other than the Company, (a)
which are, directly or indirectly, controlled by either of
the Executive Shareholders or (b) of which either Executive
Shareholder (or both Executive Shareholders together),
directly or indirectly, is the holder of at least 5% of the
outstanding equity interests (a "Related Entity").
SECTION .Employees. No officer or key employee of the Company
has advised the Company (orally or in writing) that he or she
intends to terminate employment with the Company. The
Company has complied in all material respects with all
applicable laws relating to the employment of labor,
including provisions relating to wages, hours, equal
opportunity, collective bargaining and the payment of Social
Security and other taxes, and with the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). The
Company is not a party to any collective bargaining agreement
or contract with, or commitment to, any labor union or
association. The Company has not experienced any material
work stoppage, and there is no work stoppage or other
concerted action, grievance, claim of unfair labor practices
or dispute existing or threatened against the Company. There
is no disputed request for representation or other
representation questions existing or threatened, and no union
organization effort is underway, respecting the employees of
the Company.
SECTION .U.S. Real Property Holding Corporation. The Company
is not now and has never been a "United States real property
holding corporation", as defined in Section 897(c)(2) of the
Code and Section 1.897-2(b) of the Regulations promulgated by
the Internal Revenue Service, and the Company has filed with
the Internal Revenue Service all statements, if any, with its
United States income tax returns which are required under
Section 1.897-2(h) of such Regulations.
SECTION .Environmental Protection. The Company has not
caused or allowed, or contracted with any party for, the
generation, use, transportation, treatment, storage or
disposal of any Hazardous Substances in connection with the
operation of its business or otherwise. The Company, the
operation of its business, and any real property that the
Company leases or otherwise occupies or uses (the "Premises")
are in compliance with all applicable Environmental Laws and
orders or directives of any governmental authorities having
jurisdiction under such Environmental Laws, including,
without limitation, any Environmental Laws or orders or
directives with respect to any cleanup or remediation of any
release or threat of release of Hazardous Substances. The
Company has not received any citation, directive, letter or
other communication, written or oral, or any notice of any
proceeding, claim or lawsuit, from any person arising out of
the ownership or occupation of the Premises, or the conduct
of its operations, and the Company is not aware of any basis
therefor. The Company has obtained and is maintaining in
full force and effect all necessary permits, licenses and
approvals required by all Environmental Laws applicable to
the Premises and the business operations conducted thereon,
and is in compliance with all such permits, licenses and
approvals. The Company has not caused or allowed a release,
or a threat of release, of any Hazardous Substance onto, at
or near the Premises, and, to the knowledge of the Company
and the Executive Shareholders, neither the Premises nor any
property at or near the Premises has ever been subject to a
release, or a threat of release, of any Hazardous Substance.
For the purposes of this Agreement, the term "Environmental
Laws" shall mean any Federal, state or local law or ordinance
or regulation pertaining to the protection of human health or
the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Sections 9601, et seq., the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Sections 11001, et seq., and the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901, et seq.; and the term
"Hazardous Substances" shall include oil and petroleum
products, asbestos, polychlorinated biphenyls, urea
formaldehyde and any other materials classified as hazardous
or toxic under any Environmental Laws.
SECTION .ERISA. Neither the Company nor any entity required
to be aggregated with the Company under Sections 414(b), (c),
(m) or (n) of the Code sponsors, maintains, has any
obligation to contribute to, has any liability under, or is
otherwise a party to, any Benefit Plan. For purposes of this
Agreement, "Benefit Plan" shall mean any plan, fund, program,
policy, arrangement or contract, whether formal or informal,
which is in the nature of an employee pension benefit plan
(as defined in Section 3(2) of ERISA), an employee welfare
benefit plan (as defined in Section 3(1) of ERISA) or a
bonus, deferred compensation, severance, salary continuation,
incentive, insurance or fringe benefit plan, program or
arrangement or any similar plan, program or arrangement.
With respect to each Benefit Plan listed in the Disclosure
Schedule, to the extent applicable:()each such Benefit Plan
has been maintained and operated in all material respects in
compliance with its terms and with all applicable provisions
of ERISA, the Code and all regulations, rulings and other
authority issued thereunder;()all contributions required by
law to have been made under each such Benefit Plan (without
regard to any waivers granted under Section 412 of the Code)
to any fund or trust established thereunder or in connection
therewith have been made by the due date thereof;()there has
not been any failure to make any contributions or to pay any
amounts in accordance with the terms of the Benefit Plans,
ERISA or any other law applicable to the Benefit Plans, and
all contributions and payments with respect to Benefit Plans
with respect to periods prior to December 31, 1996 have been
made or appropriately accrued on the December Balance
Sheet;()each such Benefit Plan intended to qualify under
Section 401(a) of the Code is the subject of a favorable
unrevoked determination letter issued by the Internal Revenue
Service as to its qualified status under the Code, which
determination letter may still be relied upon as to such tax
qualified status, and no circumstances have occurred that
would adversely affect the tax qualified status of any such
Benefit Plan;()the actuarial present value of all accrued
benefits under each such Benefit Plan subject to Title IV of
ERISA did not, as of the latest valuation date of such
Benefit Plan, exceed the then current value of the assets of
such Benefit Plan allocable to such accrued benefits, all as
based upon the actuarial assumptions and methods currently
used for such Benefit Plan;()none of such Benefit Plans that
are "employee welfare benefit plans" as defined in Section
3(1) of ERISA provides for continuing benefits or coverage
for any participant or beneficiary of a participant after
such participant's termination of employment; and()neither
the Company nor any trade or business (whether or not
incorporated) under common control with the Company within
the meaning of Section 4001 of ERISA has, or at any time has
had, any obligation to contribute to any "multiemployer plan"
as defined in Section 3(37) of ERISA or any plan subject to
Section 4063 or 4064 of ERISA.
SECTION .Illegal Payments. There is not now, and there has
never been, any employment by the Company of, or beneficial
ownership in the Company by, any governmental or political
official. Neither the Company nor any of its former or
current officers, directors, employees, agents or
representatives has made, directly or indirectly, with
respect to the Company or its business activities, any (a)
bribes or kickbacks, (b) illegal political contributions, (c)
payments from corporate funds not recorded on the books and
records of the Company, (d) payments from corporate funds
that were falsely recorded on the books and records of the
Company, (e) payments from corporate funds to governmental
officials in their individuals capacities for the purpose of
affecting their action or the action of the government they
represent to obtain favorable treatment in securing business
or licenses or to obtain special concessions or (f) illegal
payments from corporate funds to obtain or retain business.
SECTION .Interest in Competitors, Etc. Neither Executive
Shareholder, directly or indirectly, owns any interest in,
controls or is an employee, officer, director or agent of, or
consultant to, any person that is a competitor, supplier,
customer, landlord or tenant of, or otherwise concerned with
or interested in the Company.
SECTION .Books and Records. The books, records and accounts
of the Company (a) are true and complete, (b) have been
maintained in accordance with good business practices and in
compliance with all laws, ordinances, rules, regulations,
orders and decrees applicable to the Company's business, (c)
accurately present and reflect material transactions to which
the Company is or has been a party and (d) are accurately
reflected in the Financial Information. The minute books of
the Company, as previously made available to the Purchasers
and their counsel, contain accurate records of all official
meetings, and accurately reflect all other corporate
proceedings, of the shareholders and the directors of the
Company.
SECTION .Federal Reserve Regulations. The Company is not
engaged in the business of extending credit for the purpose
of purchasing or carrying margin securities (within the
meaning of Regulation G of the Board of Governors of the
Federal Reserve System), and no part of the proceeds from the
sale of the Preferred Shares or the Notes will be used to
purchase or carry any margin security or to extend credit to
others for the purpose of purchasing or carrying any margin
security or in any other manner which would involve a
violation of any of the regulations of the Board of Governors
of the Federal Reserve System.
SECTION .Limitation Regarding Executive Shareholders. The
representations and warranties in this Agreement and in any
Schedules or Exhibits hereto, to the extent given or made by
the Executive Shareholders, are given or made, in each
instance and whether or not so expressed in such
representations and warranties, on the basis of such
Executive Shareholder's actual or presumed knowledge. An
Executive Shareholder shall be deemed to have presumed
knowledge of any facts and circumstances as to which he would
have had actual knowledge if he had exercised reasonable care
in the performance of his duties on behalf of the Company.
ARTICLE .
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally, but not jointly, represents and
warrants to the Company as follows:
SECTION .Authorization of Agreements, Etc. The execution and
delivery by such Purchaser of this Agreement and each
Purchaser Ancillary Document to be delivered by such
Purchaser and the performance by such Purchaser of its
obligations hereunder and thereunder have been duly
authorized by all requisite action of such Purchaser and will
not violate any provision of law, any order of any court or
other agency of government, the governing documents of such
Purchaser or any provision of any indenture, agreement or
other instrument to which such Purchaser is bound.
SECTION .Validity. This Agreement has been duly executed and
delivered by such Purchaser and constitutes the legal, valid
and binding obligation of such Purchaser, enforceable against
such Purchaser in accordance with its terms. Each Purchaser
Ancillary Document to which such Purchaser is a party, when
executed and delivered in accordance with this Agreement,
will constitute the legal, valid and binding obligation of
such Purchaser, enforceable against such Purchaser in
accordance with its terms.
SECTION .Investment Representations. Such Purchaser (a) is
an "accredited investor" within the meaning of Rule 501
promulgated under the Securities Act and was not organized
for the specific purpose of acquiring the Preferred Shares or
the Notes and is domiciled in the state indicated by the
address of such Purchaser as set forth on Schedule I; (b) is
acquiring the Preferred Shares and the Notes being purchased
by it for its own account for the purpose of investment and
not with a view to or for sale in connection with any
distribution thereof; (c) understands that (i) the Preferred
Shares, the Conversion Shares and the Notes have not been
registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2)
thereof or Rule 505 or 506 promulgated under the Securities
Act, (ii) the Preferred Shares, the Conversion Shares and the
Notes must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or
is exempt from such registration, (iii) the Preferred Shares,
the Conversion Shares and the Notes will bear a legend to
such effect and (iv) the Company will make a notation on its
transfer books to such effect; (d) will, if such Purchaser
sells any Conversion Shares pursuant to Rule 144A promulgated
under the Securities Act, take all necessary steps in order
to perfect the exemption from registration provided thereby,
including (i) obtaining on behalf of the Company information
to enable the Company to establish a reasonable belief that
the purchaser is a qualified institutional buyer and (ii)
advising such purchaser that Rule 144A is being relied upon
with respect to such resale; (e) has total assets in excess
of $5,000,000; and (f) has received and reviewed such
documents and information concerning the Company and has had
the opportunity to conduct such discussions with management
of the Company as such Purchaser deems necessary in
connection with the purchase of the Preferred Shares and
Notes by such Purchaser. Nothing in the foregoing shall be
deemed to modify or limit any representation or warranty made
by the Company or the Executive Shareholders in this
Agreement, any Company Ancillary Document or any Executive
Shareholder Ancillary Document, or to modify or limit the
liability of the Company and the Executive Shareholders for
the inaccuracy of any such representation or warranty.
Without limiting the representations and warranties set forth
in Section 2.18, each Purchaser acknowledges that any
projections contained in the Business Plan reflect only the
Company's management's expectations regarding future events
and that such projections are not guarantees of future
results.
ARTICLE .
PRE-CLOSING COVENANTS OF THE COMPANY
The Company hereby covenants and agrees with the Purchasers
that, between the date of this Agreement and the earlier of
the Closing or the date of termination of this Agreement:
SECTION .Access to Information. The Company shall: (a)
allow the Purchasers and their counsel, accountants,
consultants and other representatives reasonable access
during normal business hours to all properties, personnel,
books, accounts, tax returns, contracts, commitments and
records of the Company; (b) provide the Purchasers with
reasonable access to all material customers of and suppliers
to the Company; (c) assure the full assistance and
cooperation of the directors, officers and employees of, and
accountants, legal counsel and other advisors to, the
Company; and (d) furnish to the Purchasers and their counsel,
accountants, consultants and other representatives all such
additional documents and financial and other information with
respect to the business and affairs of the Company as the
Purchasers or their representatives may from time to time
request. The Company and the Executive Shareholders hereby
agree that no investigation by the Purchasers or their
counsel, accountants, consultants or other representatives
shall affect or limit the scope of the representations and
warranties of the Company or the Executive Shareholders made
in this Agreement, any Company Ancillary Document or any
Executive Shareholder Ancillary Document.
SECTION .Conduct of Business. The Company shall: (a)
operate its business only in the usual, regular and ordinary
manner, consistent with past practices and, to the extent
consistent with such operation, use its best efforts to (i)
preserve its present business organization intact, (ii) keep
available the services of its present officers, employees and
agents, (iii) continue its normal marketing, advertising and
promotional expenditures and (iv) preserve its present
beneficial business relationships with customers, suppliers
and others having business dealings with it; (b) maintain its
books, records and accounts in the usual, regular and
ordinary manner and on a basis consistent with prior years;
(c) duly comply with all applicable laws; and (d) perform all
of its obligations under contracts with respect to its
assets, properties and business without default.
SECTION .Negative Covenants. Except as otherwise provided or
contemplated herein, or as the Purchasers may otherwise
consent in writing, neither the Company nor either Executive
Shareholder shall: (a) enter into any transaction or take
any action that would or is reasonably likely to result in
any of the representations and warranties made by the Company
or the Executive Shareholders in this Agreement, any Company
Ancillary Document or any Executive Shareholder Ancillary
Document not being true and correct (i) after such
transaction has been entered into or consummated or such
action has been taken or (ii) as of the Closing, except for
transactions or actions contemplated by this Agreement or
other actions (none of which shall be materially adverse to
the Company) resulting from the operation of the Company's
business in the ordinary course; (b) perform any act which,
if performed, or not perform any act which, if omitted to be
performed, would prevent or excuse the performance of its or
his obligations under this Agreement, any Company Ancillary
Document or any Executive Shareholder Ancillary Document; or
(c) publicize, advertise or, except as may be required by law
or upon advice of counsel, announce or permit any of its
directors, officers, employees or agents to publicize,
advertise or announce publicly the entering into of this
Agreement, any Company Ancillary Document or any Executive
Shareholder Ancillary Document or the terms of this Agreement
or the transactions contemplated hereby.
SECTION .Additional Financial Information. The Company shall
deliver to the Purchasers, as soon as practicable, copies of
all financial information prepared with respect to the
Company or its business for internal reporting purposes, and
all such financial information shall be prepared on a basis
consistent with prior periods except as specifically set
forth therein.
SECTION .Consents. The Company shall use its best efforts to
obtain all consents required to be set forth in the
Disclosure Schedule pursuant to Section 2.04.
SECTION .Consummation of Transactions. The Company and the
Executive Shareholders shall use their respective reasonable
best efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary to
consummate the transactions contemplated by this Agreement as
soon as practicable.
ARTICLE .
CONDITIONS
SECTION .Conditions to Purchaser's Obligations. The
obligation of each Purchaser to purchase and pay for the
Preferred Shares and the Closing Notes is subject to the
satisfaction, on or before the Closing Date, of each of the
following conditions, each of which may be waived at the
option of such Purchaser.
()Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II, any
Company Ancillary Document and any Executive Shareholder
Ancillary Document shall be true, complete and correct on and
as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of
such date, except for changes contemplated by this Agreement
or other changes (none of which shall be materially adverse
to the Company) resulting from the operation of the Company's
business in the ordinary course.
()Performance. The Company and the Executive Shareholders
shall have performed, in all material respects, all
obligations and agreements and complied with all covenants to
be performed or complied with by them on or before the
Closing Date pursuant to this Agreement, any Company
Ancillary Document or any Executive Shareholder Ancillary
Document.
()Closing Certificates. The Purchasers shall have received
certificates of each of the Executive Shareholders, dated the
Closing Date, in form and substance reasonably satisfactory
to the Purchasers and their counsel (i) certifying that the
conditions set forth in Section 5.01(a) and 5.01(b) have been
satisfied and (ii) certifying that resolutions approving this
Agreement and each Company Ancillary Document and the
transactions contemplated hereby and thereby have been duly
adopted by the Board of Directors of the Company.
()Proceedings Satisfactory. All actions, proceedings,
instruments and documents required to carry out the
transactions contemplated by this Agreement or incidental
hereto, and all other related legal matters, shall be
reasonably satisfactory to Altheimer & Gray, counsel to the
Purchasers, and such counsel shall have been furnished with
such other instruments and documents as they shall have
reasonably requested.
()Opinion of Company's Counsel. The Purchasers shall have
received from Baker & Daniels, counsel for the Company and
the Executive Shareholders, an opinion dated the Closing
Date, with respect to the matters set forth on Exhibit C.
()Review of Business and Legal Matters. The Purchasers and
their accountants and counsel shall have completed a review
of business, accounting and legal matters with respect to the
Company, and nothing shall have come to the attention of the
Purchasers or their counsel or accountants that causes the
Purchasers to conclude that (i) the Financial Information
does not present fairly the financial position and results of
operations of the Company as of their respective dates, (ii)
all material customer or supplier relationships of the
Company as of December 31, 1996 or arising since December 31,
1996, will not be available to the Company on substantially
the same terms following the Closing or (iii) there is any
material breach or inaccuracy in the representations and
warranties of the Company or the Executive Shareholders set
forth in this Agreement, any Company Ancillary Document or
any Executive Shareholder Ancillary Document.
()No Material Adverse Change. Since December 31, 1996, there
shall not have occurred and be continuing, and no event shall
have occurred which (in the judgment of the Purchasers) can
be reasonably expected to result in, any material adverse
change in the properties, business, condition (financial or
otherwise), operations or prospects of the Company.
()Voting Agreement. The Company and the Executive
Shareholders shall have executed and delivered a Voting
Agreement in the form of Exhibit D (the "Voting Agreement").
()Registration Rights Agreement. The Company shall have
executed and delivered a Registration Rights Agreement in the
form of Exhibit E (the "Registration Rights Agreement").
()Key Person Life Insurance. The Company shall have applied
for policies of "key person" life insurance on the lives of
each of the Executive Shareholders, with terms as set forth
in Section 6.05; each Executive Shareholder shall have
complied with all requirements requested by the respective
insurers under such policies; and neither the Company nor
either Executive Shareholder shall have any reason to believe
that such policies will not be issued promptly after the
Closing Date.
() Series B Shareholders. Each of the Series B Holders shall
have executed a binding Series B Redemption Agreement with
the Company.
() Other Approvals. All consents, authorizations and
approvals, waivers or exemptions, and filings and
registrations, required to be obtained from or made with any
person in connection with the execution, delivery and
performance by the Company or the Executive Shareholders of
this Agreement, the Company Ancillary Documents and the
Executive Shareholder Ancillary Documents and the
consummation by the Company and the Executive Shareholders of
the transactions contemplated hereby and thereby shall have
been obtained or made, including all such consents,
authorizations and approvals required to be set forth in the
Disclosure Schedule pursuant to Section 2.04, and all
required filings shall have become effective.
()Fees. The Company shall have paid in accordance with
Section 9.01(a) the fees and expenses of the Purchasers
invoiced at the Closing; provided, however, that such fees
and expenses may be paid by the Company out of the proceeds
to the Company of the sale of the Preferred Shares and the
Notes.
SECTION .Conditions to Obligations of the Company and the
Executive Shareholders. The obligations of the Company and
the Executive Shareholders to consummate the transactions
contemplated hereby are subject to the satisfaction, on or
before the Closing Date, of each of the following conditions,
each of which may be waived at the option of the Company or
such Executive Shareholder.
()Representations and Warranties to be True and Correct. The
representations and warranties contained in Article III and
any Purchaser Ancillary Document shall be true, complete and
correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on
and as of such date.
()Performance. The Purchasers shall have performed, in all
material respects, all obligations and agreements and
complied with all covenants to be performed or complied with
by them on or before the Closing Date pursuant to this
Agreement or any Purchaser Ancillary Document.
()Closing Certificates. The Company shall have received
certificates of each of the Purchasers, dated the Closing
Date, in form and substance reasonably satisfactory to the
Company and its counsel certifying that the conditions set
forth in Section 5.02(a) and 5.02(b) have been satisfied.
()Proceedings Satisfactory. All actions, proceedings,
instruments and documents required to carry out the
transactions contemplated by this Agreement or incidental
hereto, and all other related legal matters, shall be
reasonably satisfactory to Baker & Daniels, counsel to the
Company and the Executive Shareholders, and such counsel
shall have been furnished with such other instruments and
documents as they shall have reasonably requested.
()Voting Agreement. The Purchasers shall have executed and
delivered the Voting Agreement.
() Series B Shareholders. Each of the Series B Holders shall
have executed a binding Series B Redemption Agreement with
the Company.
()Executive Share Agreement. The Purchasers shall have
executed and delivered an Executive Share Agreement in the
form of Exhibit F.
ARTICLE .
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers
that:
SECTION .Financial Statements, Reports, Etc. The Company
shall furnish to each holder of Preferred Shares or Notes as
reflected in the books and records of the
Company:
()within 90 days after the end of each fiscal year of the
Company, a consolidated balance sheet of the Company as of
the end of such fiscal year and the related consolidated
statements of income, shareholders' equity and cash flows for
the fiscal year then ended, prepared in accordance with
generally accepted accounting principles and certified by a
firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company;
()within 30 days after the end of each calendar month in each
fiscal year of the Company, an unaudited consolidated balance
sheet of the Company and the related unaudited consolidated
statements of income, shareholders' equity and cash flows,
prepared in accordance with generally accepted accounting
principles and certified by the Chief Financial Officer of
the Company, such consolidated balance sheet to be as of the
end of such month and such consolidated statements of income,
shareholders' equity and cash flows to be for such month and
for the period from the beginning of the fiscal year to the
end of such month, in each case with comparative statements
for the prior fiscal year;
()at the time of delivery of each annual financial statement
pursuant to Section 6.01(a), a certificate executed by the
Chief Financial Officer of the Company stating that such
officer has caused this Agreement, the Series C Convertible
Preferred Stock and the Notes to be reviewed and has no
knowledge of any default by the Company in the performance or
observance of any of the provisions of this Agreement, the
Series C Convertible Preferred Stock or the Notes or, if such
officer has such knowledge, specifying such default and the
nature thereof;
()at the time of delivery of each monthly financial statement
pursuant to Section 6.01(b), a management narrative report
explaining all significant variances from forecasts and all
significant current developments in staffing, marketing,
sales and operations;
()no later than 30 days prior to the start of each fiscal
year of the Company, consolidated capital and operating
expense budgets of the Company and consolidated cash flow and
income and loss projections for the Company and its
subsidiaries in respect of such fiscal year, all itemized in
reasonable detail and prepared on a monthly basis, and,
promptly after preparation, any revisions to any of the
foregoing;
()promptly following receipt by the Company, each audit
response letter, accountant's management letter and other
written reports submitted to the Company by its independent
public accountants in connection with an annual or interim
audit of the books of the Company or any of its subsidiaries;
()immediately upon its knowledge thereof, notice of all
actions, suits, claims, proceedings, investigations and
inquiries of the type described in Section 2.08(a) and notice
of any other event or occurrence that could materially
adversely affect the Company or any of its subsidiaries;
()promptly upon sending, making available or filing the same,
all press releases, reports and financial statements that the
Company sends or makes available to its shareholders or
directors or files with the SEC;
()copies of all notices, reports, minutes and consents to or
of the Board of Directors of the Company or any committee
thereof at the time and in the manner as they are provided to
the Board of Directors or any committee, but in no event
later than seven days prior to any scheduled meeting of the
Board of Directors or such committee; and
()promptly, from time to time, such other information
regarding the business, prospects, financial condition,
operations, property or affairs of the Company and its
subsidiaries as such holder reasonably may request.
SECTION .Right of Participation. The Company shall, prior to
any proposed issuance by the Company of any of its equity
securities (or securities that are convertible, exercisable
or exchangeable into or for (whether directly or indirectly)
equity securities of the Company), offer to each Purchaser by
written notice the right, for a period of 30 days, to
purchase for cash (at a purchase price equal to the price or
other consideration for which such securities are to be
issued) a number of such securities so that, after giving
effect to such issuance (and the conversion, exercise and
exchange into or for (whether directly or indirectly) equity
securities of the Company of all such securities that are so
convertible, exercisable or exchangeable), such Purchaser
will continue to maintain its same proportionate equity
ownership in the Company as of the date of such notice
(treating each Purchaser, for the purpose of such
computation, as the holder of the number of shares of Common
Stock held by such Purchaser on the date such offer is made
and the number of shares of Common Stock which would be
issuable to such Purchaser upon conversion, exercise and
exchange of all securities (including but not limited to the
Preferred Shares) held by such Purchaser on the date such
offer is made that are convertible, exercisable or
exchangeable into or for (whether directly or indirectly)
equity securities of the Company, and assuming the like
conversion, exercise and exchange of all such other
securities held by other persons); provided, however, that
the participation rights of the Purchasers pursuant to this
Section 6.02 shall not apply to securities issued (a) upon
conversion of any of the Preferred Shares, (b) as a stock
dividend or upon any subdivision of shares of Common Stock,
provided that the securities issued pursuant to such stock
dividend or subdivision are limited to additional shares of
Common Stock, (c) solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its
subsidiaries of all or substantially all of the stock or
assets of any other entity, (d) pursuant to a firm commitment
public offering or (e) pursuant to the exercise of options to
purchase Common Stock granted to directors, officers,
employees or consultants of the Company pursuant to a stock
option plan approved by the affirmative vote of the holders
of at least a majority of the outstanding shares of Series C
Convertible Preferred Stock. The Company's written notice to
the Purchasers shall describe the securities proposed to be
issued by the Company and specify the number, price and any
other terms of the offer. Each Purchaser may accept the
Company's offer as to the full number of securities offered
to it or any lesser number, by written notice thereof given
by it to the Company prior to the expiration of the aforesaid
30 day period, in which event the Company shall promptly sell
and such Purchaser shall buy, upon the terms specified, the
number of securities agreed to be purchased by such
Purchaser. The Company shall be free at any time prior to 90
days after the date of its notice of offer to the Purchasers,
to offer and sell to any third party or parties the remainder
of such securities proposed to be issued by the Company, at a
price and on terms no less favorable to the Company than
those specified in such notice of offer to the Purchasers.
The Company shall not sell such securities as shall not have
been purchased within such 90-day period without again
complying with this Section 6.02.
SECTION .Corporate Existence. The Company shall maintain its
corporate existence, rights and franchises in full force and
effect, except to the extent the Company determines that the
preservation of any such right or franchise is no longer
desirable in the conduct of the Company's business, and
subject to the Company's right to engage in a merger or
similar transaction otherwise approved in accordance with
this Agreement and all applicable legal requirements.
SECTION .Properties, Business, Insurance. The Company shall
maintain and cause each of its subsidiaries to maintain as to
their respective properties and business, with financially
sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such
amounts as is customary for companies similarly situated.
SECTION ."Key Person" Insurance. As promptly as practicable
after the Closing Date, the Company shall purchase, and
thereafter the Company shall maintain in effect, "key person"
life insurance policies, payable to the Company, on the lives
of each of the Executive Shareholders (so long as they remain
employees of the Company), in the amounts of $4,500,000 for
McCoy and $2,000,000 for Wildman. The Company shall not
cause or permit any assignment or change in beneficiary and
shall not borrow against any such policy. If requested by
Purchasers holding at least a majority of the outstanding
Preferred Shares, the Company will add one designee of such
Purchasers as a notice party for each such policy (if
permitted) and shall request that the issuer of each policy
provide such designee with ten days' notice before such
policy is terminated (for failure to pay premiums or
otherwise) or assigned or before any change is made in the
beneficiary thereof.
SECTION .Inspection, Consultation and Advice. The Company
shall permit and cause each of its subsidiaries to permit
each Purchaser and its designees to visit and inspect any of
the properties of the Company and its subsidiaries, examine
their books and take copies and extracts therefrom and
discuss the affairs, finances and accounts of the Company and
its subsidiaries with their respective officers, employees
and public accountants (and the Company hereby authorizes
said accountants to discuss with such Purchaser and such
designees such affairs, finances and accounts), all at
reasonable times and upon reasonable notice and upon the
execution by any such Purchaser (or its designee) of any
appropriate confidentiality agreement reasonably requested by
the Company; provided, however, that nothing herein shall
require the Company to violate the terms of any
confidentiality or similar agreement to which it is a party
and which has been approved by the Board of Directors of the
Company.
SECTION .Restrictive Agreements Prohibited. Neither the
Company nor any of its subsidiaries shall become a party to
any agreement which by its terms restricts the Company's
performance of its obligations under this Agreement, any
Company Ancillary Document or the Charter.
SECTION .Transactions with Affiliates. Except as otherwise
approved by the Board of Directors of the Company and the
holders of two-thirds of the Preferred Shares then
outstanding, neither the Company nor any of its subsidiaries
shall knowingly enter into any transaction with any director,
officer, employee or holder of more than 5% of the
outstanding shares of any class or series of capital stock of
the Company or any of its subsidiaries, member of the family
of any such person, or any corporation, partnership, trust or
other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee,
partner or holder of more than 5% of the outstanding equity
thereof, except for transactions on customary terms related
to such person's employment.
SECTION .Use of Proceeds. The Company shall use the proceeds
of the Senior Financing (as defined in Section 8.02(e)) in
accordance with the terms thereof, and shall use the proceeds
from the sale of the Preferred Shares and the Notes solely
for the financing of restaurant equipment leases in
accordance with the Business Plan, for the redemption of the
outstanding shares of Series B Preferred Stock and the
related warrants, for payment of fees and expenses incurred
in connection with the transactions contemplated by this
Agreement and for working capital.
SECTION .Board of Directors Meetings. The Company shall use
its best efforts to ensure that meetings of its Board of
Directors are held at least once during any period of six
consecutive weeks unless otherwise approved by the Board of
Directors of the Company.
SECTION .By-laws. The Company shall at all times cause its
By-laws to provide that (a) any director shall have the right
to call a meeting of the Board of Directors, any two
directors shall have the right to call a meeting of the
shareholders and any holder or holders of at least 25% of the
outstanding shares of Series C Convertible Preferred Stock
shall have the right to call a meeting of the shareholders
and (b) the number of directors fixed in accordance therewith
shall in no event conflict with any of the terms or
provisions of the Voting Agreement. Beginning as promptly as
practicable following the Closing Date, the Company shall at
all times maintain provisions in its By-laws or Charter
indemnifying all directors against liability and absolving
all directors from liability to the Company and its
shareholders to the maximum extent permitted under the laws
of the State of Indiana.
SECTION .Compliance with Laws. The Company shall comply, and
cause each subsidiary to comply, with all applicable laws,
rules, regulations and orders, noncompliance with which could
materially adversely affect its business or condition,
financial or otherwise.
SECTION .Keeping of Records and Books of Account. The
Company shall keep, and cause each subsidiary to keep,
adequate records and books of account, in which complete
entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all
financial transactions of the Company and such subsidiary,
and in which, for each fiscal year, all proper reserves for
depreciation, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
SECTION .Change in Business or Plan. Without the consent of
the holders of two- thirds of the Preferred Shares then
outstanding, the Company shall not make, or permit any
subsidiary to make, any material change in the nature of its
business as set forth in the Business Plan.
SECTION .Disposal of Property. Without the consent of the
holders of two-thirds of the Preferred Shares then
outstanding, the Company shall not, and shall not permit any
subsidiary to, sell, lease, assign, transfer or otherwise
dispose of any of its property, assets and rights, other than
in the ordinary course of business consistent with the
Business Plan.
SECTION .Payment of Obligations. The Company shall pay,
discharge or otherwise satisfy at or before maturity or
before they become delinquent, as the case may be, all of its
obligations of whatever nature, except where (a) the amount
or validity thereof is currently being contested in good
faith by appropriate proceedings, (b) reserves in conformity
with generally accepted accounting principles with respect
thereto have been provided on the books of the Company or its
subsidiaries, as the case may be, or (c) the Company shall
have posted any bond or other security required by applicable
law against the payment thereof.
SECTION .Dividends and Similar Transactions. Without the
consent of the holders of two-thirds of the Preferred Shares
then outstanding, the Company will not declare or pay any
dividends or make any other payments on its capital stock,
redeem, repurchase or retire any of its capital stock, issue
any equity security ranking, as to payment upon liquidation,
senior to or on a parity with the Preferred Shares or having
any right to vote (other than as required by law) (a "Senior
Security"), grant or issue any warrant, right or option
pertaining to, or other security convertible into, any Senior
Security, or make any distribution to its shareholders,
except (a) the payment of dividends or other distributions on
shares of Common Stock solely in the form of additional
shares of Common Stock, (b) the issuance of Conversion Shares
upon the conversion of Preferred Shares, (c) the redemption
of Preferred Shares in accordance with the terms of the
Preferred Shares, (d) the issuance of shares of Common Stock
pursuant to a stock option plan approved by the affirmative
vote of the holders of a majority of the outstanding
Preferred Shares, (e) the payment or regular quarterly
dividends on shares of Series A Preferred Stock in accordance
with the terms of the Charter as in effect on the date of
this Agreement, (f) the redemption of the Series B Preferred
Stock and the related warrants in accordance with the Series
B Redemption Agreements, (g) the acquisition of any assets or
businesses for consideration consisting in whole or in part
of capital stock of the Company, on terms approved by the
Board of Directors of the Company, and (h) a public offering
of capital stock of the Company pursuant to demand rights as
provided in the Registration Rights Agreement or with the
approval of the Board of Directors of the Company.
SECTION .Rule 144A Information. The Company shall, at all
times during which it is neither subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act nor
exempt from reporting pursuant to Rule 12g3-2(b) under the
Exchange Act, provide in writing, upon the written request of
any Purchaser or a prospective buyer of Preferred Shares or
Conversion Shares from any Purchaser, all information
required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the SEC under the Securities Act ("Rule 144A
Information"). Upon the written request of any Purchaser, the
Company shall cooperate with and assist such Purchaser or any
member of the National Association of Securities Dealers,
Inc. PORTAL system in applying to designate and thereafter
maintain the eligibility of the Preferred Shares or
Conversion Shares, as the case may be, for trading through
PORTAL (if such shares otherwise qualify for trading through
PORTAL). The Company's obligations under this Section 6.18
shall at all times be contingent upon the relevant
Purchaser's obtaining from the prospective buyer of Preferred
Shares or Conversion Shares a written agreement to take all
reasonable precautions to safeguard the Rule 144A Information
from disclosure to anyone other than a person who will assist
such buyer in evaluating the purchase of any Preferred Shares
or Conversion Shares. The covenants set forth in this
Sections 6.18 shall terminate and be of no further force or
effect as to each of the Purchasers when such Purchaser no
longer holds any shares of capital stock of the Company.
SECTION .Salary and Bonus Plan. The Company shall, as
promptly as practicable after the Closing Date, establish
salaries and a cash bonus plan consistent with the terms of
Item 18(c) of that certain Term Sheet dated January 14, 1997
with respect to the transactions contemplated by this
Agreement.
SECTION .Termination of Covenants. The covenants set forth
in this Article VI (other than those contained in Section
6.07) shall terminate and be of no further force and effect
as to any Purchaser at such time as such Purchaser no longer
holds any shares of capital stock of the Company or any Notes
or the earlier completion of a firm commitment underwritten
public offering of the Company's equity securities.
ARTICLE .
COVENANTS OF THE EXECUTIVE SHAREHOLDERS
SECTION .Transfers of Shares. Without the consent of the
holders of two-thirds of the Preferred Shares then
outstanding, neither of the Executive Shareholders shall
transfer, sell, assign, pledge, encumber or otherwise dispose
of ("Transfer") any interest in any securities of the Company
held by such Executive Shareholder at any time that any Notes
or Preferred Shares are outstanding, except that an Executive
Shareholder may Transfer securities of the Company: (a) to
any member of such Executive Shareholder's Family Group
solely for estate planning purposes, provided that in the
aggregate such Transfers are limited to no more than 50% of
the shares of Common Stock held by such Executive Shareholder
on the date of this Agreement, (b) to the personal
representative of such Executive Shareholder or a Permitted
Transferee (as defined below) who is deceased or adjudicated
incompetent or (c) upon termination of a trust or
custodianship which is a Permitted Transferee, by the trustee
of such trust or custodian of such custodianship to the
person or persons who, in accordance with the provisions of
such trust or custodianship, are entitled to receive the
securities held in trust or custody (collectively, the
"Permitted Transferees"); provided that (i) the restrictions
contained in this Section 7.01 shall continue to be
applicable to the securities after any such Transfer and (ii)
the Permitted Transferees of such securities shall have
agreed in writing to be bound by all of the provisions of
this Section 7.01. "Family Group" means the spouse and
descendants (whether natural or adopted) of an Executive
Shareholder (collectively, "Relatives"), any custodian of a
custodianship for and on behalf of a Relative who is a minor
and any trustee of a trust solely for the benefit of one or
more of the foregoing. Upon termination of any Executive
Shareholder's employment with the Company (for any reason)
and the expiration of any period during which such Executive
Shareholder is restricted from competing with the Company
pursuant to section 7.02, such Executive Shareholder shall no
longer be subject to the restrictions contained in this
Section 7.01.
SECTION .Certain Restrictive Covenants.
()Each of the Executive Shareholders acknowledges and agrees
that (i) through his continuing services to the Company and
its subsidiaries, he will learn valuable trade secrets and
other proprietary information relating to their respective
businesses, (ii) his services to the Company are unique in
nature, (iii) the Company and its subsidiaries would be
irreparably damaged if such Executive Shareholder were to
provide services to any person in violation of the
restrictions contained in this Agreement and (iv) the
Purchasers would not have entered into this Agreement or
agreed to consummate the transactions contemplated hereby but
for the agreements of the Executive Shareholders contained in
this Section 7.02. Accordingly, as an inducement to the
Purchasers to enter into this Agreement, each Executive
Shareholder agrees that at all times during which he is
employed by the Company or any of its subsidiaries and
continuing for an additional period of 24 months following
the date of termination of such employment (the period of
such Executive Shareholder's employment with the Company and
such additional period being referred to herein collectively
as the "Restricted Period"), he shall not:
()engage or participate in, as an employee, owner, partner,
shareholder, officer, director, member, advisor, consultant,
agent or (without limitation by the specific enumeration of
the foregoing) otherwise, or permit his name to be used by or
render services of any type for, any Competing Business;
provided, however, that nothing in this Agreement shall
prevent an Executive Shareholder from acquiring or owning, as
a passive investment, up to 1% of the outstanding voting
securities of an entity engaged in a Competing Business which
are publicly traded in any recognized national securities
market;
()take any action which could reasonably be expected to
divert from the Company or any subsidiary any opportunity
which would be within the scope of the Company's or such
subsidiary's business;
()solicit or attempt to solicit any person who is or has been
(x) a customer of the Company or any subsidiary at any time
on or prior to the date of termination of the Executive
Shareholder's employment to purchase any product or service
which may be provided by a Competing Business or (y) a
customer, supplier or other business relation of the Company
or any subsidiary conducting business with the Company or
such Subsidiary at any time on or prior to the date of
termination of the Executive Shareholder's employment to
cease doing business with the Company or any such subsidiary;
or
()solicit any officers, employees, representatives or agents
of the Company or any subsidiary to terminate their
association with the Company or any subsidiary. As used
herein, a "Competing Business" shall mean a business which
is, in whole or in part, directly or indirectly, engaged,
anywhere in the United States, in the business of leasing
restaurant equipment.
()Each Executive Shareholder recognizes that he will generate
and be exposed to Confidential Information. Accordingly, as
an inducement for the Company and the Purchasers to enter
into this Agreement, each Executive Shareholder agrees that
during the Restricted Period, such Executive Shareholder and
each of his affiliates shall hold in strictest confidence and
shall not, other than as required by law, without the prior
written consent of the Company, use for his own benefit or
that of any third party or disclose to any person, except the
Company and its subsidiaries, any Confidential Information,
provided that with respect to Confidential Information that
is protectable as a trade secret under applicable law, each
Executive Shareholder agrees that the foregoing restriction
shall apply for the longest period permitted by such
applicable law. Notwithstanding the foregoing, it shall not
be deemed a breach of this Agreement in the event that an
Executive Shareholder discloses or uses Confidential
Information (1) in connection with the performance of his
duties in the course of his employment with the Company or
any subsidiary, if such disclosure is made by such Executive
Shareholder reasonably and in good faith, or (2) in
accordance with the reasonable advice of counsel, as required
by law, provided that such Executive Shareholder gives
notice to the Company or any subsidiary of such required
disclosure as far in advance as practical. "Confidential
Information" shall mean all information, and all documents
and other tangible items which record information, relating
to the businesses conducted by the Company or any subsidiary,
whether or not protectable as a trade secret under applicable
law, and which has been or is from time to time known or
disclosed to an Executive Shareholder, including, without
limitation, the following especially sensitive types of
information: (i) future expansion plans, marketing plans,
advertising programs and strategies; (ii) training manuals,
pricing models, lessee or franchisor data or information,
research in progress, and the like; (iii) the identity,
purchase and payment patterns of, and special relations with
customers; (iv) the identity, net prices and credit terms of,
and special relations with suppliers; (v) sales and other
financial information; and (vi) proprietary software and
business records. Information shall not be deemed to be
"Confidential Information" which is or becomes generally
known to the industry or the public other than (x) as a
result of an Executive Shareholder's breach of this Agreement
or (y) as a result of a breach by any other person of a
legal, contractual or fiduciary obligation not to disclose
such information, where an Executive Shareholder has reason
to know such a breach has occurred.
()Each Executive Shareholder and each of their respective
affiliates shall promptly following a request therefor from
the Company return to the Company, without retaining copies,
all tangible items which are or which contain Confidential
Information.
()Each Executive Shareholder acknowledges that in his
capacity as an executive of the Company or any of its
subsidiaries he may be involved in the development of trade
secrets, Confidential Information and other intellectual
property relating to the business of the Company or its
subsidiaries. Each Executive Shareholder acknowledges that
all such intellectual property conceived, made, authored or
developed during such Executive Shareholder's employment with
the Company or any subsidiary is the exclusive property of
the Company or such subsidiary. Each Executive Shareholder
hereby waives any rights he may have in or to such
intellectual property, and hereby assigns to the Company or
such subsidiary, as the case may be, all right, title and
interest in and to such intellectual property. At the
Company's request and at no expense to the Executive
Shareholder, each Executive Shareholder shall execute and
deliver all such papers, including, without limitation, any
assignment documents, and shall provide such cooperation as
may be necessary or reasonably desirable, or as the Company
may reasonably request, in order to enable the Company or any
subsidiary to secure and exercise its rights to such
intellectual property.
()Each Executive Shareholder agrees that any violation by him
of this Section 7.02 would be highly injurious to the Company
and would cause irreparable harm to the Company and its
subsidiaries. By reason of the foregoing, each Executive
Shareholder consents and agrees that if he violates any
provision of this Section 7.02, the Company shall be
entitled, in addition to any other rights and remedies that
it may have, to apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief
(without the requirement of posting of a bond or other
security) in order to enforce, or prevent any continuing
violation of, the provisions of this Section 7.02. Each
Executive Shareholder acknowledges that the limitations set
forth in this Section 7.02 are reasonable and are properly
required for the protection of the Company. Each Executive
Shareholder acknowledges that this Section 7.02 shall survive
termination of such Executive Shareholder's employment and
shall be tolled during the period of any breach.
(f)The Company agrees that if an Executive Shareholder's
employment is terminated either (i) by the Company without
Cause or (ii) in the case of McCoy, by McCoy following and
arising out of a breach by the Company of any of its
obligations under the Employment Agreement dated December 15,
1994 between the Company and McCoy (the "Employment
Agreement"), which breach is not cured within 30 days after
notice thereof by McCoy to the Company, the Company will pay
to such Executive Shareholder an amount equal to (i) such
Executive Shareholder's base salary for the Company's most
recent fiscal year ended prior to the date of such
termination less (ii) any severance or similar payment
payable by the Company or any of its subsidiaries to such
Executive Shareholder pursuant to any agreement entered into
with such Executive Shareholder after the date of this
Agreement (such amount shall be paid ratably when and as
such base salary would have been required to be paid or in
accordance with the Company's past practices) . As used
herein, "Cause" with respect to an Executive Shareholder
shall mean any of the following: (i) the conviction,
admission or plea of no contest by such Executive Shareholder
with respect to any crime, whether or not involving the
Company, which constitutes a felony in the jurisdiction
involved; (ii) the embezzlement or misappropriation of
property of the Company or any of its subsidiaries or
affiliates, or any other act involving fraud with respect to
the Company or any of its subsidiaries or affiliates; (iii)
any substance abuse by such Executive Shareholder that
interferes with such Executive Shareholder's ability to
discharge his duties to the Company; (iv) a breach by such
Executive Shareholder of any of the provisions of this
Section 7.02; or (v) the failure by such Executive
Shareholder (following reasonable notice and an opportunity
to cure) to perform such duties as may be delegated to him by
the Board of Directors.
SECTION .Devotion of Time. At all times during which an
Executive Shareholder is employed by the Company, (a) such
Executive Shareholder shall faithfully and diligently perform
such services and assume such duties and responsibilities as
may from time to time be assigned to him by the Board of
Directors of the Company and (b) each Executive Shareholder
will devote his full business time and attention to the
business and affairs of the Company and the performance of
his duties to the Company (other than (i) immaterial amounts
of time devoted to charitable and, in the case of McCoy,
sports officiating activities, (ii) service on the boards of
directors (or equivalent governing bodies) of other entities
with the approval of the Board of Directors of the Company,
which approval will not be unreasonably withheld if such
entities do not compete with the Company and if such
Executive Shareholder does not own any material equity
interest therein, and (iii) in the case of McCoy, service as
an official at sporting events which would require more than
an immaterial amount of time, if approved by the Board of
Directors of the Company.
SECTION .Related Entities. Each Executive Shareholder shall
immediately notify the Purchasers upon acquiring control of,
or an interest in, a Related Entity.
ARTICLE .
PURCHASES OF ADDITIONAL NOTES
SECTION .Purchase Request. At any time during the period
beginning on the Closing Date and ending on the first
anniversary of the Closing Date, the Company may request that
the Purchasers purchase all of the Additional Notes by
delivery of a written notice to each of the Purchasers (a
"Purchase Request") setting forth (a) the date, which shall
be not less than ten business days following the date of such
Purchase Request, on which the closing of the purchase of the
Additional Notes is requested to be held (the "Purchase
Date"), and (b) wire transfer instructions designating an
account of the Company into which the purchase price for the
Additional Notes is to be paid. Subject to the provisions of
Section 8.02, on the Purchase Date (i) each Purchaser shall
purchase the initial principal amount of Additional Notes set
forth opposite the name of such Purchaser on Schedule I by
payment on the Purchase Date of the purchase price for the
Additional Notes to the account designated in the Purchase
Request, and (ii) upon receipt of such payment, the Company
shall immediately issue and deliver to each Purchaser such
Additional Notes.
SECTION .Conditions Precedent. The Purchasers shall not be
required to purchase the Additional Notes pursuant to this
Article VIII unless:
()on the Purchase Date, the Company has furnished to the
Purchasers:
()a certificate, in form and substance satisfactory to the
Purchasers, signed by a duly authorized officer on behalf of
the Company, stating that on the Purchase Date (x) there has
been no material adverse change in the condition, financial
or otherwise, of the Company or any of its subsidiaries since
the Closing Date, (y) the Company and the Executive
Shareholders are not in default of any then-outstanding Note
(as determined pursuant to such Note) or in breach of this
Agreement, any Company Ancillary Document or the Charter; and
(z) each of the Executive Shareholders is employed by the
Company in a management capacity; and
()such other documents as the Purchasers or their counsel may
have reasonably requested;
()the weighted average spread on the Lease Agreements entered
into by the Company after the Closing Date and prior to the
Purchase date (excluding any Lease Agreements sold to third
parties or owned by the Company as of the Purchase Date and
in good faith anticipated to be sold to third parties) shall
not be less than 800 basis points. For purposes hereof, the
spread on any Lease Agreement shall be the difference between
(i) the yield on such Lease Agreement (including, without
duplication, for purposes of calculating such yield, fees and
payments collected at the inception of the applicable lease
term, as well as any "balloon" payments or similar payments
at the end of the applicable lease term) as determined by the
Company in good faith, in accordance with industry practices,
and (ii) the coupon rate of interest for prime rate
borrowings of the Company under the Senior Financing (as
defined in Section 8.02(e)) as of the date such Lease
Agreement was entered into by the Company (or, if the Senior
Financing is not consummated as of such date, such rate of
interest as would have been in effect (based on the terms of
the Commitment, dated March 13, 1997, for the Senior
Financing) had the Senior Financing been consummated as of
such date);
()no more than 5% of payments under Lease Agreements
outstanding as of the close of business on the business day
immediately prior to the Purchase Date is more than 45 days
past due;
()the average monthly volume of Lease Agreements during the
four full calendar months immediately preceding the month in
which the Purchase Date occurs (or, if shorter, during the
period elapsed between the Closing Date and the Purchase
Date) (based on the original value of the underlying Leased
Equipment) is no less than $1.2 million;
()the Company shall have entered into definitive
documentation for senior debt financing (the "Senior
Financing") of at least $20 million (the "Target Amount") on
terms acceptable to the Purchasers and such Senior Financing
shall be available to the Company on the Purchase Date
pursuant to such documentation; and
()the Company shall have purchased the policies of "key-
person" life insurance required by Section 6.05 and such
policies shall, on the Purchase Date, be in full force and
effect.
ARTICLE .
MISCELLANEOUS
SECTION .Fees and Expenses.
() The Company will pay the reasonable expenses of the
Purchasers in connection with the transactions contemplated
hereby, whether or not such transactions are consummated, and
in connection with any subsequent amendment, waiver, consent
or enforcement of the provisions hereof or any Purchaser
Ancillary Document.
()In consideration of the assistance of the Purchasers in
arranging the Senior Financing (whether or not in the Target
Amount), on or before December 31, 1997, the Company shall
pay to the Purchasers a fee of the lesser of (i) one percent
(1%) of the Senior Financing and (ii) $250,000, which fee
shall be allocated among the Purchasers as set forth on
Schedule III, such fee to be fully refundable to the Company
in the event the Senior Financing is not closed. The amount
of the fee payable pursuant to this Section 9.01(b) shall be
reduced on a pro rata basis among the Purchasers by any
amounts payable to Salvatore F. Mulia in connection with
arranging the Senior Financing or any portion thereof.
SECTION .Survival of Agreements. All covenants, agreements,
representations and warranties of the parties hereto made in
this Agreement, any Company Ancillary Document, any Executive
Shareholder Ancillary Document or any Purchaser Ancillary
Document shall survive the execution and delivery of this
Agreement, the issuance, sale and delivery of the Preferred
Shares and the Notes, and the issuance and delivery of the
Conversion Shares, and all statements made by any party in
this Agreement, any Company Ancillary Document, any Executive
Shareholder Ancillary Document or any Purchaser Ancillary
Document shall be deemed to constitute representations and
warranties made by the party making such statements.
SECTION .Parties in Interest. All representations, covenants
and agreements contained in this Agreement by or on behalf of
any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties
hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants
and agreements benefiting the Purchasers shall inure to the
benefit of any and all subsequent holders from time to time
of Preferred Shares, Notes or Conversion Shares.
SECTION .Notices. All notices and other communications which
are required or permitted to be given under this Agreement
shall be in writing and shall be delivered personally, mailed
by certified or registered mail, return receipt requested,
sent by reputable overnight courier or sent by confirmed
telecopier, addressed as follows:
()if to the Company, at 8250 Haverstick Road, Suite 110,
Indianapolis, Indiana 46240-2401, Attention: President, with
a copy (which shall not constitute notice to the Company) to
Daniel L. Boeglin, Esq., Baker & Daniels, 300 North Meridian
Street, Suite 2700, Indianapolis, IN 46204;
()if to any Executive Shareholder, at the address of such
Executive Shareholder as disclosed by the books and records
of the Company, with a copy (which shall not constitute
notice to any of the Executive Shareholders) to Daniel L.
Boeglin, Esq., Baker & Daniels, 300 North Meridian Street,
Suite 2700, Indianapolis, IN 46204; and
()if to any Purchaser, at the address of such Purchaser set
forth in Schedule I, with a copy (which shall not constitute
notice to any of the Purchasers) to Peter M. Howard, Esq.,
Altheimer & Gray, 10 South Wacker Drive, Suite 4000, Chicago,
IL 60606;
or to such other address and/or such other addressee as any
of the above shall have specified by notice hereunder. Each
notice or other communication which shall be delivered
personally, mailed or telecopied in the manner described
above shall be deemed sufficiently given, served, sent,
received or delivered for all purposes at such time as it is
delivered to the addressee (with the return receipt, the
delivery receipt or the affidavit of messenger being deemed
conclusive, but not exclusive, evidence of such delivery) or
at such time as delivery is refused by the addressee upon
presentation.
SECTION .Assignment. Neither the Company nor the Executive
Shareholders may assign any of the rights or obligations
hereunder without the express written consent of each of the
Purchasers. Prior to any firm commitment underwritten public
offering of the Company's equity securities, no Purchaser may
Transfer any Preferred Shares, Conversion Shares or Notes
without the prior written approval of McCoy (for so long as
McCoy is employed by the Company in an executive capacity),
which approval shall not be unreasonably withheld or delayed.
SECTION .Remedies. If any party to this Agreement obtains a
judgment against any party hereto by reason of any breach of
this Agreement or the failure of such other party to comply
with the provisions hereof, a reasonable attorneys' fee as
fixed by the court shall be included in such judgment. No
remedy conferred upon any party to this Agreement is intended
to be exclusive of any other remedy herein or by law provided
or permitted, but each such remedy shall be cumulative or
shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute.
SECTION .Waiver. None of the terms of this Agreement shall
be deemed to have been waived by any party hereto, unless
such waiver is in writing and signed by that party; provided,
however, that the holders of (a) 75% in principal amount of
the Notes then outstanding and (b) 75% of the Preferred
Shares then outstanding may waive any breach by the Company
or an Executive Shareholder of this Agreement. No action
taken pursuant to this Agreement, including any investigation
by or on behalf of any party hereto, shall be deemed to
constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto
of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other provision of
this Agreement or of any further breach of the provision so
waived or of any other provision of this Agreement. No
extension of time for the performance of any obligation or
act hereunder shall be deemed an extension of time for the
performance of any other obligation or act. The waiver by
any party of any of the conditions precedent to its
obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement.
SECTION .Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Indiana, without giving effect to its conflicts of law rules.
SECTION .Entire Agreement. This Agreement, including the
Schedules and Exhibits hereto, the Company Ancillary
Documents, the Executive Shareholder Ancillary Documents and
the Purchaser Ancillary Documents constitutes the sole and
entire agreement of the parties with respect to the subject
matter hereof. All Schedules and Exhibits hereto are hereby
incorporated herein by reference.
SECTION .Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be effective only
upon delivery and thereafter shall be deemed to be an
original, and all of which shall be taken to be one and the
same instrument with the same effect as if each of the
parties hereto had signed the same signature page. Any
signature page of this Agreement may be detached from any
counterpart of this Agreement without impairing the legal
effect of any signature thereon and may be attached to
another counterpart of this Agreement identical in form
hereto and having attached to it one or more additional
signature pages.
SECTION .Amendments. This Agreement may not be amended,
modified or changed in any respect without the written
consent of the Company and the approval of the holders of (a)
75% in principal amount of the Notes then outstanding and (b)
75% of the Preferred Shares then outstanding, unless a
greater percentage is required by any provision hereof.
SECTION .Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any
provision of this Agreement shall be unenforceable or invalid
under applicable law, such provision shall be ineffective
only to the extent of such unenforceability or invalidity,
and the remaining provisions of this Agreement shall continue
to be binding and in full force and effect.
SECTION .Headings. The section and other headings contained
in this Agreement are for convenience only and shall not be
deemed to limit, characterize or interpret any provision of
this Agreement.
SECTION .Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and
plural forms of the terms defined):
()"person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization,
government agency or any agency or political subdivision
thereof, or other entity;
()"subsidiary" shall mean, as to the Company, any corporation
of which more than 50% of the outstanding stock having
ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether or not
at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time directly
or indirectly owned by the Company, or by one or more of its
subsidiaries, or by the Company and one or more of its
subsidiaries;
()"affiliate" shall mean, with respect to any person, a
person who controls such person, who is controlled by such
person or who is under common control with such person. and
()"material" shall mean, with respect to any item or matter
with respect to the Company, that such item or matter is (or
could result in) a liability to the Company of $10,000 or
more. The Company and the Executive Shareholders represent
and warrant to the Purchasers that the aggregate potential
liability to the Company of all items and matters which are
known by the Company or the Executive Shareholders but which
are not reflected in the Disclosure Schedule by application
of the foregoing definition could not be reasonably expected
to exceed $50,000.
SECTION .Required Vote. Whenever in this Agreement, a matter
requires the consent or vote of the holders of a specified
percentage of Preferred Shares, such matter shall require the
consent or vote of holders of such specified percentage of
Conversion Shares, with holders of Preferred Shares then
outstanding being deemed to own that number of Conversion
Shares into which such Preferred Shares are then convertible
pursuant to the terms of the Preferred Shares.
SECTION .Obligations Several. The obligations of each
Purchaser hereunder shall be several and not joint and no
Purchaser shall be liable or responsible for the acts of any
other Purchaser.
IN WITNESS WHEREOF, the Company, the Executive Shareholders
and the Purchasers have executed this Agreement as of the day
and year first above written.
MERIDIAN FINANCIAL
CORPORATION
By:
Title:
PURCHASERS:
INROADS CAPITAL PARTNERS,
L.P.
By:INROADS GENERAL
PARTNERS, L.P., its general partner
By:
Title:
MESIROW CAPITAL PARTNERS
VII, an
Illinois Limited Partnership
By:MESIROW FINANCIAL
SERVICES, INC., its general partner
By:
Title:
EDGEWATER PRIVATE EQUITY
FUND II, L.P.
By:GORDON MANAGEMENT,
INC.,
its general partner
By:
Title:
EXECUTIVE SHAREHOLDERS:
Michael F. McCoy
William L. Wildman
SCHEDULE I
Purchasers
Name and
Address of Purchaser
Number of
Preferred Shares
to be Purchased
Aggregate
Purchase Price
for Preferred
Shares
Closing
Notes
Aggregate
Closing Date
Purchase Price
Additional
Notes
Inroads Capital Partners, L.P.
1603 Orrington Avenue
Suite 2050
Evanston, IL 60201
1,384.61538
$1,384,615.38
$230,769.24
$1,615,384.62
$1,384,615.38
Mesirow Capital Partners VII,
an Illinois Limited Partnership
350 North Clark Street
Chicago, IL 60610
807.69231
$807,692.31
$134,615.38
$942,307.69
$807,692.31
Edgewater Private Equity Fund II, L.P.
666 Grand Avenue
Suite 2002
Des Moines, IA 50309
807.69231
$807,692.31
$134,615.38
$942,307.69
$807,692.31
3,000.0000
$3,000,000.00
$500,000.00
$3,500,000.00
$3,000,000.00
SCHEDULE II
Disclosure Schedule
SCHEDULE III
Fee Allocation
Inroads Capital Partners, L.P.65.0%
Mesirow Capital Partners VII, an17.5%
Illinois Limited Partnership
Edgewater Private Equity Fund II, L.P.17.5%
EXHIBIT A
Section 5.8. Terms of Series C Convertible
Preferred Stock. The designation,
preferences, limitations and relative voting and other
rights of the shares of the third series of the
authorized Special Shares of the Corporation (such series
being hereinafter called the "Series C
Convertible Preferred Stock"), in addition to those set
forth in these Articles of Incorporation which are
applicable to Special Shares of all series, are hereby fixed
as follows:
1. Number of Shares. The series of Special Shares
designated and known as "Series C
Convertible Preferred Stock" shall consist of 3,000 shares.
2. Voting.
2.1 General. Except as may be otherwise provided
in these terms of the Series C
Convertible Preferred Stock or by the Corporation Law, the
Series C Convertible Preferred Stock shall
vote together with the Common Shares (which are referred to
hereinafter as the "Common Stock") as a
single class on all actions to be taken by the shareholders
of the Corporation. Each share of Series C
Convertible Preferred Stock shall entitle the holder thereof
to such number of votes per share on each such
action as shall equal the number of shares of Common Stock
(including fractions of a share) into which
each share of Series C Convertible Preferred Stock is then
convertible.
2.2 Board Size. The Corporation shall not,
without the affirmative vote of the holders
of at least two-thirds of the then outstanding shares of
Series C Convertible Preferred Stock, voting
separately as a series, increase the maximum number of
directors constituting the Board of Directors to
a number in excess of five.
3. Dividends. The holders of the Series C Convertible
Preferred Stock shall be entitled to
receive, out of funds legally available therefor, dividends
at the same rate as dividends (other than
dividends paid in additional shares of Common Stock) are
paid with respect to the Common Stock
(treating each share of Series C Convertible Preferred Stock
as being equal to the number of shares of
Common Stock (including fractions of a share) into which
each share of Series C Convertible Preferred
Stock is then convertible).
4. Liquidation. Upon any liquidation, dissolution or
winding up of the Corporation, whether
voluntary or involuntary, the holders of the shares of
Series C Convertible Preferred Stock shall be
entitled, before any distribution or payment is made upon
any stock ranking on liquidation junior to the
Series C Convertible Preferred Stock, to be paid an amount
equal to the greater of (i) $1,000 per share
plus, in the case of each share, an amount equal to all
dividends declared but unpaid thereon, computed
to the date payment thereof is made, or (ii) such amount per
share as would have been payable had each
such share been converted to Common Stock pursuant to
paragraph 6 immediately prior to such
liquidation, dissolution or winding up, and the holders of
Series C Convertible Preferred Stock shall not
be entitled to any further payment, such amount payable with
respect to one share of Series C Convertible
Preferred Stock being sometimes referred to as the
"Liquidation Payment" and with respect to all shares
of Series C Convertible Preferred Stock being sometimes
referred to as the "Liquidation Payments". If
upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Series C
Convertible Preferred Stock shall be insufficient
to permit payment to the holders of Series C Convertible
Preferred Stock of the amount distributable as
aforesaid, then the entire assets of the Corporation to be
so distributed shall be distributed ratably among
the holders of Series C Convertible Preferred Stock and any
shares of stock of the Corporation ranking
on parity with such shares of Series C Convertible Preferred
Stock as to payments upon any liquidation,
dissolution or winding up of the Corporation. Upon any such
liquidation, dissolution or winding up of
the Corporation, after the holders of Series C Convertible
Preferred Stock shall have been paid in full the
amounts to which they shall be entitled, the remaining net
assets of the Corporation may be distributed
to the holders of stock ranking on liquidation junior to the
Series C Convertible Preferred Stock. Written
notice of such liquidation, dissolution or winding up,
stating a payment date, the amount of the
Liquidation Payments and the place where said Liquidation
Payments shall be payable, shall be delivered
in person, mailed by certified or registered mail, return
receipt requested, or sent by telecopier, not less
than 20 days prior to the payment date stated therein, to
the holders of record of Series C Convertible
Preferred Stock, such notice to be addressed to each such
holder at its address as shown by the records
of the Corporation. For purposes hereof, shares of Common
Stock shall rank on liquidation junior to the
Series C Convertible Preferred Stock, unless the Liquidation
Payments are calculated pursuant to clause
(ii) above, in which case shares of Common Stock shall rank
on liquidation on parity with the Series C
Convertible Preferred Stock. The Series A Preferred Stock
and the Series B Preferred Stock shall rank
on liquidation junior to the Series C Convertible Preferred
Stock.
5. Restrictions. At any time when shares of Series C
Convertible Preferred Stock are
outstanding, except where the vote of the holders of a
greater number of shares of the Corporation is
required by law or by the Articles of Incorporation of the
Corporation, and in addition to any other vote
required by law or the Articles of Incorporation of the
Corporation, without the approval of the holders
of at least two-thirds of the then outstanding shares of
Series C Convertible Preferred Stock, voting
separately as a series, the Corporation will not:
(i) create, authorize the creation of or
issue any additional shares of any class
or series of shares of stock unless the same ranks
junior to the Series C Convertible
Preferred Stock as to the distribution of assets on
the liquidation, dissolution or winding
up of the Corporation, or increase the authorized
amount of the Series C Convertible
Preferred Stock or increase the authorized amount
of any class or series of shares of stock
unless the same ranks junior to the Series C
Convertible Preferred Stock as to the
distribution of assets on the liquidation,
dissolution or winding up of the Corporation, or
create or authorize any obligation or security
convertible into shares of Series C
Convertible Preferred Stock or into shares of any
other class or series of stock unless the
same ranks junior to the Series C Convertible
Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding
up of the Corporation, whether any such
creation, authorization, issuance or increase shall
be by means of amendment to the
Articles of Incorporation of the Corporation or by
merger, consolidation or otherwise;
(ii) consent to any liquidation, dissolution
or winding up of the Corporation
or consolidate or merge into or with any other
entity or entities or sell, lease, abandon,
transfer or otherwise dispose of all or
substantially all of its assets;
(iii) amend, alter or repeal its Articles
of Incorporation;
(iv) purchase or set aside any sums for the
purchase of, or pay any dividends
or make any distribution on, any shares of stock
other than the Series C Convertible
Preferred Stock, except for (x) dividends or other
distributions payable on the Common
Stock solely in the form of additional shares of
Common Stock, (y) regular quarterly
dividends on shares of Series A Preferred Stock
outstanding as of the date these terms of
Series C Convertible Preferred Stock are filed with
the Indiana Secretary of State, in
accordance with the terms of such Series A
Preferred Stock, and (z) redemption of the
Series B Preferred Stock substantially
contemporaneously with the issuance and sale of
the Series C Convertible Preferred Stock; or
(v) redeem or otherwise acquire any shares of
Series C Convertible Preferred
Stock except as expressly authorized in paragraph 7
hereof or pursuant to a purchase offer
made pro rata to all holders of the shares of
Series C Convertible Preferred Stock on the
basis of the aggregate number of outstanding shares
of Series C Convertible Preferred
Stock then held by each such holder.
6. Conversion. The holders of shares of Series C
Convertible Preferred Stock shall have the
following conversion rights:
6.1 Right to Convert. Subject to the terms and
conditions of this paragraph 6, the
holder of any share or shares of Series C Convertible
Preferred Stock shall have the right, at its option
at any time, to convert any such shares of Series C
Convertible Preferred Stock (except that upon any
liquidation of the Corporation the right of conversion shall
terminate at the close of business on the
business day fixed for payment of the amount distributable
on the Series C Convertible Preferred Stock)
into such number of fully paid and nonassessable shares of
Common Stock as is obtained by (i)
multiplying the number of shares of Series C Convertible
Preferred Stock so to be converted by $1,000
and (ii) dividing the result by the conversion price of
$1,000 per share or, in case an adjustment of such
price has taken place pursuant to the further provisions of
this paragraph 6, then by the conversion price
as last adjusted and in effect at the date any share or
shares of Series C Convertible Preferred Stock are
surrendered for conversion (such price, or such price as
last adjusted, being referred to as the "Conversion
Price"). Such rights of conversion shall be exercised by
the holder thereof by giving written notice that
the holder elects to convert a stated number of shares of
Series C Convertible Preferred Stock into shares
of Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the
Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation
may designate by notice in writing to the holders of the
Series C Convertible Preferred Stock) at any time
during its usual business hours, together with a statement
of the name or names (with address) in which
the certificate or certificates for shares of Common Stock
shall be issued.
6.2 Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of
the written notice referred to in subparagraph 6.1 and
surrender of the certificate or certificates for the
share or shares of Series C Convertible Preferred Stock to
be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder,
registered in such name or names as such holder
may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon
the conversion of such share or shares of Series C
Convertible Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been
effected and the Conversion Price shall be
determined as of the close of business on the date on which
such written notice shall have been received
by the Corporation and the certificate or certificates for
such share or shares shall have been surrendered
as aforesaid, and at such time the rights of the holder of
such share or shares of Series C Convertible
Preferred Stock shall cease, and the person or persons in
whose name or names any certificate or
certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have
become the holder or holders of record of the shares
represented thereby.
6.3 Fractional Shares; Partial Conversion. No
fractional shares shall be issued upon
conversion of Series C Convertible Preferred Stock into
shares of Common Stock. At the time of each
conversion, the Corporation shall pay in cash an amount
equal to all dividends, accrued and unpaid on
the shares of Series C Convertible Preferred Stock
surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in
subparagraph 6.2. In case the number of shares of
Series C Convertible Preferred Stock represented by the
certificate or certificates surrendered pursuant to
subparagraph 6.1 exceeds the number of shares converted, the
Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the
Corporation, a new certificate or certificates for
the number of shares of Series C Convertible Preferred Stock
represented by the certificate or certificates
surrendered which are not to be converted. If any
fractional share of Common Stock would, except for
the provisions of the first sentence of this subparagraph
6.3, be delivered upon such conversion, the
Corporation, in lieu of delivering such fractional share,
shall pay to the holder surrendering the Series C
Convertible Preferred Stock for conversion an amount in cash
equal to the current market price of such
fractional share as determined in good faith by the Board of
Directors of the Corporation.
6.4 Adjustment of the Conversion Price. Except as
provided in subparagraph 6.5, if
and whenever the Corporation shall issue or sell, or is
deemed to have issued or sold, at any time, whether
in a public or private offering or sale or otherwise, any
shares of Common Stock for a consideration per
share less than the lesser of (i) the Conversion Price in
effect immediately prior to such issue or sale and
(ii) the Fair Market Value (as herein defined) of a share of
Common Stock immediately prior to such issue
or sale, then, forthwith upon such issue or sale, the
Conversion Price shall be reduced by an amount equal
to: (x) the difference between (1) the greater of (A) the
Conversion Price in effect immediately prior to
such issue or sale or (B) the Fair Market Value of a share
of Common Stock immediately prior to such
issue or sale and (2) the price at which the Corporation
issued or sold, or is deemed to have issued or
sold, such share of Common Stock; multiplied by (y) the
number of shares of Common Stock issued
(including the maximum number of shares issuable upon the
exercise of Options (as defined herein) or
conversion of Convertible Securities (as defined herein)) at
such price; and divided by the number of
shares of Common Stock (determined on a fully-diluted basis)
outstanding immediately prior to such
issuance or sale. Such adjustment shall be made
successively each time any event described in this
subparagraph 6.4 shall occur. For purposes of applying the
foregoing provisions of this subparagraph 6.4,
the following subparagraphs shall be applicable:
(i) In case at any time the Corporation shall
in any manner grant (whether
directly or by assumption in a merger or otherwise)
any warrants or other rights to
subscribe for or to purchase, or any options for
the purchase of, shares of Common Stock
or any stock or security convertible into or
exchangeable for shares of Common Stock
(such warrants, rights or options being called
"Options" and such convertible or
exchangeable stock or securities being called
"Convertible Securities"), whether or not
such Options or the right to convert or exchange
any such Convertible Securities are
immediately exercisable, and the price per share
for which shares of Common Stock are
issuable upon the exercise of such Options or upon
the conversion or exchange of such
Convertible Securities (determined by dividing (A)
(x) in the case of an Option not
relating to Convertible Securities, the total
amount, if any, received or receivable by the
Corporation as consideration for the granting of
all such Options, plus the minimum
aggregate amount of additional consideration
payable to the Corporation upon the exercise
of all such Options or (y) in the case of an Option
relating to Convertible Securities, the
total amount, if any, received or receivable by the
Corporation as consideration for the
granting of such Options, plus the minimum
aggregate amount of additional consideration
payable to the Corporation upon the exercise of all
such Options, plus the minimum
aggregate amount of additional consideration, if
any, payable to the Corporation upon the
issue or sale of all such Convertible Securities
and upon conversion or exchange of all
such Convertible Securities by (B) the total
maximum number of shares of Common
Stock issuable upon the exercise of such Options or
upon the conversion or exchange of
all such Convertible Securities issuable upon the
exercise of such Options) shall be less
than the lesser of (1) the Conversion Price in
effect immediately prior to the granting of
such Options and (2) the Fair Market Value of a
share of Common Stock in effect
immediately prior to the time of the granting of
such Options, then the total maximum
number of shares of Common Stock issuable upon the
exercise of such Options or upon
conversion or exchange of the total maximum amount
of such Convertible Securities
issuable upon the exercise of such Options shall be
deemed to have been issued for such
price per share as of the date of granting of such
Options and thereafter shall be deemed
to be outstanding. Except as otherwise provided in
subparagraph (iii) below, no further
adjustment of the Conversion Price shall be made
upon the actual issue of such Common
Stock or of such Convertible Securities upon
exercise of such Options or upon the actual
issue of such shares of Common Stock upon
conversion or exchange of such Convertible
Securities.
(ii) In case at any time the Corporation shall
in any manner issue (whether
directly or by assumption in a merger or otherwise)
or sell any Convertible Securities,
whether or not the rights to exchange or convert
any such Convertible Securities are
immediately exercisable, and the price per share
for which shares of Common Stock are
issuable upon such conversion or exchange
(determined by dividing (A) the total amount
received or receivable by the Corporation as
consideration for the issue or sale of all such
Convertible Securities, plus the minimum aggregate
amount of additional consideration,
if any, payable to the Corporation upon the
conversion or exchange thereof by (B) the
total maximum number of shares of Common Stock
issuable upon the conversion or
exchange of all such Convertible Securities) shall
be less than the lesser of (1) the
Conversion Price in effect immediately prior to
such issue or sale and (2) the Fair Market
Value of a share of Common Stock in effect
immediately prior to the time of such issue
or sale, then the total maximum number of shares of
Common Stock issuable upon
conversion or exchange of all such Convertible
Securities shall be deemed to have been
issued for such price per share as of the date of
the issue or sale of such Convertible
Securities and thereafter shall be deemed to be
outstanding, provided that (x) except as
otherwise provided in subparagraph (iii) below, no
further adjustment of the Conversion
Price shall be made upon the actual issue of such
shares of Common Stock upon
conversion or exchange of such Convertible
Securities and (y) if any such issue or sale
of such Convertible Securities is made upon
exercise of any Options to purchase any such
Convertible Securities for which adjustments of the
Conversion Price have been or are to
be made pursuant to any other provisions of this
subparagraph 6.4, no further adjustment
of the Conversion Price shall be made by reason of
such issue or sale.
(iii) Upon the happening of any of the
following events, namely, if the
purchase price provided for in any Option referred
to in subparagraph (i) above, the
number of shares of Common Stock or number or
amount of Convertible Securities
subject to such Option, the additional
consideration, if any, payable upon the exercise of
any Option referred to in subparagraph (i) above
which relates to Convertible Securities,
the additional consideration, if any, payable upon
the conversion or exchange of any
Convertible Securities referred to in subparagraph
(i) or (ii) above, or the rate at which
Convertible Securities referred to in subparagraph
(i) or (ii) above are convertible into or
exchangeable for shares of Common Stock, shall
change at any time (including, but not
limited to, changes under or by reason of
provisions designed to protect against dilution),
the Conversion Price in effect at the time of such
event shall forthwith be readjusted to
the Conversion Price which would have been in
effect at such time (subject to any other
adjustments under the other provisions of this
subparagraph 6.4 subsequent to the time of
such initial grant, issue or sale) had such Options
or Convertible Securities still
outstanding provided for such changed purchase
price, additional consideration or
conversion rate, as the case may be, at the time
initially granted, issued or sold, but only
if as a result of such adjustment the Conversion
Price then in effect hereunder is thereby
reduced; and on the expiration of any Option or the
termination of any right to convert
or exchange Convertible Securities, the Conversion
Price then in effect hereunder shall
forthwith be adjusted to the Conversion Price which
would have been in effect at the time
of such expiration or termination had such Option
or Convertible Securities, to the extent
outstanding immediately prior to such expiration or
termination, never been issued and
thereafter the shares of Common Stock theretofore
issuable upon the exercise of such
Option or the conversion or exchange of such
Convertible Securities shall no longer be
deemed to be outstanding.
(iv) In case the Corporation shall declare a
dividend or make any other
distribution upon any stock of the Corporation
payable in Options or Convertible
Securities (except for (A) dividends or other
distributions upon the Series C Convertible
Preferred Stock to the exclusion of any other class
or series or, if other classes or series
participate in such dividend or distribution, then
dividends or distributions declared ratably
(as determined in good faith by the Board of
Directors of the Corporation) among the
Series C Convertible Preferred Stock and such other
classes or series, and (B) the issuance
of stock dividends or distributions upon the
outstanding shares of Common Stock for
which adjustment is made pursuant to any other
paragraph or subsection hereof), the
provisions of this subparagraph 6.4 shall be
applicable, except that any Options or
Convertible Securities, as the case may be,
issuable in payment of such dividend or
distribution shall be deemed to have been issued or
sold without consideration for
purposes of calculating the consideration in
subparagraphs (i) through (iii) above.
(v) In case any shares of Common Stock,
Options or Convertible Securities
shall be issued or sold for cash, the consideration
received therefor shall be deemed to be
the amount received by the Corporation therefor,
without deduction therefrom of any
expenses incurred or any underwriting commissions
or concessions paid or allowed by the
Corporation in connection therewith. In case any
shares of Common Stock, Options or
Convertible Securities shall be issued or sold for
a consideration other than cash, the
amount of the consideration other than cash
received by the Corporation, for purposes of
calculating the consideration in subparagraphs (i)
through (iii) above, shall be deemed to
be the fair value of such consideration as
determined reasonably and in good faith by the
Board of Directors of the Corporation, without
deduction of any expenses incurred or any
underwriting commissions or concessions paid or
allowed by the Corporation in
connection therewith. In case any Options or
Convertible Securities shall be issued in
connection with the issue and sale of other
securities of the Corporation, together
comprising one integral transaction in which no
specific consideration is allocated to such
Options or Convertible Securities by the parties
thereto, such Options and Convertible
Securities shall be deemed to have been issued for
such consideration as determined
reasonably and in good faith by the Board of
Directors of the Corporation.
(vi) In case the Corporation shall take a
record of the holders of shares of
Common Stock or any other class of stock or series
thereof of the Corporation for the
purpose of entitling them (A) to receive a dividend
or other distribution payable in shares
of Common Stock, Options or Convertible Securities
or (B) to subscribe for or purchase
shares of Common Stock, Options or Convertible
Securities, then such record date shall
be deemed to be the date of the issue or sale of
the shares of Common Stock to be issued
or sold upon the declaration of such dividend or
the making of such other distribution or
the date of the granting of such right of
subscription or purchase, as the case may be.
(vii) The number of shares of Common Stock
outstanding at any time shall not
include shares of Common Stock owned or held by or
for the account of the Corporation,
and the disposition of any such shares of Common
Stock shall be considered an issue or
sale of shares of Common Stock for the purpose of
this subparagraph 6.4
6.5 Certain Issues of Common Stock Excepted.
Anything herein to the contrary
notwithstanding, the Corporation shall not be required to
make any adjustment of the Conversion Price
in the case of any issuances, from and after the date of
filing of these terms of the Series C Convertible
Preferred Stock, of (i) shares of Common Stock or Options to
directors, officers, employees or consultants
of the Corporation pursuant to a stock option or incentive
plan approved by the affirmative vote of at least
a majority of the outstanding shares of Series C Convertible
Preferred Stock or (ii) shares of Common
Stock upon the exercise of any such Options.
6.6 Subdivision or Combination of Common Stock.
In case the Corporation shall at
any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common
Stock into a greater number of shares, the Conversion Price
in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case
the outstanding shares of Common Stock shall
be combined into a smaller number of shares, the Conversion
Price in effect immediately prior to such
combination shall be proportionately increased. In the case
of any such subdivision, no further adjustment
shall be made pursuant to subparagraph 6.4(iv) by reason
thereof.
6.7 Fundamental Changes. In case of any
reclassification or change of the outstanding
shares of Common Stock, sale or conveyance of substantially
all the assets of the Corporation, or
consolidation or merger of the Corporation with another
corporation (each, a "Fundamental Change"), a
holder of a share of Series C Convertible Preferred Stock
then outstanding shall thereafter have the right
to receive upon conversion the kind and amount of shares of
stock and other securities and property
receivable upon such Fundamental Change by a holder of the
number of shares of Common Stock which
the holder of such share of Series C Convertible Preferred
Stock would have had the right to receive upon
conversion immediately prior to such Fundamental Change, at
a price equal to the Conversion Price then
in effect pertaining to such share of Series C Convertible
Preferred Stock, provided, however, that the
Corporation shall not permit, or enter into an agreement
which will result in a Fundamental Change unless
such Fundamental Change has been approved by the vote of the
holders of at least two-thirds of the then
outstanding shares of Series C Convertible Preferred Stock,
voting separately as a single class.
6.8 Fair Market Value. For purposes of this
paragraph 6, the "Fair Market Value" of
a share of Common Stock shall be the fair market value of
such a share as determined by the Board of
Directors of the Corporation in the good faith exercise of
its informed, business judgment for the purposes
of the then applicable issuance or sale; provided, however,
that the Corporation shall, within five days of
such determination give to the holders of Series C
Convertible Preferred Stock written notice of such
determination and the basis therefor; provided, further,
that such Fair Market Value shall be the fair
market value of such share of the Corporation determined by
an appraisal if, within 15 days of receipt of
such notice, the holders of a majority of the shares of
Series C Convertible Preferred Stock then
outstanding shall so elect by service of written notice on
the Corporation to such effect. In the event that
the Fair Market Value of a share of Common Stock is, in
accordance with the immediately preceding
proviso, to be determined by an appraisal, such appraisal
shall be conducted by a regionally or nationally
recognized independent appraiser with experience in the
appraisal of businesses similar to those of the
Corporation and mutually acceptable to the Corporation and
the holders of a majority of the shares of
Series C Convertible Preferred Stock then outstanding. All
fees and expenses associated with the appraisal
shall be paid by the Corporation. The valuation made in an
appraisal pursuant to this subparagraph 6.8
shall be made in conformity with standard appraisal
techniques in use at the time of such appraisal,
including, without limitation, discounted cash flow analysis
and shall apply the market and economic facts
then relevant. The Corporation shall cause any appraiser
appointed pursuant to this subparagraph 6.8 to
report in writing to the Corporation and the holders of
Series C Convertible Preferred Stock the results
of the appraisal, including the Fair Market Value of a share
of Common Stock as of the time such
determination is to be made in accordance with this
subparagraph 6.8. Within five days after any
appraiser appointed pursuant to this subparagraph 6.8
delivers its report to the Corporation as to the Fair
Market Value of a share of Common Stock, the Corporation
shall give to the holders of Series C
Convertible Preferred Stock a copy of such appraisal report.
Such report shall be binding on the
Corporation and the holders of the Series C Convertible
Preferred Stock.
6.9 Notice of Adjustment. Upon any adjustment of
the Conversion Price, then and
in each such case the Corporation shall give written notice
thereof, by delivery in person, certified or
registered mail, return receipt requested, or telecopier,
addressed to each holder of shares of Series C
Convertible Preferred Stock at the address of such holder as
shown by the records of the Corporation,
which notice shall state the Conversion Price resulting from
such adjustment, setting forth in reasonable
detail the method upon which such calculation is based.
6.10 Other Notices. In case at any time: (i) the
Corporation shall declare any dividend
upon its Common Stock payable in cash or stock or make any
other distribution to the holders of its
Common Stock; (ii) the Corporation shall offer for
subscription pro rata to the holders of its Common
Stock any additional shares of stock of any class or other
rights; (iii) there shall be any capital
reorganization or reclassification of the capital stock of
the Corporation, or a consolidation or merger of
the Corporation with or into another entity or entities, or
a sale, lease, abandonment, transfer or other
disposition of all or substantially all its assets; or (iv)
there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; then, in any
one or more of said cases, the Corporation shall
give, by delivery in person, certified or registered mail,
return receipt requested, or telecopier, addressed
to each holder of any shares of Series C Convertible
Preferred Stock at the address of such holder as
shown by the records of the Corporation, (x) at least 20
days' prior written notice of the date on which
the books of the Corporation shall close or a record shall
be taken for such dividend, distribution or
subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation
or winding up and (y) in the case of any such
reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up,
at least 20 days' prior written notice of the date when the
same shall take place. Such notice in
accordance with the foregoing clause (x) shall also specify,
in the case of any such dividend, distribution
or subscription rights, the date on which the holders of
shares of Common Stock shall be entitled thereto
and such notice in accordance with the foregoing clause (y)
shall also specify the date on which the
holders of shares of Common Stock shall be entitled to
exchange their shares of Common Stock for
securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up, as the
case may be.
6.11 Reservation of Shares. The Corporation shall
at all times reserve from its
authorized Common Stock a sufficient number of shares to
provide for conversion of all Series C
Convertible Preferred Stock from time to time outstanding.
As a condition precedent to the taking of any
action which would cause an adjustment reducing the
Conversion Price, the Corporation will take such
corporate action as may be necessary in order that it may
validly and legally issue to holders of Series C
Convertible Preferred Stock upon conversion fully paid and
non-assessable shares of Common Stock at
such adjusted Conversion Price. If the Common Stock
issuable upon conversion of the Series C
Convertible Preferred Stock is listed on any national
securities exchange or automated quotation system
of NASD, the Corporation will cause, within 60 days of any
such listing, and within 60 days of any
adjustment reducing the Conversion Price, all shares
reserved for such conversion to be listed on such
exchange or automated quotation system, subject to official
notice of issuance upon such conversion.
6.12 Taxes. The issuance of certificates for
shares of Common Stock upon conversion
of Series C Convertible Preferred Stock shall be made
without charge to the holders thereof for any
issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which
may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a
name other than that of the holder of the Series C
Convertible Preferred Stock which is being converted.
6.13 Closing of Books. The Corporation will at no
time close its transfer books against
the transfer of any Series C Convertible Preferred Stock or
of any shares of Common Stock issued or
issuable upon the conversion of any shares of Series C
Convertible Preferred Stock in any manner which
interferes with the timely conversion of such Series C
Convertible Preferred Stock, except as may
otherwise be required to comply with applicable securities
laws.
6.14 Definition of Common Stock. As used in this
paragraph 6, the term "Common
Stock" shall mean and include the Corporation's authorized
Common Shares, without par value, as
constituted on the date of filing of these terms of the
Series C Convertible Preferred Stock, and shall also
include any capital stock of any class of the Corporation
thereafter authorized (other than the Series C
Convertible Preferred Stock) which shall not be limited to a
fixed sum or percentage in respect of the
rights of the holders thereof to participate in dividends or
in the distribution of assets upon the voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation; provided that the shares of
Common Stock receivable upon conversion of shares of Series
C Convertible Preferred Stock shall include
only shares designated as shares of Common Stock of the
Corporation on the date of filing of this
instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the
stock,
securities or assets provided for in subparagraph 6.7.
6.15 Mandatory Conversion. If at any time the
Corporation shall effect a firm
commitment underwritten public offering of shares of Common
Stock in which (i) the aggregate price paid
for such shares by the public (net of underwriting discounts
and other expenses) shall be at least
$25,000,000, (ii) the public offering price for such shares
shall be at least three times the Conversion Price
in effect immediately prior to such public offering and
(iii) the holders of at least two-thirds of the then
outstanding shares of Series C Convertible Preferred Stock
have approved the selection of the managing
underwriter of such public offering, then effective upon the
closing of the sale of such shares by the
Corporation pursuant to such public offering, all
outstanding shares of Series C Convertible Preferred
Stock shall automatically convert to shares of Common Stock
on the basis set forth in this paragraph 6.
Holders of shares of Series C Convertible Preferred Stock so
converted may deliver to the Corporation
at its principal office (or such other office or agency of
the Corporation as the Corporation may designate
by notice in writing to such holders) during its usual
business hours, the certificate or certificates for the
shares so converted. As promptly as practicable thereafter,
the Corporation shall issue and deliver to such
holder a certificate or certificates for the number of whole
shares of Common Stock to which such holder
is entitled, together with any cash dividends and payment in
lieu of fractional shares to which such holder
may be entitled pursuant to subparagraph 6.3. Until such
time as a holder of shares of Series C
Convertible Preferred Stock shall surrender his, her or its
certificates therefor as provided above, such
certificates shall be deemed to represent the shares of
Common Stock to which such holder shall be
entitled upon the surrender thereof.
7. Redemption. The shares of Series C Convertible
Preferred Stock shall be redeemed as
follows:
7.1 Mandatory Redemption. Each holder of shares
of Series C Convertible Preferred
Stock shall have the right by written notice delivered to
the Company (a "Redemption Notice") to request
the Company to redeem all or any portion of the shares of
Series C Convertible Preferred Stock held by
such holder at any time following the earlier of (i) the
sixth anniversary of the date of first issuance of
any shares of Series C Convertible Preferred Stock or (ii)
unless waived by the holders of at least 75%
of the outstanding shares of Series C Convertible Preferred
Stock, the occurrence of any of the following
events:
(a) The Corporation shall default in the
payment of any installment of
principal or interest under any subordinated note
of the Corporation issued pursuant to the
Securities Purchase Agreement among the
Corporation, Inroads Capital Partners, L.P.,
Mesirow Capital Partners VII, L.P., Edgewater
Private Equity Fund II, L.P., Michael F.
McCoy and William L. Wildman (the "Purchase
Agreement") when the same shall
become due and payable, and such default shall
continue unremedied for a period of five
business days after the date payment is due;
(b) The Corporation shall default in the
performance of any covenant,
condition or agreement on its part to be performed
or observed pursuant to the terms of
the Purchase Agreement, unless waived pursuant to
the Purchase Agreement, and such
default shall continue unremedied for a period of
ten business days after the delivery to
the Corporation of written notice thereof;
(c) Any representation or warranty made by
the Corporation in the Purchase
Agreement shall fail to be true and correct in any
material respect when made or deemed
to have been made pursuant to the Purchase
Agreement, unless waived pursuant to the
Purchase Agreement;
(d) The Corporation shall: (i) file a
petition commencing a voluntary case
under any chapter of Title 11 of the United States
Code; (ii) make a general assignment
for the benefit of creditors; (iii) admit in
writing its inability to pay its debts as they
mature; (iv) file an application for, or consent to
the appointment of, any receiver or a
permanent or interim trustee of the Corporation,
including, without limitation, the
appointment or authorization of a trustee, receiver
or agent under applicable law or under
a contract to take charge of its property for the
purpose of enforcing a lien against such
property or for the purpose of general
administration of such property for the benefit of
its creditors; (v) file a petition seeking a
reorganization of its financial affairs or to take
advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution
or liquidation law or statute, or an answer
admitting the material allegations of a petition
filed against it in any proceeding under such law
or statute; or (vi) take any corporate
action for the purpose of effecting any of the
foregoing;
(e) An involuntary case is commenced against
the Corporation by the filing
of a petition under chapter 7 or chapter 11 of
Title 11 of the United States Code and
within 60 days after the filing thereof either the
petition is not dismissed or an order for
relief is entered therein; or an order, judgment or
decree is entered against the Corporation
or against all or any portion of its property,
including, without limitation, the entry of an
order, judgment or decree appointing or authorizing
a trustee, receiver or agent to take
charge of the property of the Corporation for the
purpose of general administration of
such property or for the benefit of creditors of
the Corporation and such order, judgment
or decree shall continue unstayed and in effect for
a period of 60 days; or an order,
judgment or decree is entered, without the approval
or consent of the Corporation,
approving or authorizing the reorganization,
insolvency, readjustment of debt, dissolution
or liquidation of the Corporation under any law or
statute, and such order, judgment or
decree shall continue unstayed and in effect for a
period of 60 days; and
(f) The Corporation shall sell, lease,
abandon, transfer or otherwise dispose
of all or substantially all of its assets, except
in connection with any such transaction
effected in the form of a securitization.
7.2 Redemption Price and Payment. Shares of
Series C Convertible Preferred Stock
for which redemption is requested pursuant to subparagraph
7.1 shall be redeemed on the tenth business
day following delivery to the Corporation of the Redemption
Notice (the "Redemption Date") by paying
on the Redemption Date an amount in cash equal to $1,000 per
share plus (i) an amount equal to all
dividends declared but unpaid thereon, computed to the date
of redemption, (such amount being referred
to as the "Redemption Price") and (ii) in the case of any
failure by the Corporation to redeem such share
on the Redemption Date, interest at a rate of 13.5%,
compounded annually, on the Redemption Price from
the Redemption Date through the actual date of redemption.
The Redemption Price shall be paid only
upon surrender of the certificate or certificates
representing the shares to be redeemed. If fewer than all
of the shares represented by a certificate are to be
redeemed, then the Corporation shall issue a
replacement certificate for the unredeemed shares.
7.3 Redemption Mechanics. From and after the
close of business on the Redemption
Date, unless there shall have been a default in the payment
of the Redemption Price, all rights of holders
of shares of Series C Convertible Preferred Stock (except
the right to receive the Redemption Price) for
which redemption has been requested shall cease with respect
to such shares, 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 the funds of the Corporation legally
available for redemption of shares of Series C
Convertible Preferred Stock on the Redemption Date are
insufficient to redeem the number of outstanding
shares of Series C Convertible Preferred Stock for which
redemption has been requested, the holders of
shares of Series C Convertible Preferred Stock for which
redemption has been requested shall share ratably
in any funds legally available for redemption of such shares
according to the respective amounts which
would be payable with respect to the full number of shares
owned by them for which redemption has been
requested. The shares of Series C Convertible Preferred
Stock not redeemed shall remain outstanding and
entitled to all rights and preferences provided herein. At
any time thereafter when additional funds of the
Corporation are legally available for the redemption of such
shares of Series C Convertible Preferred
Stock, such funds will be used to redeem the balance of such
shares for which redemption has been
requested, or such portion thereof for which funds are then
legally available, on the basis set forth above.
7.4 Redeemed or Otherwise Acquired Shares to be
Retired. Any shares of Series C
Convertible Preferred Stock redeemed pursuant to this
paragraph 7 or otherwise acquired by the
Corporation in any manner whatsoever shall be canceled and
shall not under any circumstances be
reissued; and the Corporation may from time to time take
such appropriate corporate action as may be
necessary to reduce accordingly the number of authorized
shares of Series C Convertible Preferred Stock.
8. Record Holders. The Corporation and its transfer
agent, if any, for the Series C
Convertible Preferred Stock may deem and treat the record
holder of any shares of Series C Convertible
Preferred Stock as the sole true and lawful owner thereof
for all purposes, and neither the Corporation nor
any such transfer agent shall be affected by any notice to
the contrary.
9. Amendments. No provision of these terms of the
Series C Convertible Preferred Stock
may be amended, modified or waived without the affirmative
vote of the holders of at least two-thirds of
the then outstanding shares of Series C Convertible
Preferred Stock.
FORM OF NOTE
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND SUCH STATE SECURITIES LAWS, OR AN EXEMPTION
FROM REGISTRATION THEREUNDER.
SUBORDINATED PROMISSORY NOTE
$____________________ March 28, 1997
FOR VALUE RECEIVED, MERIDIAN FINANCIAL
CORPORATION, an Indiana corporation (including any successor
or assign thereof, including, without limitation, a receiver,
trustee or debtor-in-possession, "Maker"), hereby promises to
pay to ___________________________ ("Payee") the aggregate principal sum
of
$__________________________, on the dates and in the
amounts set forth below, and to pay to Payee interest on the
unpaid principal balance hereof at the rate and times set
forth herein.
. Reference to Purchase Agreement. This
subordinated promissory note (this "Note") is issued and
delivered by Maker pursuant to the terms of that certain
Securities Purchase Agreement, dated as of March 28, 1997
(the "Purchase Agreement"), by and among Maker, Payee and the
other parties thereto. This Note is one of several
Subordinated Promissory Notes issued by Maker pursuant to the
Purchase Agreement on substantially the same terms and
conditions contained herein (collectively, including notes
issued in exchange therefor, the "Subordinated Notes").
. Payment of Principal. The principal amount of
this Note, together with all unpaid interest accrued thereon
and any other amounts payable hereunder, shall be due and
payable as follows: (a) on March 31, 2001, fifty percent of
the then unpaid principal amount of this Note shall be due
and payable and (b) on March 31, 2002, the entire then unpaid
principal amount of this Note, together with all unpaid
interest accrued thereon, shall be due and payable.
Notwithstanding the foregoing, in the event of (i) a sale or
conveyance of substantially all the assets of Maker (except
in connection with any sale effected in the form of a
securitization), or consolidation or merger of Maker with any
other entity in which Maker is not the surviving entity or in
which Maker survives as a wholly-owned subsidiary of another
entity or (ii) the consummation of an initial public offering
of equity securities of Maker, the entire unpaid principal
amount of this Note, together with all unpaid interest
accrued thereon and any other amounts payable hereunder shall
be immediately due and payable.
. Payment of Interest. The unpaid principal
balance of this Note shall bear interest from the date hereof
at an annual rate of 10%, compounded quarterly, on the basis
of a 365 day year. Interest on this Note shall be paid
quarterly in arrears on the last day of each calendar
quarter, commencing on March 31, 1998, except that interest
on this Note with respect to periods from the date hereof
through March 31, 1998 shall accrue and be added to the
principal balance of this Note. From and during the
continuance of an Event of Default (as defined in Section 6
hereof), the unpaid principal balance of this Note shall bear
interest at an annual rate of 13.5%.
. Manner and Place of Payments. Payments of
principal and interest shall be paid in lawful money of the
United States of America on the day when due, at the office
of Payee or at such other place as Payee shall designate.
Any payment due on a Saturday, Sunday or legal holiday shall
be made on the next succeeding day not a Saturday, Sunday or
legal holiday, and any extension of the due date shall be
reflected in the calculation of the interest payable. All
payments shall be credited first to accrued interest, next to
any other sums due hereunder, and the remainder to the unpaid
principal balance, until all sums due hereunder have been
paid in full.
. Prepayment. Maker may not prepay, in whole or
in part, the outstanding principal amount of this Note.
. Events of Default. Maker shall be in default
of its obligations hereunder upon the occurrence of any of
the following events (each, an "Event of Default"), unless
waived in writing by the holders of 75% in principal amount
of Subordinated Notes then outstanding:
() Maker shall default in the payment
of any installmentof principal or interest under this
Note or any other Subordinated Note when the
same shall become due and payable, and
such default shall continue unremedied for
a period of five business days after
the date payment is due;
() Maker shall default in the
performance of any covenant, condition or agreement on its part
to be performed or observed pursuant to the
terms of the Purchase Agreement, unless waived pursuant to the
Purchase Agreement, and such default shall
continue unremedied for a period of ten business days after
the delivery to Maker of written notice thereof;
() Any representation or warranty made
by Maker in the Purchase Agreement shall fail to be
true and correct in any material respect when
made or deemed to have been made
pursuant to the Purchase Agreement, unless
waived pursuant to the Purchase
Agreement;
() Without limiting the generality of
Section 6(b) hereof, Maker shall default (i) in any payment
of principal of or interest on any indebtedness for borrowed
money or any payment obligation under any interest rate
swap agreement or similar arrangement
designed to protect Maker against fluctuations in interest
rates (collectively, "Indebtedness") beyond any period
of grace provided with respect thereto or (ii) in the
performance of any other covenant, agreement, term or condition
contained in any agreement under which any such Indebtedness is
created or governed if the effect of such default is (x) to
cause (whether automatically or by acceleration) such obligation
to become due prior to its stated maturity or (y)
upon the expiration of any applicable grace
period, to permit the holder of such obligation to cause such
obligation to become due prior to its stated
maturity, provided that such grace period shall
have expired;
() Maker shall: (i) file a petition
commencing a voluntary case under any chapter of
Title 11 of the United States Code; (ii) make
a general assignment for the benefit of
creditors; (iii) admit in writing its
inability to pay its debts as they
mature; (iv) file an application for, or
consent to, the appointment of any
receiver or a permanent or interim trustee of
Maker, including, without limitation,
the appointment or authorization of a
trustee, receiver or agent under
applicable law or under a contract to take
charge of its property for the purpose
of enforcing a lien against such property
or for the purpose of general
administration of such property for the benefit of
its creditors; (v) file a petition
seeking a reorganization of its financial
affairs or to take advantage of any
bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or
liquidation law or statute, or an answer
admitting the material allegations of a
petition filed against it in any
proceeding under such law or statute;
or (vi) take any corporate action for the
purpose of effecting any of the
foregoing; and
() An involuntary case is commenced
against Maker by the
filing of a petition under chapter 7 or
chapter 11 of Title 11 of the United
States Code and within 60 days after
the filing thereof either the petition is
not dismissed or an order for relief is
entered therein; or an order, judgment or
decree is entered against Maker or
against all or any portion of its property,
including, without limitation, the
entry of an order, judgment or decree
appointing or authorizing a trustee,
receiver or agent to take charge of the
property of Maker for the purpose of
general administration of such property or
for the benefit of creditors of Maker
and such order, judgment or decree shall
continue unstayed and in effect for a
period of 60 days; or an order, judgment or
decree is entered, without the approval
or consent of Maker, approving or
authorizing the reorganization,
insolvency, readjustment of debt, dissolution or
liquidation of Maker under any law or
statute, and such order, judgment or decree
shall continue unstayed and in effect
for a period of 60 days.
. Remedies, Rights upon Default. If an Event of
Default shall occur and be continuing, the principal
indebtedness evidenced hereby, together with all unpaid
accrued interest thereon, shall, at the option of Payee and
without further notice to Maker, at once become due and
payable.
. Costs of Collection. Maker agrees to pay on
demand all costs of collection, including attorneys' fees,
incurred by Payee in enforcing this Note in the event that
default is made in the payment hereof.
. Waiver. Maker hereby waives presentment for
payment, demand, protest or any notice (to the extent
permitted by applicable law) of any kind in connection with
this Note. No acceptance of a past due payment or
indulgences granted from time to time shall be construed (i)
as a novation of the Note or as a waiver of such right of
acceleration or of Payee's right to insist upon strict
compliance with the terms hereof or (ii) to prevent the
exercise of any right granted herein. No extension of time
for the payment of this Note or any installment due hereunder
shall operate to release, discharge, modify, change or affect
the original liability of Maker under this Note, either in
whole or in part, unless Payee agrees otherwise in writing.
. Notices. All notices and other communications
which are required or permitted to be given under this Note
shall be in writing and shall be delivered personally or by
certified mail (return receipt requested), or telecopied and
addressed as follows:
() if to Maker, to:
Meridian Financial Corporation
8250 Haverstick Road
Suite 110
Indianapolis, Indiana 46240-2401
Telecopier No.: (317) 722-2905
() if to Payee, to the address of
Payee as set forth in
the records of Maker
or to such other address as either of the above
shall have specified by notice hereunder. Each notice or
other communication which shall be delivered personally,
mailed or telecopied in the manner described above shall be
deemed sufficiently given, served, sent, received or
delivered for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt,
the affidavit of messenger or (with respect to a telecopy)
the confirmation report being deemed conclusive, but not
exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
. Amendments and Modifications. This Note may
not be modified, amended or changed in any respect except in
writing duly signed by the party against whom enforcement of
any such modification, amendment or change is sought;
provided, however, that any default may be waived as provided
in Section 6 hereof.
. Headings. The section and other headings
contained in this Note are for convenience only and shall not
be deemed to be a part of this Note or to affect the meaning
or interpretation of this Note.
. Governing Law. This Note shall be construed
and interpreted in accordance with the laws of the State of
Illinois, without application of the rules regarding
conflicts of laws.
. Savings Clause. Nothing in this Note will
permit Payee to collect interest at a rate higher than
permitted by applicable law. If, from any circumstance
whatsoever, fulfillment of any provision of this Note, at the
time performance of such provision shall be due, shall
involve exceeding the limit of validity presently prescribed
under any applicable usury statute or any other applicable
law, with regard to obligations of like character and amount,
then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity, so that in no event
shall any exaction of interest be possible under this Note
that is in excess of the current limit of such validity, but
such obligation shall be fulfilled to the limit of such
validity.
IN WITNESS WHEREOF, this Note has been signed by
Maker as of the date first above written.
MERIDIAN FINANCIAL
CORPORATION
By:
Its:
VOTING AGREEMENT
This VOTING AGREEMENT (the "Agreement"), dated as of March 28,
1997, is entered into among Meridian Financial Corporation, an
Indiana corporation (the "Company"), Inroads Capital Partners,
L.P. ("Inroads"), Mesirow Capital Partners VII, an Illinois
Limited Partnership ("Mesirow"), Edgewater Private Equity Fund
II, L.P. ("Edgewater"; together with Inroads and Mesirow,
individually an "Investor" and collectively the "Investor
Group"), Michael F. McCoy ("McCoy") and William L. Wildman
("Wildman"; together with McCoy and the Investor Group, the
"Shareholders").
W I T N E S S E T H:
WHEREAS, the Company and the Shareholders have entered into a
Securities Purchase Agreement, dated as of March 28, 1997 (the
"Purchase Agreement"), pursuant to which, concurrently with the
execution of this Agreement, the Investor Group has purchased
shares of Series C Convertible Preferred Stock of the Company
and 10.0% Subordinated Notes of the Company;
WHEREAS, the parties hereto wish to avoid possible dissension
among the Shareholders and otherwise to make provision for the
future governance of the Company;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE
CERTAIN AGREEMENTS
SECTION . Voting Agreements. From and after the date hereof,
each Shareholder hereby agrees to vote all voting securities of
the Company ("Securities") over which such Shareholder has
voting control, and to take all other necessary or desirable
actions within its or his control (whether in its or his
capacity as a shareholder, director, member of a board
committee, officer of the Company or otherwise, including,
without limitation, attendance at meetings in person, by
telephone or by proxy for purposes of obtaining a quorum,
execution of written consents in lieu of meetings and amendments
of the Company's articles of incorporation and Bylaws), and the
Company shall take all necessary and desirable actions within
its control, so that:
() the authorized number of directors of the Board of
Directors of the Company (the "Board") shall at all times be
established at five;
() the following directors shall be elected to the Board:
() one director designated by
Inroads;
() one director designated by
Mesirow;
() one director designated by the
holders of two-thirds of the voting power of the Securities held
by the Investor Group; and
() two directors designated by
McCoy;
() the removal from the Board (with or
without cause) of any director designated pursuant to this
Section 1.1 shall be effective only upon the written request of
the party or parties entitled to designate such director
pursuant to this Section 1.1; and
() in the event that any director
designated pursuant to this Section 1.1 for any reason ceases to
serve as a member of the Board during his or her term of office,
the resulting vacancy shall be filled by a director designated
by the party or parties that designated such departing director
pursuant to this Section 1.1.
SECTION . Expenses of Directors. The Company
shall pay the reasonable out-of-pocket expenses incurred by each
director in connection with attending the meetings of the Board
or discharging any of his or her other duties as a director of
the Company.
SECTION . Termination of Certain Rights. The
right of any party to designate directors pursuant to Section
1.1 shall terminate at such time as such party shall cease to
own any Securities. In addition, the right of McCoy to
designate directors pursuant to Section 1.1 shall terminate on
the termination of his employment with the Company.
ARTICLE
MISCELLANEOUS
SECTION . Termination. This Agreement shall terminate and be of
no further force or effect upon the consummation of an initial
public offering of equity securities of the Company.
SECTION . Legend on Certificates. All certificates evidencing
Securities which are subject to this Agreement shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THAT CERTAIN VOTING AGREEMENT DATED AS OF MARCH 28, 1997, AMONG
CERTAIN OF THE SHAREHOLDERS OF THE CORPORATION. A COPY OF SAID
AGREEMENT IS ON FILE IN THE OFFICE OF THE SECRETARY OF THE
CORPORATION."
Upon termination of this Agreement, certificates for Securities
bearing the foregoing legend may be surrendered to the Company
in exchange for new certificates without the foregoing legend.
SECTION . Transfers of Shares. Each party hereto agrees that
such party will not transfer any of the Securities owned by it,
unless the transferee has joined in this Agreement and agreed to
be bound hereby.
SECTION . Parties in Interest. This Agreement shall be binding
and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
SECTION . Notices. All notices and other communications which
are required or permitted to be given under this Agreement to
any Shareholder shall be in writing and shall be delivered
personally, mailed by certified or registered mail, return
receipt requested, sent by reputable overnight courier or sent
by confirmed telecopy, addressed to the address of such
Shareholder as disclosed by the books and records of the
Company, or to such other address and/or such other addressee as
any of the above shall have specified by notice hereunder. Each
notice or other communication which shall be delivered
personally, mailed or telecopied in the manner described above
shall be deemed sufficiently given, served, sent, received or
delivered for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt or
the affidavit of messenger being deemed conclusive, but not
exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
SECTION . Remedies. Each party hereto specifically recognizes
that any breach of the provisions of this Agreement will cause
irrevocable injury to the other parties hereto and that actual
damages will be difficult to ascertain and, in any event, would
be inadequate. Accordingly, each party hereto agrees that in
the event of any such breach, the other parties hereto (or any
of them) shall be entitled to injunctive relief in addition to
such other legal and equitable remedies that may be available,
without the posting of a bond or other security (to the extent
waiver of such posting is permissible by law) or making a
showing of any special damages or irreparable injury. If any
party to this Agreement obtains a judgment against any party
hereto by reason of any breach of this Agreement or the failure
of such other party to comply with the provisions hereof, a
reasonable attorneys' fee as fixed by the court shall be
included in such judgment. No remedy conferred upon any party
to this Agreement is intended to be exclusive of any other
remedy herein or by law provided or permitted, but each such
remedy shall be cumulative or shall be in addition to every
other remedy given hereunder or now or hereafter existing at law
or in equity or by statute.
SECTION . Waiver. None of the terms of this Agreement shall be
deemed to have been waived by any party hereto, unless such
waiver is in writing and signed by that party. The waiver by
any party hereto of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other
provision of this Agreement or of any further breach of the
provision so waived or of any other provision of this Agreement.
No extension of time for the performance of any obligation or
act hereunder shall be deemed an extension of time for the
performance of any other obligation or act.
SECTION . Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Indiana, without giving effect to its conflicts of law rules.
SECTION . Entire Agreement. This Agreement constitutes the sole
and entire agreement of the parties with respect to the subject
matter hereof.
SECTION . Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be effective only
upon delivery and thereafter shall be deemed to be an original,
and all of which shall be taken to be one and the same
instrument with the same effect as if each of the parties hereto
had signed the same signature page. Any signature page of this
Agreement may be detached from any counterpart of this Agreement
without impairing the legal effect of any signature thereon and
may be attached to another counterpart of this Agreement
identical in form hereto and having attached to it one or more
additional signature pages.
SECTION . Amendments. This Agreement may not be amended,
modified or changed in any respect without the written consent
of the holders of at least two-thirds in voting power of the
aggregate number of Securities then held by the Shareholders.
SECTION . Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision
of this Agreement shall be unenforceable or invalid under
applicable law, such provision shall be ineffective only to the
extent of such unenforceability or invalidity, and the remaining
provisions of this Agreement shall continue to be binding and in
full force and effect.
SECTION . Headings. The section and other headings contained in
this Agreement are for convenience only and shall not be deemed
to limit, characterize or interpret any provision of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by all of
the parties hereto or by their respective duly authorized
officers and partners, as the case may be, all as of the date
first written above.
INROADS CAPITAL PARTNERS, L.P.
Michael F. McCoy
By: INROADS
GENERAL PARTNERS, L.P., its
general
partner
William L. Wildman
By:
MERIDIAN FINANCIAL CORPORATION Its:
By: MESIROW CAPITAL
PARTNERS VII, an Illinois Limited
Partnership
Its:
By: MESIROW
FINANCIAL SERVICES, INC., its general partner
By:
Its:
EDGEWATER PRIVATE EQUITY FUND
II, L.P.
By: GORDON
MANAGEMENT, INC. its
general
partner
By:
Its:
REGISTRATION RIGHTS AGREEMENT
This AGREEMENT (this "Agreement"), dated as of March 28,
1997, is entered into among Meridian Financial Corporation,
an Indiana corporation (the "Company"), and those parties
listed under the heading "Shareholders" on the signature page
to this Agreement (the "Shareholders").
WHEREAS, pursuant to a Securities Purchase Agreement dated as
of March 28, 1997, the Shareholders have, concurrently with
the execution of this Agreement, purchased from the Company
shares of its Series C Convertible Preferred Stock
("Preferred Shares"); and
WHEREAS, the Company and the Shareholders desire to provide a
mechanism for the registration of the Conversion Shares (as
defined in Section 1(c)) and certain other securities of the
Company that may hereafter be issued in respect of the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein
and intending to be legally bound hereby, the parties hereto
agree as follows:
SECTION .Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
()The term "Commission" shall have the meaning assigned
thereto in Section 2(c) of this Agreement.
()The term "Company Common Stock" means the common stock, no
par value, of the Company.
()The term "Conversion Shares" means the shares of Company
Common Stock issuable upon conversion of Preferred Shares;
()The term "Demand" shall have the meaning assigned thereto
in Section 2(a) of this Agreement.
()The term "Demand Registration" shall have the meaning
assigned thereto in Section 2(a) of this Agreement.
()The term "Demanding Sellers" shall have the meaning
assigned thereto in Section 2(e) of this Agreement.
()The term "Internal Expenses" shall have the meaning
assigned thereto in Section 7 of this Agreement.
()The term "Maximum Demand Number" shall have the meaning
assigned thereto in Section 2(e) of this Agreement.
()The term "Maximum Piggyback Number" shall have the meaning
assigned thereto in Section 3(b) of this Agreement.
()The term "Other Demand Rights" shall have the meaning
assigned thereto in Section 3(b) of this Agreement.
()The term "Other Demanding Sellers" shall have the meaning
assigned thereto in Section 3(b) of this Agreement.
()The term "Person" means any individual, firm, corporation,
partnership, limited liability company or other entity, and
shall include any successor (by merger or otherwise) of such
entity.
()The term "Piggyback Notice" shall have the meaning assigned
thereto in Section 3(a) of this Agreement.
()The term "Piggyback Registration" shall have the meaning
assigned thereto in Section 3(a) of this Agreement.
()The term "Piggyback Seller" shall have the meaning assigned
thereto in Section 3(b) of this Agreement.
()The term "Primary Offering" shall have the meaning assigned
thereto in Section 3(b) of this Agreement.
()The term "Registrable Securities" means (i) the Conversion
Shares and (ii) securities issued or issuable with respect to
the Conversion Shares (or other Registrable Securities by
virtue of this clause (ii)) by way of a dividend, stock
split, combination of shares, recapitalization,
reorganization, reclassification, merger, consolidation,
compulsory share exchange or any transaction or series of
related transactions in which Preferred Shares, shares of
Company Common Stock or Registrable Securities are changed
into, converted into or exchanged for other securities. As to
any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (i) a registration
statement registering such securities under the Securities
Act has been declared effective and such securities have been
sold or otherwise transferred by the holder thereof pursuant
to such registration statement or (ii) such securities are
sold in compliance with Rule 144. For purposes of this
Agreement, a Person will be deemed to be a holder of
Registrable Securities whenever such Person has the right to
acquire such Registrable Securities from the Company (by
conversion, exercise or otherwise, including, without
limitation, by conversion of Preferred Shares) whether or not
such acquisition has actually been effected; provided,
however, that if more than one Person would be deemed to be
the holder of Registrable Securities by virtue of this
sentence, then the Person who then owns such Registrable
Securities shall be deemed to be the holder thereof; provided
further, that the Company need not recognize any Person as a
holder of Registrable Securities unless such Person acquired
such Registrable Securities (or the securities evidencing the
right to acquire Registrable Securities) from the Company or
unless such Person otherwise appears as a holder of record of
such Registrable Securities (or such securities evidencing
such right) on the books and records of the Company.
()The term "Registration Expenses" shall have the meaning
assigned thereto in Section 7 of this Agreement.
()The term "Requisite Amount" means 60% of the then
outstanding Registrable Securities.
()The term "Rule 144" means Rule 144 (or any successor
provisions) promulgated under the Securities Act.
()The term "Securities Act" shall have the meaning assigned
thereto in Section 2(a) of this Agreement.
SECTION .Demand Registrations.
()Requests for Registration. At any time and from time to
time after the earlier to occur of (i) the fourth anniversary
of the date of this Agreement and (ii) the closing of the
first registered public offering of equity securities of the
Company, holders of the Requisite Amount of Registrable
Securities shall be entitled to make written requests of the
Company (each such request being a "Demand") for registration
under the Securities Act of 1933, as amended (the "Securities
Act"), of all or part of the Registrable Securities (a
"Demand Registration"). Such Demand shall specify: (i) the
aggregate number and kind of Registrable Securities requested
to be registered; and (ii) the intended method of
distribution in connection with such Demand Registration to
the extent then known. No Demand shall be effective or impose
any obligation upon the Company unless such Demand shall
request the registration of not less than the Requisite
Amount of Registrable Securities. Within ten days after
receipt of a Demand, the Company shall give written notice of
such Demand to all other holders of Registrable Securities
and shall include in such registration all Registrable
Securities of each holder thereof with respect to which the
Company has received a written request for inclusion therein
within 20 days after the receipt by such holder of the
Company's notice required by this paragraph.
()Number of Demand Registrations. The holders of Registrable
Securities shall be entitled to two Demand Registrations.
()Satisfaction of Obligations. Subject to Section 4, a
registration shall not be treated as a Demand Registration
until (i) the applicable registration statement under the
Securities Act has been filed with the Securities and
Exchange Commission (the "Commission") with respect to such
Demand Registration and (ii) such registration statement
shall have been maintained continuously effective for a
period of at least 120 days or such shorter period when all
Registrable Securities included therein have been sold
thereunder in accordance with the manner of distribution set
forth in such registration statement.
()Restrictions on Demand Registrations. The Company shall
not be obligated to file any Demand Registration within 180
days after the effective date of a so-called "firm
commitment" underwritten registration in which all holders of
Registrable Securities were given so-called "piggyback"
rights pursuant to Section 3 hereof (provided that, with
respect to such a registration in which such piggyback rights
were exercised, each such holder exercising such piggyback
rights was permitted to include in such registration all
Registrable Securities that such holder sought to include
therein). In addition, the Company shall be entitled to
postpone (upon written notice to all holders of Registrable
Securities) the filing or the effectiveness of a registration
statement in respect of a Demand (x) for up to 90 days (but
no more than once in any period of nine consecutive months
and no more than two times in total) if the Company's Board
of Directors determines in good faith and in its reasonable
judgment that effecting the Demand Registration in respect of
such Demand would (i) have a material adverse effect on any
proposal or plan by the Company to engage in any material,
public debt or equity financing, acquisition or disposition
of assets (other than in the ordinary course of business) or
any material merger, consolidation, tender offer or other
similar transaction (in each case, authorization for the
negotiation of which has been obtained from the Board of
Directors of the Company prior to the service of such Demand)
or (ii) involve disclosure obligations contrary to the
Company's best interests or (y) until such time as a
registration statement may be filed and become effective
without the necessity of the Company having conducted any
special audit of its financial statements solely for the
purpose of such registration, unless the holders of the
Registrable Securities sought to be registered in such Demand
agree to pay one-half the costs of any such special audit.
()Participation in Demand Registrations. Neither the Company
nor any other Person shall include any securities other than
Registrable Securities in a Demand Registration, except with
the written consent of the holders of the majority of the
Registrable Securities sought to be registered pursuant to
such Demand Registration. If, in connection with a Demand
Registration, any managing underwriter (or, if such Demand
Registration is not an underwritten offering, a nationally
recognized independent underwriter selected by the holders of
a majority of the Registrable Securities sought to be
registered in such Demand Registration (which such
underwriter shall be reasonably acceptable to the Company and
whose fees and expenses shall be borne solely by the
Company)) advises the Company and the holders of the
Registrable Securities sought to be included in such Demand
Registration that, in its opinion, the inclusion of all the
Registrable Securities and, if authorized pursuant to this
paragraph, other securities of the Company, in each case,
sought to be registered in connection with such Demand
Registration would adversely affect the marketability of the
Registrable Securities sought to be sold pursuant thereto,
then the Company shall include in the registration statement
applicable to such Demand Registration only such securities
as the Company and the holders of Registrable Securities
sought to be registered therein ("Demanding Sellers") are
advised by such underwriter can be sold without such an
effect (the "Maximum Demand Number"), as follows and in the
following order of priority:
()first, the number of Registrable Securities sought to be
registered by each Demanding Seller, pro rata in proportion
to the number of Registrable Securities sought to be
registered by all Demanding Sellers; and
()second, if the number of Registrable Securities to be
included under clause (i) next above is less than the Maximum
Demand Number, the number of securities sought to be included
by each other seller, pro rata in proportion to the number of
securities sought to be sold by all such other sellers, which
in the aggregate, when added to the number of securities to
be included pursuant to clause (i) next above, equals the
Maximum Demand Number.
()Selection of Underwriters. If the holders of a majority of
the Registrable Securities sought to be registered in a
Demand Registration request that such Demand Registration be
an underwritten offering, then such holders shall select a
nationally recognized underwriter or underwriters to manage
and administer such offering, such underwriter or
underwriters, as the case may be, to be subject to the
approval of the Company's Board of Directors, which such
approval shall not be unreasonably withheld.
()Other Registrations. If the Company has received a Demand
pursuant to this Section 2 and if the applicable registration
statement in respect of such Demand has not been withdrawn or
abandoned, the Company will not file or cause to be effected
any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable
for its equity securities under the Securities Act (except on
Form S-4 or S-8 or any successor form), whether on its own
behalf or at the request of any holder or holders of such
securities, until a period of at least 120 days has elapsed
from the effective date of a firm commitment underwritten
Demand Registration (or, if later, the date of an
underwriting agreement with respect thereto) or a period of
at least 90 days has elapsed from the effective date of any
other Demand Registration, unless, in each case, a shorter
period of time is approved by the holders of a majority of
the Registrable Securities included in such Demand
Registration.
SECTION .Piggyback Registrations.
()Right to Piggyback. At any time from and after the date
hereof, whenever the Company proposes to register any of its
equity securities under the Securities Act (other than
pursuant to a Demand Registration or on a Form S-4 or S-8 (or
any successor form)) (a "Piggyback Registration"), the
Company shall give all holders of Registrable Securities
prompt written notice thereof (but not less than 30 days
prior to the filing by the Company with the Commission of any
registration statement with respect thereto). Such notice (a
"Piggyback Notice") shall specify, at a minimum, to the
extent known, the number and kind of securities proposed to
be registered, the proposed date of filing of such
registration statement with the Commission, the proposed
means of distribution, the proposed managing underwriter or
underwriters (if any and if known), and a good faith estimate
by the Company of the proposed minimum offering price of such
securities, as such price is proposed to appear on the facing
page of such registration statement. Upon the written
request of a holder of Registrable Securities given within
ten business days of such holder's receipt of the Piggyback
Notice (which written request shall specify the number and
kind of Registrable Securities intended to be disposed of by
such holder and the intended method of distribution thereof),
the Company shall include in such registration all
Registrable Securities with respect to which the Company has
received such written requests for inclusion; provided that
such holder sells such Registrable Securities only in
accordance with the method of distribution selected by the
Company or in accordance with any other method of
distribution which may be approved by the managing
underwriter of such offering.
()Priority on Piggyback Registrations. If, in connection
with a Piggyback Registration, any managing underwriter (or,
if such Piggyback Registration is not an underwritten
offering, a nationally recognized independent underwriter
selected by the Company (reasonably acceptable to the holders
of a majority of the Registrable Securities sought to be
included in such Piggyback Registration and whose fees and
expenses shall be borne solely by the Company)) advises the
Company and the holders of the Registrable Securities to be
included in such Piggyback Registration, that, in its
opinion, the inclusion of all the securities sought to be
included in such Piggyback Registration by the Company, any
Persons who have sought to have shares registered thereunder
pursuant to rights to demand (other than pursuant to so-
called "piggyback" or other incidental or participation
registration rights) such registration (such demand rights
being "Other Demand Rights" and such Persons being "Other
Demanding Sellers"), any holders of Registrable Securities
seeking to sell such securities in such Piggyback
Registration ("Piggyback Sellers") and any other proposed
sellers, in each case, if any, would adversely affect the
marketability of the securities sought to be sold pursuant
thereto, then the Company shall include in the registration
statement applicable to such Piggyback Registration only such
securities as the Company and the Piggyback Sellers are so
advised by such underwriter can be sold without such an
effect, which may exclude any class of Registrable Securities
if, in the judgment of such underwriter, the inclusion of
such Registrable Securities would adversely affect the
marketability of the securities sought to be sold pursuant
thereto (the "Maximum Piggyback Number"), as follows and in
the following order of priority:
()if the Piggyback Registration is an offering on behalf of
the Company and not any Person exercising Other Demand Rights
(whether or not other Persons seek to include securities
therein pursuant to so-called "piggyback" or other incidental
or participatory registration rights) (a "Primary Offering"),
then (A) first, such number of securities to be sold by the
Company as the Company shall have determined, (B) second, if
the number of securities to be included under clause (A) next
above is less than the Maximum Piggyback Number, the number
of Registrable Securities of each Piggyback Seller, pro rata
in proportion to the number of securities sought to be
registered by all the Piggyback Sellers, which in the
aggregate, when added to the number of securities to be
registered under clause (A) next above, equals the Maximum
Piggyback Number and (C) third, if the number of securities
to be included under clauses (A) and (B) next above is less
than the Maximum Piggyback Number, the number of securities
of each other proposed seller, pro rata in proportion to the
number of securities sought to be registered by all such
other proposed sellers, which in the aggregate, when added to
the number of securities to be registered under clauses (A)
and (B) next above, equals the Maximum Piggyback Number;
()if the Piggyback Registration is an offering other than
pursuant to a Primary Offering, then (A) first, such number
of securities sought to be registered by each Other Demanding
Seller, pro rata in proportion to the number of securities
sought to be registered by all such Other Demanding Sellers,
(B) second, if the number of securities included under clause
(A) next above is less than the Maximum Piggyback Number, the
number of securities sought to be registered by each
Piggyback Seller, pro rata in proportion to the number of
securities sought to be registered by all the Piggyback
Sellers, which in the aggregate, when added to the number of
securities to be registered pursuant to clause (A) next
above, equals the Maximum Piggyback Number and (C) third, if
the number of securities to be included under clauses (A) and
(B) next above is less than the Maximum Piggyback Number, the
number of securities of each other proposed seller, pro rata
in proportion to the number of securities sought to be
included by all such other proposed sellers, which in the
aggregate, when added to the number of securities to be
registered under clauses (A) and (B) next above, equals the
Maximum Piggyback Number.
()Withdrawal by the Company. If, at any time after giving
written notice of its intention to register any of its
securities as set forth in Section 3(a) and prior to the time
the registration statement filed in connection with such
registration is declared effective, the Company shall
determine for any reason not to register such securities, the
Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and
thereupon shall be relieved of its obligation to register any
Registrable Securities in connection with such particular
withdrawn or abandoned registration (but not from its
obligation to pay the Registration Expenses in connection
therewith as provided herein).
SECTION .Withdrawal Rights. Any holder of Registrable
Securities having notified or directed the Company to include
any or all of its Registrable Securities in a registration
statement under the Securities Act (whether pursuant to
Section 2 or 3 hereof) shall have the right to withdraw any
such notice or direction with respect to any or all of the
Registrable Securities designated for registration thereby by
giving written notice to such effect to the Company prior to
the effective date of such registration statement. In the
event of any such withdrawal, the Company shall not include
such Registrable Securities in the applicable registration
and such Registrable Securities shall continue to be
Registrable Securities hereunder. No such withdrawal shall
affect the obligations of the Company with respect to the
Registrable Securities not so withdrawn; provided that in the
case of a registration pursuant to Section 2 hereof, if such
withdrawal shall reduce the number of Registrable Securities
sought to be included in such registration below the
Requisite Amount, then the Company shall as promptly as
practicable give each holder of Registrable Securities so to
be registered notice to such effect, referring to this
Agreement and summarizing this Section, and within five
business days following the effectiveness of such notice,
either the Company or the holders of a majority of the
Registrable Securities may, by written notice to each holder
of Registrable Securities or the Company, respectively, elect
that such registration statement not be filed or, if
theretofore filed, be withdrawn. During such five business
day period, the Company shall not file such registration
statement if not theretofore filed or, if such registration
statement has been theretofore filed, the Company shall not
seek, and shall use its best efforts to prevent, the
effectiveness thereof. Any registration statement not filed
or withdrawn in accordance with an election by the Company or
the holders of Registrable Securities shall not be counted as
a Demand for purposes of Section 2 hereof.
SECTION .Holdback Agreements.
()Holders. Each holder of Registrable Securities agrees not
to effect any public sale or distribution (including sales
pursuant to Rule 144) of equity securities of the Company, or
any securities convertible into or exchangeable or
exercisable for such securities, during the seven days
immediately prior to and the 120-day period beginning on the
effective date of any Demand Registration or (excluding sales
pursuant to Rule 144) any Piggyback Registration (in each
case, except as part of such registration and whether or not,
in the case of a Piggyback Registration, any Registrable
Securities are included therein), or, in each case, if later,
the date of any underwriting agreement with respect thereto.
The holders of a majority of the Registrable Securities
included in a Demand Registration may waive the limitation
contained in this paragraph with respect to such Demand
Registration.
()The Company. The Company agrees (i) not to effect, whether
for itself or for any other Person, any public sale or
distribution of its securities of the same class as any
Registrable Securities to be registered by the Company
pursuant to this Agreement, or any securities convertible
into or exchangeable or exercisable for such securities,
during the seven days immediately prior to and the 120-day
period beginning on the effective date of any registration in
connection with a Demand Registration or a Piggyback
Registration with respect to such Registrable Securities
(except as part of such registration to the extent permitted
pursuant to this Agreement or pursuant to registrations on
Form S-4 or Form S-8 (or any successor form)) or, in each
case, if later, the date of any underwriting agreement with
respect thereto, and (ii) in connection with a Demand
Registration will use reasonable efforts to cause each of the
Company's officers and each holder (other than a holder of
Registrable Securities and a holder eligible to report its
holdings on Schedule 13G pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of at least 5% of its Common Stock, or Common Stock
and any securities convertible into or exchangeable or
exercisable for Common Stock, representing, in the aggregate,
at least 5% of the Common Stock (on a fully diluted basis) to
agree not to effect any public sale or distribution
(excluding sales pursuant to Rule 144) of any such securities
during such period (except as part of such registration to
the extent permitted pursuant to the terms of this
Agreement). This Section 5(b) shall not be deemed to limit
the exercise of Demands hereunder by the holders of
Registrable Securities and the disposition of such securities
by such holders as permitted by the other terms of this
Agreement.
SECTION .Registration Procedures. Whenever the holders of
Registrable Securities have requested that any Registrable
Securities be registered pursuant to this Agreement (whether
pursuant to Section 2 or Section 3 of this Agreement), the
Company shall use its best efforts to effect the registration
and the sale of such Registrable Securities in accordance
with the intended method of disposition thereof and, in
connection therewith, the Company shall as expeditiously as
possible:
()prepare and file with the Commission a registration
statement with respect to such Registrable Securities, on any
form for which the Company then qualifies and which counsel
for the Company shall deem appropriate for the sale of such
Registrable Securities in accordance with the intended method
of distribution thereof, and use its best efforts to cause
such registration statement to become effective;
()prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective for a continuous period of
not less than 120 days (or, if earlier, until all Registrable
Securities included in such registration statement have been
sold thereunder in accordance with the manner of distribution
set forth therein) and comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by such registration statement during such
period in accordance with the intended methods of disposition
by the sellers thereof as set forth in such registration
statement (including, without limitation, by incorporating in
a prospectus supplement or post-effective amendment, at the
request of a seller of Registrable Securities, the terms of
the sale of such Registrable Securities);
()before filing with the Commission any such registration
statement or prospectus or any amendments or supplements
thereto, the Company shall furnish to counsel selected by the
holders of a majority of the Registrable Securities covered
by such registration statement and counsel for the
underwriter or sales or placement agent, if any, in
connection therewith, drafts of all such documents proposed
to be filed and provide such counsel with a reasonable
opportunity for review thereof and comment thereon, such
review to be conducted and such comments to be delivered with
reasonable promptness;
()promptly (i) notify the selling holders of Registrable
Securities of each of (x) the filing and effectiveness of the
registration statement and prospectus and any amendments or
supplements thereto, (y) the receipt of any comments from the
Commission or any state securities law authorities or any
other governmental authorities with respect to any such
registration statement or prospectus or any amendments or
supplements thereto and (z) any oral or written stop order
with respect to such registration, any suspension of the
registration or qualification of the sale of such Registrable
Securities in any jurisdiction or any initiation or
threatening of any proceedings with respect to the foregoing
and (ii) use its best efforts to obtain the withdrawal of any
order suspending the registration or qualification (or the
effectiveness thereof) or suspending or preventing the use of
any related prospectus in any jurisdiction with respect
thereto;
()furnish to each seller of Registrable Securities, the
underwriters and the sales or placement agent, if any, and
counsel for each of the foregoing, a conformed copy of such
registration statement and each amendment and supplement
thereto (in each case, including all exhibits thereto and
documents incorporated by reference therein) and such
additional number of copies of such registration statement,
each amendment and supplement thereto, the prospectus
(including each preliminary prospectus) included in such
registration statement and prospectus supplements and all
exhibits thereto and documents incorporated by reference
therein and such other documents as such seller, underwriter,
agent or counsel may reasonably request in order to
facilitate the disposition of the Registrable Securities
owned by such seller, the use of each of which thereby and
therefor to which the Company hereby consents;
()if requested by the managing underwriter or underwriters of
any registration or by the holders of a majority of the
Registrable Securities included in any registration
statement, subject to approval of counsel to the Company in
its reasonable judgment, promptly incorporate in a
prospectus, supplement or post-effective amendment to the
registration statement such information concerning
underwriters and the plan of distribution of the Registrable
Securities as such managing underwriter or underwriters or
such holders reasonably shall furnish to the Company in
writing and request be included therein, including, without
limitation, with respect to the number of Registrable
Securities being sold by such holders to such underwriter or
underwriters and the purchase price being paid therefor by
such underwriter or underwriters; and make all required
filings of such prospectus, supplement or post-effective
amendment as soon as reasonably possible after being notified
of the matters to be incorporated in such prospectus,
supplement or post-effective amendment;
()use its best efforts to register or qualify such
Registrable Securities under such securities or "blue sky"
laws of such jurisdictions as any seller reasonably requests
and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller and keep such
registration or qualification in effect for so long as the
registration statement remains effective under the Securities
Act (provided that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this
paragraph or (ii) subject itself to taxation in any such
jurisdiction where it would not otherwise be subject to
taxation but for this paragraph);
()notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon the discovery that,
or of the happening of any event as a result of which, the
registration statement covering such Registrable Securities,
as then in effect, contains an untrue statement of a material
fact or omits to state any material fact required to be
stated therein or any fact necessary to make the statements
therein not misleading, and promptly prepare and furnish to
each such seller a supplement or amendment to the prospectus
contained in such registration statement so that such
Registration Statement shall not, and such prospectus as
thereafter delivered to the purchaser of such Registrable
Securities shall not, contain an untrue statement of a
material fact or omit to state any material fact required to
be stated therein or any fact necessary to make the
statements therein not misleading;
()cause all such Registrable Securities to be listed on each
securities exchange and included in each established over-
the-counter market on which or through which securities of
the same class of the Company are then listed or traded and,
if not so listed or traded, to be listed on the National
Association of Securities Dealers Automated Quotation system
("NASDAQ") and if listed on NASDAQ, use its reasonable
efforts to secure designation of all such Registrable
Securities covered by such registration statement as a NASDAQ
"national market system security" within the meaning of Rule
11Aa2-1 under the Exchange Act, or, failing that, to secure
NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange
for at least two (2) market makers to register as such with
respect to such Registrable Securities with the National
Association of Securities Dealers;
()provide a transfer agent, registrar and CUSIP number for
all of such Registrable Securities not later than the
effective date of such registration statement;
()make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney,
accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause
the Company's officers, directors, employees, attorneys and
independent accountants to supply all information, in each
case reasonably requested by any such sellers, underwriters,
attorneys, accountants or agents in connection with such
registration statement, subject to the right of the Company
to limit access to any such information to the extent that
(i) the Company is restricted from providing such information
pursuant to any bona fide confidentiality agreement to which
the Company or any of its subsidiaries is a party and (ii)
the Company shall have delivered to each seller of the
Registrable Securities a certificate duly executed by the
chief executive or chief financial officer of the Company
stating that such information does not contain any material
information that has not been publicly disclosed and which
would be required to be disclosed in, or which would
materially affect any information required to be disclosed
in, such registration statement;
()use its best efforts to comply with all applicable laws
related to such registration statement and offering and sale
of securities and all applicable rules and regulations of
governmental authorities in connection therewith (including,
without limitation, the Securities Act and the Exchange Act
and the rules and regulations promulgated by the Commission)
and make generally available to its security holders as soon
as practicable (but in any event not later than 15 months
after the effectiveness of such registration statement) an
earnings statement of the Company and its subsidiaries
complying with Section 11(a) of the Securities Act;
()furnish to each seller of Registrable Securities a signed
counterpart of (i) an opinion of counsel for the Company
(which counsel shall be reasonably acceptable to the holders
of a majority of the Registrable Securities being so
registered) and (ii) a "comfort" letter signed by the
independent public accountants who have certified the
Company's financial statements included or incorporated by
reference in such registration statement, covering such
matters with respect to such registration statement and, in
the case of the accountants' comfort letter, with respect to
events subsequent to the date of such financial statements,
as are customarily covered in opinions of issuer's counsel
and in accountants' comfort letters delivered to the
underwriters in underwritten public offerings of securities
for the account of, or on behalf of, an issuer of common
stock, such opinion and comfort letters to be dated the date
such opinions and comfort letters are customarily dated in
such transactions, and covering, in the case of such legal
opinion, such other legal matters and, in the case of such
comfort letter, such other financial matters, as any seller
of such Registrable Securities may reasonably request; and
()take all such other actions as the holders of a majority of
the Registrable Securities being sold or the underwriters, if
any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
Without limiting any of the foregoing, in the event that the
offering of Registrable Securities is to be made by or
through an underwriter, the Company shall enter into an
underwriting agreement with a managing underwriter or
underwriters containing representations, warranties,
indemnities and agreements customarily included (but not
inconsistent with the agreements contained herein) by an
issuer of common stock in underwriting agreements with
respect to offerings of common stock for the account of, or
on behalf of, selling shareholders. In connection with the
sale of Registrable Securities hereunder, any seller of such
Registrable Securities may, at its option, require that any
and all representations and warranties by, and indemnities
and agreements of, the Company to or for the benefit of such
underwriter or underwriters (or which would be made to or for
the benefit of such an underwriter or underwriters if such
sale of Registrable Securities were pursuant to a customary
underwritten offering) be made to and for the benefit of such
seller and that any or all of the conditions precedent to the
obligations of such underwriter or underwriters (or which
would be so for the benefit of such underwriter or
underwriters under a customary underwriting agreement) be
conditions precedent to the obligations of such seller in
connection with the disposition of its securities pursuant to
the terms hereof (it being agreed that in connection with any
Demand Registration, without limiting any rights or remedies
of the holders of Registrable Securities, subject to Section
4, in the event any such condition precedent shall not be
satisfied and, if not so satisfied, shall not be waived by
the holders of a majority of the Registrable Securities to be
included in such Demand Registration, such Demand
Registration shall not be counted as a permitted Demand
hereunder). Each seller of Registrable Securities pursuant
to the terms of this Agreement shall be required to make such
representations and warranties to, and agreements with, the
Company and/or underwriter or underwriters as are customary
in similar transactions or are contemplated by the terms of
this Agreement. In connection with any offering of
Registrable Securities registered pursuant to this Agreement,
the Company shall (i) furnish to the underwriter, if any (or,
if no underwriter, the sellers of such Registrable
Securities), unlegended certificates representing ownership
of the Registrable Securities being sold, in such
denominations as requested for sale pursuant to such
registration and (ii) instruct any transfer agent and
registrar of the Registrable Securities to release any stop
transfer order with respect thereto.
Each seller of Registrable Securities hereunder agrees that
upon receipt of any notice from the Company of the happening
of any event of the kind described in paragraph (h) of this
Section 6, such seller shall forthwith discontinue such
seller's disposition of Registrable Securities pursuant to
the applicable registration statement and prospectus relating
thereto until such seller's receipt of the copies of the
supplemented or amended prospectus contemplated by paragraph
(h) of this Section 6 and, if so directed by the Company,
deliver to the Company (at the Company's sole cost and
expense) all copies, other than permanent file copies, then
in such seller's possession of the prospectus current at the
time of receipt of such notice relating to such Registrable
Securities. In the event the Company shall give such notice,
the 120-day period during which such registration statement
must remain effective pursuant to this Agreement shall be
extended by the number of days during the period from the
date of giving of a notice regarding the happening of an
event of the kind described in paragraph (h) of this Section
6 to the date when all such sellers shall receive such a
supplemented or amended prospectus and such prospectus shall
have been filed with the Commission.
SECTION .Registration Expenses. All expenses incident to the
Company's performance of, or compliance with, its obligations
under this Agreement (without implication that the contrary
would otherwise be true, whether or not a registration
statement under the Securities Act is filed with the
Commission or becomes effective under the Securities Act)
including, without limitation, all registration and filing
fees, all fees and expenses of compliance with securities and
"blue sky" laws (including, without limitation, the fees and
expenses of counsel for underwriters or placement or sales
agents in connection therewith to the extent provided for in
the underwriting agreement), all printing and copying
expenses, all messenger and delivery expenses, all fees and
expenses of underwriters and sales and placement agents in
connection therewith (excluding discounts and commissions),
all fees and expenses of the Company's independent certified
public accountants and counsel (including, without
limitation, with respect to "comfort" letters and opinions)
and other Persons retained by the Company in connection
therewith, and the fees and expenses of no more than one
counsel for the holders (as a group) of Registrable
Securities to be registered hereunder (collectively, the
"Registration Expenses") shall be borne by the Company unless
otherwise provided in this Agreement except that the Company
will, in any event (and without implication that the contrary
would otherwise be true), pay its internal expenses
(including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting
duties, and the expense of any annual audit) (collectively,
"Internal Expenses") and the expenses and fees for listing
the securities to be registered on each securities exchange
and included in each established over-the-counter market on
which securities of the same class issued by the Company are
then listed or traded or for listing on the NASDAQ pursuant
to paragraph (i) of Section 6 of this Agreement.
SECTION .Indemnification.
()By the Company. The Company agrees to indemnify, to the
fullest extent permitted by law, each holder of Registrable
Securities, its officers, directors, employees and agents and
each Person who controls (within the meaning of the
Securities Act) such holder or such an other indemnified
Person against all losses, claims, damages, liabilities and
expenses caused by any untrue or alleged untrue statement of
material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of
a material fact required to be stated therein or of a fact
necessary to make the statements therein not misleading,
except insofar as the same are caused by and contained in any
information furnished in writing to the Company by such
holder expressly for use therein. In connection with an
underwritten offering and without limiting any of the
Company's other obligations under this Agreement, the Company
shall indemnify such underwriters, their officers, directors,
employees and agents and each Person who controls (within the
meaning of the Securities Act) such underwriters or such an
other indemnified Person to the same extent as provided above
with respect to the indemnification of the holders of
Registrable Securities.
()By Holders. In connection with any registration statement
in which a holder of Registrable Securities is participating,
each such holder will furnish to the Company in writing
information regarding such holder's ownership of Registrable
Securities and its intended method of distribution thereof
and, to the extent permitted by law, shall indemnify the
Company, its directors, officers, employees and agents and
each Person who controls (within the meaning of the
Securities Act) the Company or such an other indemnified
Person against any losses, claims, damages, liabilities and
expenses (including with respect to any claim for
indemnification hereunder asserted by any other indemnified
Person) resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of
a material fact required to be stated therein or necessary to
make the statements therein not misleading, but only to the
extent that such untrue statement or omission is caused by
and contained in such information so furnished in writing by
such holder; provided that the obligation to indemnify will
be several, not joint and several, among holders of
Registrable Securities and the liability of each such holder
of Registrable Securities will be in proportion to and
limited to the net amount received by such holder from the
sale of Registrable Securities pursuant to such registration
statement.
()Notice. Any Person entitled to indemnification hereunder
shall give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification;
provided, however, the failure to give such notice shall not
release the indemnifying party from its obligation under this
Section 8, except to the extent that the indemnifying party
has been materially prejudiced by such failure to provide
such notice.
()Defense of Actions. In any case in which any such action
is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein,
and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not (so long
as it shall continue to have the right to defend, contest,
litigate and settle the matter in question in accordance with
this paragraph) be liable to such indemnified party hereunder
for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof
other than reasonable costs of investigation, supervision and
monitoring (unless such indemnified party reasonably objects
to such assumption on the grounds that there may be defenses
available to it which are different from or in addition to
the defenses available to such indemnifying party, in which
event the indemnified party shall be reimbursed by the
indemnifying party for the expenses incurred in connection
with retaining separate legal counsel; provided that the
indemnifying party shall not be obligated to reimburse the
indemnified parties for the fees and expenses of more than
one counsel for all indemnified parties who do not have
different or additional defenses among themselves). An
indemnifying party shall not be liable for any settlement of
an action or claim effected without its consent. The
indemnifying party shall lose its right to defend, contest,
litigate and settle a matter if it shall fail to diligently
contest such matter (except to the extent settled in
accordance with the next following sentence). No matter
shall be settled by an indemnifying party without the consent
of the indemnified party (which consent shall not be
unreasonably withheld).
()Survival. The indemnification provided for under this
Agreement shall remain in full force and effect regardless of
any investigation made by or on behalf of the indemnified
Person and will survive the transfer of the Registrable
Securities.
()Contribution. If recovery is not available under the
foregoing indemnification provisions for any reason or
reasons other than as specified therein, any Person who would
otherwise be entitled to indemnification by the terms thereof
shall nevertheless be entitled to contribution with respect
to any losses, claims, damages, liabilities or expenses with
respect to which such Person would be entitled to such
indemnification but for such reason or reasons. In
determining the amount of contribution to which the
respective Persons are entitled, there shall be considered
the Persons' relative knowledge and access to information
concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any
statement or omission, and other equitable considerations
appropriate under the circumstances. It is hereby agreed
that it would not necessarily be equitable if the amount of
such contribution were determined by pro rata or per capita
allocation.
SECTION .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 and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of
such underwriting arrangements.
SECTION .Miscellaneous.
()Existing Registration Rights; No Inconsistent Agreements.
The Company represents and warrants that there are no
existing rights to require or request the Company to register
any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such
securities. The Company shall not grant to any Person the
right to require or request the Company to register any
equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such
securities, without the prior written consent of the holders
of two-thirds of the Registrable Securities.
()Rule 144. The Company shall timely file the reports, if
any, required to be filed by it under the Securities Act or
the Exchange Act (including, if required, the reports under
Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c)(1) of Rule 144). Upon the request of any
holder of Registrable Securities, the Company shall: (i)
deliver to such holder a written statement as to its
compliance with the reporting requirements of Rule 144, as
such rule may be amended from time to time, and (ii) take
such further action, including, without limitation, supply
and make publicly available any other information in the
possession of or reasonably obtainable by the Company, with
the purpose of allowing such holder to avail itself of Rule
144 or any other rule or regulation of the Commission
allowing it to sell securities without registration under the
Securities Act.
()Remedies. If any party to this Agreement obtains a
judgment against any other party hereto by reason of any
breach of this Agreement or the failure of such other party
to comply with the provisions hereof, a reasonable attorneys'
fee as fixed by the court shall be included in such judgment.
No remedy conferred upon any party to this Agreement is
intended to be exclusive of any other remedy herein or by law
provided or permitted, but each such remedy shall be
cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in
equity or by statute.
()Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may be amended or
waived and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of
holders of two-thirds of the Registrable Securities; provided
that no such amendment or waiver may be made and the Company
may not take any such action or fail to perform any such act
if such amendment, action or failure to perform adversely
affects any holder or group of holders of Registrable
Securities in a manner that does not adversely affect the
holders of Registrable Securities in general, without the
written consent of such holder or members of such group of
holders holding a majority of the Registrable Securities held
by such group. Notwithstanding the foregoing, holders of
Registrable Securities outstanding from time to time shall
not be entitled to adversely affect the rights of former
holders of Registrable Securities under this Agreement by any
such amendment or waiver without the consent of a majority in
interest of such former holders so affected. The waiver by
any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of
any other provision of this Agreement or of any further
breach of the provision so waived or of any other provision
of this Agreement. No extension of time for the performance
of any obligation or act hereunder shall be deemed an
extension of time for the performance of any other obligation
or act. The waiver by any party of any of the conditions
precedent to its obligations under this Agreement shall not
preclude it from seeking redress for breach of this
Agreement.
()Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto
will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so
expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement
which are for the benefit of purchasers or holders of
Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable
Securities; provided that securities shall cease to be
Registrable Securities under the circumstances provided in
Section 1(q).
()Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or
invalidity, and the remaining provisions of this Agreement
shall continue to be binding and in full force and effect.
()Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be effective only upon
delivery and thereafter shall be deemed to be an original,
and all of which shall be taken to be one and the same
instrument with the same effect as if each of the parties
hereto had signed the same signature page. Any signature
page of this Agreement may be detached from any counterpart
of this Agreement without impairing the legal effect of any
signature thereon and may be attached to another counterpart
of this Agreement identical in form hereto and having
attached to it one or more additional signature pages.
()Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and shall not be
deemed to limit, characterize or interpret any provision of
this Agreement.
()Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement and the
exhibits and schedules hereto will be governed by the
internal law, and not the law of conflicts, of Illinois.
()Notices. All notices and other communications which are
required or permitted to be given or delivered under or by
reason of the provisions of this Agreement shall be in
writing and shall be delivered personally, mailed by
certified or registered mail, return receipt requested, sent
by reputable overnight courier or sent by confirmed
telecopier, addressed as follows:
()if to the Company, at 8250 Haverstick Road, Suite 110,
Indianapolis, Indiana 46240-2401, Attention: President;
()if to any Shareholder, at the address of such Shareholder
as disclosed by the records of the Company; or to such other
address and/or such other addressee as any of the above shall
have specified by notice hereunder. Each notice or other
communication which shall be delivered personally, mailed or
telecopied in the manner described above shall be deemed
sufficiently given, served, sent, received or delivered for
all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt or the
affidavit of messenger being deemed conclusive, but not
exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
()Entire Agreement. This Agreement constitutes the sole and
entire
agreement of the parties with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date
first written above.
MERIDIAN FINANCIAL
CORPORATION
By:
Its:
SHAREHOLDERS:
INROADS CAPITAL PARTNERS,
L.P.
By:INROADS GENERAL
PARTNERS, L.P., its general partner
By:
Title:
MESIROW CAPITAL PARTNERS VII,
an Illinois Limited Partnership
By:MESIROW FINANCIAL
SERVICES, INC., its general partner
By:
Title:
EDGEWATER PRIVATE EQUITY FUND
II, L.P.
By:GORDON MANAGEMENT,
INC.,
its general partner
By:
Title:
EXECUTIVE SHARE AGREEMENT
This Executive Share Agreement (the "Agreement") is dated as
of March 28, 1997 among Michael F. McCoy (the "Executive
Shareholder"), INROADS Capital Partners, L.P. ("INROADS"),
Mesirow Capital Partners VII, an Illinois Limited Partnership
("Mesirow") and Edgewater Private Equity Fund II, L.P.
("Edgewater"; together with INROADS and Mesirow, the
Purchasers") and Meridian Financial Corporation (the
"Company").
WHEREAS, the Executive Shareholder is currently a shareholder
of the Company and serves as an executive officer of the
Company;
WHEREAS, pursuant to that certain Securities Purchase
Agreement, dated as of March 28, 1997 (the "Purchase
Agreement" ), the Purchasers are, concurrently with the
execution of this Agreement, purchasing shares of Series C
Convertible Preferred Stock of the Company ("Preferred
Shares") and 10.0% Subordinated Notes of the Company
("Notes");
WHEREAS, the Purchasers desire, upon the fulfillment of
certain conditions, to deliver Executive Shares (as defined
in Section l(f)) to the Executive Shareholder or to other
officers or employees of the Company, all as specified herein
and subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, intending to be legally bound hereby, the
parties hereto agree as follows:
Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
()"Board of Directors" shall mean the Board of Directors of
the Company
() "Cause" shall mean any of the following with respect to
the Executive Shareholder: (i) the conviction, admission or
plea of no contest by the Executive Shareholder with respect
to any crime, whether or not involving the Company, which
constitutes a felony in the jurisiction involved; (ii) the
embezzlement or misappropriation of property of the Company
or any of its subsidiaries or affiliates, or any other act
involving fraud with respect to the Company or any of its
subsidiaries or affiliates; (iii) any substance abuse by the
Executive Shareholder that interferes with the Executive
Shareholder's ability to discharge his duties to the Company;
(iv) a breach by the Executive Shareholder of any of the
provisions of Section 7.02 of the Purchase Agreement; or (v)
the failure by the Executive Shareholder (following
reasonable notice and an opportunity to cure) to perform such
duties as may he delegated to him by the Board of Directors.
() "Common Stock" shall mean Common Shares, without par
value, of the Company.
() "Cumulative Lease Origination Amount", for any period,
shall mean (i) the original equipment cost of all restaurant
equipment leased by the Company pursuant to leases for
restaurant equipment and (ii) the original equipment cost of
all equipment other than restaurant equipment, up to $5
million in the aggregate, leased by the Company pursuant to
leases approved by the Board of Directors, in each case
originated by the Company (whether such leases are ultimately
retained in the Company's portfolio or brokered for others)
in the ordinary course of its business during such period, as
determined by the Board of Directors.
() "Cumulative Pre-Tax Net Income", for any period, shall
mean the sum of (i) the net income before state and federal
income tax expense of the Company, as reflected on the
audited statement of operations of the Company for each
fiscal year wholly contained in such period and (ii) the net
income before state and federal income tax expense of the
Company, as determined by the Board of Directors in
accordance with generally accepted accounting principles,
applied consistently with the Company's past practice, for
each period contained in such period that is not a part of
any such fiscal year.
() "Executive Shares" shall mean, with respect to any
Purchaser, (i) 8% of the Preferred Shares purchased by such
Purchaser pursuant to the Purchase Agreement (which, together
with resect to all Purchasers, equals 6% of the Common Stock
on a fully diluted basis as of the date of this Agreement)
and any shares of Common Stock issued upon conversion of such
Preferred Shares and (ii) any other securities of the Company
issued with respect to any of such securities (or other
Executive Shares by virtue of this clause (ii)) by way of a
dividend, distribution, stock split, recapitalization,
reorganization, merger or any ransaction or series of related
transactions in which Executive Shares are changed into,
converted into or exchanged for other securities.
() "Liquidity Event" shall mean any of the following: (i)
the closing of a firm commitment underwritten public offering
of shares of Common Stock which triggers the mandatory
conversion provisions applicable to the Preferred Share; (ii)
the consummation of a transaction pursuant to which the
Company shall sell all or substantially all of its assets
(except in connection with a sale effected in the form of a
securitization); (iii) the consummation of a transaction
pursuant to which the Purchasers shall sell all or
substantially all of their aggregate equity interest in the
Company; or (iv) the consummation by the Company of a merger,
consolidation or other combination in which the Company is
not the surviving party or in which the Company survives as a
wholly-owned subsidiary of another entity.
() "Retained Asset Amount", as of any date, shall mean the
Cumulative Lease Origination Amount from the date hereof
through such date (excluding leases brokered for the accounts
of others or sold to others, but including any securitized
lease), as determined by the Board of Directors on a basis
consistent with that utilized in the preparation of the
Business Plan (as defined in the Purchase Agreement).
() The "Vested Percentage" of the Executive Shares shall be
determined as follows:
If the Executive Shareholder's The
Vested
employment is terminated between:
Percentage is:
The date hereof and March 31, 1998
0%
April 1, 1998 and March 31, 1999
25%
April 1, 1999 and March 31, 2000
50%
April 1, 2000 and March 31, 2001
75%
April l, 2001 and following
100%
. Agreement to Deliver.
()Upon the fulfillment of the conditions set forth in
Section 3, and subject to Section 2(b), on the earlier of (i)
immediately prior to a Liquidity Event or (ii) the tenth
anniversary of the date hereof, each of the Purchasers
severally, but not jointly, hereby agrees to transfer and
deliver promptly, for no additional consideration other than
the fulfillment of such conditions, all Executive Shares of
such Purchaser to the Executive Shareholder and/or such other
officers, directors, employees or consultants of the Company
as he designates in writing (and in such proportions as he
designates in writing).
()If the Executive Shareholder's employment with the Company
has been terminated for any reason prior to March 31, 2001,
no Purchaser shall have any obligation to deliver any
Executive Shares pursuant to this Agreement and this
Agreement shall terminate upon any such termination of the
Executive Shareholder's employment with the Company, except
that if (i) the Executive Shareholder's employment with the
Company is terminated prior to March 31, 2001 by the
Executive Shareholder's death or total permanent disability,
determined in accordance with the Company's practices for
employees generally and, as of the most recent period set
forth on Schedule A hereto (each such period being a
"Measuring Period") ended prior to the date of such death or
disability, the Company has met each of the projections set
forth on Schedule A hereto with respect to such Measuring
Period, or (ii) the Executive Shareholder's employment with
the Company is terminated prior to March 31, 2001 by the
Company without Cause, and, as of the end of each Measuring
Period ended prior to the date of such termination, the
Company has met each of the projections set forth on Schedule
A hereto with respect to such Measuring Periods, then, in
full satisfaction of the Purchasers' obligations under this
Agreement: (1) each Purchaser shall deliver to the Executive
Shareholder or his designees, on the earlier of (x)
immediately prior to a Liquidity Event or (y) the tenth
anniversary of the date hereof, the Vested Percentage of the
Executive Shares of such Purchaser as of the date of such
termination and (2) each Purchaser shall deliver, on the
earlier of (x) immediately prior to a Liquidity Event or (y)
the tenth anniversary of the date hereof, to senior managers
of the Company designated from time to time by the Purchasers
("Other Executives"), subject to fulfillment of the
conditions set forth in Section 3, any Executive Shares of
such Purchaser which are not deliverable by such Purchaser to
the Executive Shareholder (or his designees) as a result of
the provisions of this Section 2(b) ("Available Shares")
(provided that, in the event of the termination of this
Agreement as a result of the death of the Executive
Shareholder, the Available Shares, after any allocation of
Executive Shares to Salvatore F. Mulia, shall be allocated
60% to William L. Wildman and 40% to Gerald W. Gerichs (who
shall thereupon be the Other Executives for purposes of this
Agreement)); provided that the Purchasers shall not be
required to deliver any Available Shares to any Other
Executive who is not employed by the Company in a management
capacity on the earlier of the occurrence of a Liquidity
Event or April 1, 2001. If the Executive Shareholder's
employment is terminated for any reason on or after March 31,
2001 and the conditions set forth in Section 3 have been met,
the Purchasers shall be obligated to deliver the Executive
Shares as provided in Section 2(a). If the employment with
the Company of any Other Executive to whom Available Shares
have been allocated is terminated, such Available Shares
shall upon such termination be free of the terms of this
Agreement.
Conditions. The obligation of the Purchasers to deliver
Executive Shares pursuant to Section 2 is subject to the
fulfillment of the following conditions:
() if a Liquidity Event occurs on or after April 1, 2001:
() Cumulative Pre-Tax Net Income of the Company from the
date hereof through March 31, 2001, shall be equal to or
greater than $12.5 million;
()the Cumulative Lease Origination Amount from the date
hereof through March 31, 2001 shall be equal to or greater
than $123 million; and
()the Company's Retained Asset Amount as of March 31,
2001 shall be at least $95 million;
()if a Liquidity Event occurs prior to April 1, 2000: the
Company shall have met each of the projections set forth on
Schedule A hereto with respect to the
most recent Measuring Period ended prior to the date of such
Liquidity Event; and
()if a Liquidity Event occurs on or after April 1, 2000 and
prior to April 1, 2001: (i) the Company shall have met each
of the projections set forth on Schedule A hereto with
respect to the Measuring Period ended March 31, 2000 and (ii)
the total valuation of the Company in such Liquidity Event
shall exceed the product of (x) 4.5 and (y) the aggregate
total amount of capital invested by the Purchasers in the
Company through the date of such Liquidity Event plus the
aggregate amount of capital invested in the Company by
parties other than the Purchasers after the date of this
Agreement, in each case whether such capital is evidenced by
equity securities or subordinated debt of the Company.
Determination of Financial Conditions. As soon as
practicable after determination of the Company's results of
operations as of March 3 l, 2001, but in no event later than
15 days thereafter, the Board of Directors shall determine,
based on such statements and on the Company's internal books
and records, whether it believes that the conditions set
forth in paragraph (a) of Section 3 have been met, and shall
deliver a written notice of its determination to each of the
Purchasers and the Executive Shareholder. If either the
Executive Shareholder or a Purchaser disputes the Company's
determination with respect to such conditions, the parties,
with the assistance of the Company's independent public
accountants, shall attempt to resolve such dispute within 30
days following the date on which the determination of the
Board of Directors was delivered to the Purchasers and the
Executive Shareholder. If such dispute is not resolved
within such 30-day period, the Purchasers and the Executive
Shareholder shall jointly select a national firm of
independent public accountants familiar with the business in
which the Company is engaged (the "Arbitrating Accountant")
to determine whether any such disputed conditions have been
met. The Arbitrating Accountant shall conduct such
independent procedures and investigation as the Arbitrating
Accountant shall deem necessary in order to form an opinion
as to the fulfillment of such conditions. The Arbitrating
Accountant shall give written notice to the Purchasers, the
Executive Shareholder and the Company of its determination
within 45 days of its appointment, and such determination
shall be final and binding on the parties hereto. The fees
of the Arbitrating Accountant shall be borne by the Company.
Participation in Liquidity Event. The Company and each of
the Purchasers agree to use reasonable efforts to ensure that
upon delivery of Executive Shares to the Executive
Shareholder (or other recipient of Executive Shares) (the
"Recipient") upon a Liquidity Event, such Recipient shall
have the right to participate in such Liquidity Event with
respect to such Executive Shares in the same manner as each
other holder of shares of the same class of capital stock of
the Company and solely for such purpose, the Company shall
use its best efforts to ensure that holdback or similar
agreements with respect to securities of the Company are
ratably allocated among any Recipients and all other holders
of such securities, if the Liquidity Event is a public
offering (and the Executive Shareholder and any such other
Recipients shall not unreasonably withhold their consent to
any such ratable holdback or similar agreement). If for any
reason the Company and the Purchasers fail or are unable to
take such action as may be necessary to enable a Recipient to
participate in such a Liquidity Event, to the extent
necessary to provide the Recipient with proceeds from such
participation sufficient to cover the Recipient's federal,
state and local income tax liability attributable to his or
her receipt of Executive Shares, and the Recipient is unable,
after using his or her reasonable efforts (which shall not
require the pledge of any collateral other than the Executive
Shares of such Recipient), to secure a loan in an amount
sufficient to cover such tax liability, then the Company
agrees to use its reasonable efforts to provide such a loan
to the Recipient, on commercially reasonable terms to be
determined by the Company, in an amount sufficient to pay
such tax liability (or the balance of such tax liability, as
the case may be) which loan, with respect to any Recipient,
shall be secured by the Executive Shares of such Recipient.
Termination. The obligation of the Purchasers to deliver
Executive Shares pursuant hereto shall terminate upon the
earlier of (i) the determination under Section 4 that the
conditions set forth in paragraph (a) of Section 3 have not
been met and (ii) the tenth anniversary of the date of this
Agreement.
Restrictions on Transfer. Subject to the provisions of
Section 2 hereof, the Executive Shareholder may not transfer
or assign any rights hereunder to any person. The Purchasers
may transfer Executive Shares (subject to the restrictions
set forth in the Purchase Agreement), provided that the
transferee agrees in writing to be bound by the provisions
hereof.
Miscellaneous.
()Legend. All certificates evidencing Executive Shares
which are subject to this Agreement shall bear the following
legend:
"THE SHARES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN
AGREEMENTS SET FORTH IN AN EXECUTIVE SHARE AGREEMENT AMONG
MERIDIAN FINANCIAL CORPORATION (THE "COMPANY") AND CERTAIN
HOLDERS OF SHARES OF THE COMPANY DATED AS OF MARCH 28, 1997.
A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF
AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
Upon termination of this Agreement, certificates for
Executive Shares may be surrendered to the Company in
exchange for new certificates without the foregoing legend.
()Parties in Interest. All covenants and agreements
contained in this Agreement by or on behalf of any of the
parties hereto shall bind and inure to the benefit of the
respective successors and permitted assigns of the parties
hereto whether so expressed or not. Any person who is an
Other Executive or a Recipient for purposes of this Agreement
shall be a third party beneficiary of this Agreement and
shall be entitled to enforce the provisions hereof applicable
to such person.
()Notices. All notices and other communications which are
required or permitted to be given under this Agreement shall
be in writing and shall be delivered personally, mailed by
certified or registered mail, return receipt requested. sent
by reputable overnight courier or sent by confirmed
telecopier, addressed as follows:
() if to the Company, at 8250 Haverstick Road, Suite 110,
Indianapolis, Indiana 46240-2401, Attention: President;
()if to the Executive Shareholder, at the address of the
Executive Shareholder as shown by the records of the Company;
and
()if to any Purchaser, at the address of such Purchaser
shown by the records of the Company; or to such other address
and/or such other addressee as any of the above shall have
specified by notice hereunder. Each notice or other
communication which shall be delivered personally, mailed on
telecopied in the manner described above shall be deemed
sufficiently given, served, sent, received or delivered for
all purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt or the
affidavit of messenger being deemed conclusive, but not
exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
()Remedies. If any party to this Agreement obtains a
judgment against any party hereto by reason of any breach of
this Agreement or the failure of such other party to comply
with the provisions hereof, a reasonable attorneys' fee as
fixed by the court shall be included in such judgment. No
remedy conferred upon any party to this Agreement is intended
to be exclusive of any other remedy herein or by law provided
or permitted, but each such remedy shall be cumulative or
shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute.
Each party hereto agrees that, in the event of any violation
of this Agreement by such party, the remedies available at
law would be inadequate and that such party's obligations
under this Agreement may be specifically enforced.
Notwithstanding the foregoing sentence, nothing herein shall
be construed as prohibiting any party hereto from also
pursuing any other rights, remedies or defenses, in
connection with any breach of this Agreement.
()Waiver. None of the terms of this Agreement shall be
deemed to have been waived by any party hereto, unless such
waiver is in writing and signed by that party. The waiver by
any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of
any other provision of this Agreement or of any further
breach of the provision so waived or of any other provision
of this Agreement. No extension of time for the performance
of any obligation or act hereunder shall be deemed an
extension of time for the performance of any other obligation
or act.
() Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Illinois, without giving effect to its conflicts of law
rules.
()Entire Agreement. This Agreement constitutes the sole and
entire agreement of the parties with respect to the subject
matter hereof.
()Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be effective only
upon delivery and thereafter shall be deemed to be an
original, and all of which shall be taken to be one and the
same instrument with the same effect as if each of the
parties hereto had signed the same signature page. Any
signature page of this Agreement may be detached from any
counterpart of this Agreement without impairing the legal
effect of any signature thereon and may be attached to
another counterpart of this Agreement identical in form
hereto and having attached to it one or more additional
signature pages.
() Amendments. This Agreement may not be amended, modified
or changed in any respect without the written consent of the
party against whom enforcement of each amendment,
modification or change is sought.
() Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any
provision of this Agreement shall be unenforceable or invalid
under applicable law, such provision shall be ineffective
only to the extent of such unenforceability or invalidity,
and the remaining provisions of this Agreement shall continue
to be binding and in full force and effect.
()Headings. The section and other headings contained in
this Agreement are for convenience only and shall not be
deemed to limit, characterize or interpret any provision of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Executive Share Agreement as of the date first above written.
INROADS CAPITAL
PARTNERS,
L.P.
Michael F. McCoy
By: INROADS
GENERAL
PARTNERS,
L.P., its
general partner
By:
MERIDIAN FINANCIAL CORPORATION Its:
By: MESIROW CAPITAL
PARTNERS VII,
Its: an Illinois
Limited Partnership
By: MESIROW
FINANCIAL
SERVICES,
INC., its
general partner
By:
Its:
EDGEWATER
PRIVATE EQUITY FUND
II,
L.P.
By:
GORDON MANAGEMENT, INC. its
general
partner
By:
Its:
SCHEDULE A
Period from the date Cumulative
Cumulative Lease
Retained
of this Agreement through: Net Income
Origination Amount
Asset Amount
March 31, 1998 842,850
24,600,000
18,600,000
March 31, 1999 2,819,261
51,600,000
36,600,000
March 31, 2000 6,321,343
83,400,000
65,400,000
March 31, 2001 12,500,000 123,000,000
95,000,000
