UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number 1-13732
SHARED TECHNOLOGIES CELLULAR, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1386411
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 Great Meadow Road, Suite 102, Wethersfield, Connecticut 06109
(Address of principal executive office) (Zip Code)
(860) 258-2500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X___ No ___
The number of shares outstanding of the registrant's common stock
as of May 11, 1998 was 7,390,742
PART 1 FINANCIAL INFORMATION PAGE
Item 1.
Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 3-4
Consolidated Statements of Operations
for the Three Months Ended March 31, 1998
and 1997 5
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997 6
Consolidated Statements of Stockholders' Equity
For the Three Months Ended March 31, 1998 7
Notes to Consolidated Financial Statements 8
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-11
PART II OTHER INFORMATION
Item 1.
Legal Proceedings 12
Item 2.
Changes in Securities and Use of Proceeds 12
Item 6.
Exhibits and Reports on Form 8-K 13
Signature Page 14
<TABLE>
Item 1. Financial Statements.
Shared Technologies Cellular, Inc. and Subsidiary
Consolidated Balance Sheets (Unaudited)
<CAPTION>
<S> <C> <C>
March 31, 1998 December 31, 1997
ASSETS
Current assets:
Cash $462,000 $294,000
Accounts receivable, less
allowance for doubtful accounts
of $826,000 and $991,000 in 1998
and 1997 1,977,000 1,637,000
Carrier commissions receivable,
less unearned income 215,000 163,000
Inventories 100,000 131,000
Current portion of note
receivable 118,000 107,000
Prepaid expenses and other
current assets 569,000 127,000
Total current assets 3,441,000 2,459,000
Telecommunications and office
equipment, less accumulated
depreciation 933,000 985,000
Other assets:
Intangible assets, less
accumulated amortization 7,390,000 7,551,000
Deposits 329,000 326,000
Note receivable, less current
portion 53,000 62,000
Assets held for disposition 153,000 153,000
Total other assets 7,925,000 8,092,000
Total assets $12,299,000 $11,536,000
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
Shared Technologies Cellular, Inc. and Subsidiary
Consolidated Balance Sheets (Unaudited)
<CAPTION>
<S> <C> <C>
March 31, 1998 December 31, 1997
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of notes payable $522,000 $530,000
Accounts payable and other
current liabilities 8,201,000 7,666,000
Commissions payable 192,000 166,000
Due to former parent 1,046,000 1,052,000
Total current liabilities 9,961,000 9,414,000
Notes payable, less current
portion 1,938,000 957,000
Stockholders' equity:
Preferred stock,$.01 par value,
Series B Convertible, authorized
1,250,000 shares, no shares issued
and outstanding - -
Common stock, $.01 par value,
authorized 20,000,000 shares,
issued and outstanding 7,239,000
shares in 1998 and 7,216,000 in
1997 72,000 72,000
Capital in excess of par value 17,869,000 17,801,000
Accumulated deficit (17,541,000) (16,708,000)
Total stockholders' equity 400,000 1,165,000
Total liabilities and
stockholders' equity $12,299,000 $11,536,000
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
Shared Technologies Cellular, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended March 31,
<CAPTION>
<S> <C> <C>
1998 1997
Revenues 4,927,000 6,102,000
Cost of revenues 2,872,000 3,462,000
Gross margin 2,055,000 2,640,000
Selling, general and administrative
expenses 2,840,000 2,864,000
Loss from operations (785,000) (224,000)
Interest expense, net (45,000) (73,000)
Loss before income taxes (830,000) (297,000)
Income taxes (3,000) (4,000)
Net loss ($833,000) ($301,000)
Basic and diluted loss per
common share ($0.12) ($0.06)
Weighted average number of common
shares outstanding 7,228,000 5,002,000
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<TABLE>
Shared Technologies Cellular, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31,
<CAPTION>
<S> <C> <C>
1998 1997
Cash flows from operating activities:
Net loss ($833,000) ($301,000)
Adjustments to reconcile net loss
to net cash used in operating
activities;
Depreciation and amortization 294,000 335,000
Common stock issued for compensation
and services 27,000 15,000
Accretion of interest on notes payable 32,000
Note receivable (2,000) (2,000)
Change in assets and liabilities:
Accounts receivable (340,000) (1,068,000)
Carrier commissions receivable (52,000) (12,000)
Inventories 31,000 (11,000)
Prepaid expenses and other current
assets (442,000) (10,000)
Accounts payable and other current
liabilities 535,000 20,000
Commissions payable 26,000 (31,000)
Net cash used in operating activities (756,000 (1,033,000)
Cash flows from investing activities:
Other assets 5,000 (23,000)
Purchases of equipment (89,000) (44,000)
Net cash used in investing activities (84,000) (67,000)
Cash flows from financing activities:
Payments on notes payable (27,000) (438,000)
Issuance of note payable 1,000,000
Advances from affiliate (6,000) 726,000
Issuance of common stock 41,000 739,000
Net cash provided by financing
activities 1,008,000 1,027,000
Net increase (decrease) in cash 168,000 (73,000)
Cash, beginning of period 294,000 144,000
Cash, end of period $462,000 $71,000
Supplemental disclosures of cash
flow information:
Cash paid during the period for -
Interest $19,000 $152,000
Income taxes $3,000 $4,000
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<TABLE>
Shared Technologies Cellular, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity (Unaudited)
For the Three Months Ended March 31, 1998
<CAPTION>
<S> <C> <C>
Series B Series B
Preferred Stock Preferred Stock
Shares Amount
Balances, December 31, 1997 0 $0
Issuance of common stock
Net loss
Balances, March 31, 1998 0 $0
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<TABLE>
Shared Technologies Cellular, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity (Unaudited)
For the Three Months Ended March 31, 1998
<CAPTION>
<S> <C> <C>
Common Stock Common Stock
Shares Amount
Balances, December 31, 1997 7,216,000 $72,000
Issuance of common stock 23,000 0
Net loss
Balances, March 31, 1998 7,239,000 $72,000
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<TABLE>
Shared Technologies Cellular, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity (Unaudited)
For the Three Months Ended March 31, 1998
<CAPTION>
<S> <C> <C> <C>
Capital in Total
Excess of Accumulated Stockholders'
Par Value Deficit Equity
Balances, December
31, 1997 $17,801,000 ($16,708,000) $1,165,000
Issuance of common
stock 68,000 $68,000
Net loss (833,000) ($833,000)
Balances, March
31, 1998 $17,869,000 ($17,541,000) $400,000
</TABLE>
The accompanying notes are an integral part of these financial
statements.
Shared Technologies Cellular, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1998 (Unaudited)
1. Basis of Presentation. The consolidated financial statements
included herein have been prepared by Shared Technologies
Cellular, Inc. ("STC" or the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect
all adjustments, consisting only of normal recurring adjustments,
which are, in the opinion of management, necessary to present a
fair statement of the financial position, results of operations
and cash flows for interim periods. Certain information and
footnote disclosures have been omitted pursuant to such rules and
regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be
read in conjunction with the financial statements and the notes
thereto included in the Company's December 31, 1997 report on Form
10-K. Certain reclassifications to prior year financial
statements were made in order to conform to the 1998 presentation.
The consolidated financial statements included herein are not
necessarily indicative of the results for the fiscal year ending
December 31, 1998.
2. Loss per common share. Effective December 31, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128 (SFAS
No. 128), "Earnings Per Share". SFAS No. 128 requires dual
presentation of basic and diluted earnings per share for all
periods presented. Basic earnings per share excludes dilution and
is computed by dividing the loss available to common stockholders
by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock and then shared in the
earnings of the entity. Prior period loss information has been
restated as required by SFAS No. 128. Diluted loss per common
share is the same as basic loss per common share for the three
month periods ended March 31, 1998 and 1997. Unexercised options
to purchase 654,000 and 275,000 shares of the Company's common
stock as of March 31, 1998 and 1997, respectively, and common
stock warrants to purchase 3,503,000 and 3,217,000
shares of the Company's common stock as of March 31, 1998 and
1997, respectively, were not included in the computation of
diluted earnings per share because their effect would have been
antidilutive as a result of the Company's losses.
3. Subsequent Event. In April 1998, the Company and Summit
Assurance Cellular, Inc., and certain of its affiliates (the
"Summit Entities") and Craig Marlar, who is an officer and
director of the Summit Entities and was a director of the Company
until his resignation in April 1998, entered into a settlement of
litigation arising out of the acquisition of certain assets of the
Summit Entities in April 1996, whereby the Company received from
the Summit Entities 100,000 shares of the Company's common stock.
The stock received is in exchange for the payment by the Company
of $150,000 to a vendor on behalf of the Summit Entities, a one-
year extension of the expiration date of the warrants issued in
connection with the acquisition, the issuance to the Summit
Entities of a warrant to purchase 100,000 shares of the Company's
common stock at on exercise price of $5.00 per share, and
forgiveness of all amounts due, including accrued interest, on a
note receivable in the principal amount of $180,000. The effect of
this transaction on the Company's results of operations is
immaterial.
4. Liquidity. The Company has incurred losses during the three
most recent fiscal years, as well as the three month period ended
March 31, 1998 and has a working capital deficit of $6,520,000 at
March 31, 1998.
In April and May 1998, the Company secured
$6,300,000 of debt financing (See Item 2, "Changes in Securities
and Use of Proceeds"). Long-term liquidity is dependent on the
Company's ability to obtain long-term financing and attain
profitable operations.
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months Ended March 31, 1998 compared to March 31, 1997
Revenues for 1998 were $4,927,000 compared to $6,102,000 for
1997, a decrease of 1,176,000 (19%). The net loss for 1998 was
$833,000, compared to a net loss of $301,000 for 1997. The net
loss per common share was $0.12 for 1998, compared to $0.06 for
1997.
Revenues
In the first quarter, the Company's cellular telephone rental
operations had revenues of $3,215,000 for 1998, compared to
$3,677,000 for 1997. The decrease of $462,000 (13%) was
attributable to the closure of various locations during 1997 that
did not meet established profit criteria. In addition, all of the
Company's car rental partners went through an ownership or
management change in 1997 that may have negatively impacted their
ability to focus on the Company's cellular rental program. The
Company believes that, in the long term, the location closings
and the ownership and management changes at the car companies
should have a positive impact on the Company's cellular
operations.
In the first quarter, the Company's debit operations had revenues
of $1,273,000 for 1998, compared to $1,657,000 for 1997. The
decrease of $384,000 (23%) was primarily due to a significant rate
adjustment negotiated with a major customer in order to keep the
customer competitive with the Company's new CellEase program
which was introduced in the first quarter of 1998. Revenues for
the first quarter of 1998 included only an immaterial amount
associated with the CellEase product, which has begun to
experience significant revenue growth in the second quarter of
1998.
In the first quarter, the Company's activation operations had
revenues of $439,000 for 1998, compared to $768,000 for 1997. The
decrease of $329,000 (43%) was attributable to various retail
locations at military bases ceasing to offer cellular telephone
activations in late 1997. In addition, the Company closed its
Texas activation location in November 1997.
Gross Margin
Gross margin was 42% of revenues for 1998, compared to 43% of
revenues for 1997. The gross margin for the portable cellular
rental operations improved slightly due the closure of various
unprofitable locations. The gross margin for the debit operations
decreased as a result of the rate adjustment previously discussed.
The gross margin for the activation operations improved due to
a change in the product mix to more retail activations, which
generally have higher commission amounts.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("S,G&A") were
$2,840,000 for 1998, compared to $2,864,000 for 1997. As a
percentage of revenues, S,G&A increased to 58% for 1998, compared
to 47% for 1997. This percentage increase was due to several
factors. Field S,G&A increased to 44% of 1998 revenues, compared
to 38% of 1997 revenues. Field SG&A decreased by $129,000 for
1998, compared to 1997, however, due to the fixed nature of many
of these expenses, the decrease was not in proportion with the
decrease in revenues. Upon a recovery in revenues in the next
three quarters of 1998, field S,G&A, as a percentage of revenues,
would decrease accordingly. Corporate S,G&A increased to 13% of
1998 revenues, compared to 9% of 1997 revenues. This increase was
a result of the investment made, mainly in MIS personnel, to start
the CellEase program.
Interest Expense
Interest expense, was $45,000 for 1998, compared to $73,000 for
1997. Interest expense was mainly due to debt relating to
acquisitions made in prior years. Due to the financing disclosed
in Item 2, interest expense will increase during the remainder of
1998.
Liquidity and Capital Resources
The Company had a working capital deficit of $6,520,000 at March
31, 1998, compared to a deficit of $6,955,000 at December 31,
1997. Stockholders' equity at March 31, 1998 was $400,000,
compared to $1,165,000 at December 31, 1997.
Net cash used in operations for the three-month period ended March
31,1998 was $756,000. This was mainly due to the operating loss
for the period. For the three month period ended March 31, 1997,
the net cash used in operations was $1,033,000. This was
primarily due to an increase in the accounts receivable balance
as a result of a significant increase in debit services billings
and the delay in the cash receipt of those billings.
Net cash used in investing activities for the three month period
ended March 31, 1998 was $84,000. This was mainly attributable to
the purchase of computer equipment to handle the CellEase program.
For the three month period ended March 31, 1997 the net cash used
in investing activities was $67,000. This was primarily due to
the purchase of computers and related accessories.
During the three month period ended March 31, 1998, the Company
received $1,000,000 in consideration for a note payable personally
funded by the Chairman and Chief Executive Officer of the Company.
This was part of a $6,300,000 debt financing package that was
completed in May 1998. For the three month period ended March 31,
1997, the Company raised cash of $739,000, net of expenses,
through the sale of 250,000 Units. Each Unit consisted of one
share of the Company's common stock and one warrant to purchase an
additional share of such common stock. The Company also borrowed
$726,000 from its former parent, Shared Technologies Fairchild
Inc., which beneficially owns 25.7% of the Company's common stock.
Management believes that ongoing operations, together with the
recent debt financing, should provide the Company with sufficient
funds to finance operations and planned expansion for at least the
next 12 months. Long-term liquidity will depend on the
Company's ability to obtain long-term financing and attain
profitable operations.
Year 2000
The Company believes that its computer systems are properly
adapted to avoid a Year 2000 problem, and therefore does not
anticipate any materially adverse effect to the operations of the
Company with respect to such issue. Many of the systems used by
the Company were developed internally within the last few years
and are Year 2000 compliant. The Company is currently working
with outside vendors to obtain assurances that they are Year 2000
compliant.
"Safe Harbor" statement under the Private Securities Litigation
Reform Act of 1995: The Management's Discussion and Analysis
includes forward-looking statements with respect to the Company's
future financial performance. These forward-looking statements
are subject to various risks and uncertainties that could cause
actual results to differ materially from those in any forward-
looking statement. Such risks and uncertainties may include,
without limitation, technological obsolescence, price and industry
competition, financing capabilities, and dependence on major
customers and relationships.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not involved in any litigation which, individually
or in the aggregate, if resolved against the Company would be
likely to have a materially adverse effect on the Company's
financial condition, results of operations, or cash flows. (See
note 3 of "Notes to Consolidated Financial Statements" with
respect to the settlement of certain litigation.)
Item 2. Changes in Securities and Use of Proceeds.
The Company secured certain debt financing in the principal amount
of $4,000,000 from four lenders, in connection with which the
Company issued warrants to purchase an aggregate of 400,000 shares
of the Company's Common Stock. Pursuant to credit agreements
entered into in April 1998, the Company borrowed $1,000,000 from
Anthony D. Autorino, the Company's Chairman and Chief Executive
Officer; $500,000 from International Capital Partners, Inc
("ICP"), whose Chairman and Chief Executive Officer, Ajit G.
Hutheesing, is a director of the Company, and whose Managing
Partner, Nicholas E. Sinacori, is also a director of the Company;
$2,000,000 from Salomon Brothers Holding Company Inc. ("Salomon");
and $500,000 from a private investor. The credit agreements have
a maturity date of July 1999 and a floating interest rate of 2.5%
above a rate that is comparable to the prime rate (as defined in
the credit agreements). In connection therewith, the Company
issued to Mr. Autorino, ICP, Salomon and the private investor
warrants for the purchase of 100,000, 50,000, 200,000 and 50,000
shares of Common Stock, respectively. The warrants are
exercisable at $5.00 per share, and expire April 15, 2003. The
warrants were issued in a nonpublic offering to sophisticated
investors pursuant to the exemption provided by Section 4(2) of
the Securities Act of 1933, as amended (the "Act"). In connection
with the financing, the Company paid a facility fee of $25,000 to
ICP Investments, Inc. with respect to the fundings by ICP and the
private investor, and paid a facility fee of $50,000 to Salomon.
In May 1998, the Company issued to eight investors through a
nonpublic offering, 5% convertible notes in the aggregate
principal amount of $2,300,000 (the "Notes"). The Company relied
on the exemption provided by Regulation D promulgated under the
Act. Purchasers of the Notes included an affiliate of ICP,
International Capital Partners Profit Sharing Trust, which
purchased a Note in the amount of $200,000. The Notes have a term
of seven years and are convertible at any time at the option of
the noteholder into shares of the Company's Common Stock at a rate
of $5.00 per share, subject to certain antidilution adjustments.
The Company has the right to force conversion of the Notes after
three years, in the event that the Company's Common Stock trades
at or above $10 per share for at least five consecutive trading
days.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3. (ii) Amended and Restated By-Laws of Shared Technologies
Cellular, Inc. as of April 16, 1998.
4.1 Form of Credit Agreement, dated as of April 15, 1998, between
Shared Technologies Cellular, Inc. as Borrower and
Salomon Brothers Holding Company Inc. as Lender.
4.2 Security Agreement, dated as of April 15, 1998 among
Shared Technologies Cellular, Inc., as Grantor, Anthony D.
Autorino and Salomon Brothers Holding Company Inc. as Lenders and
Salomon Brothers
Holding Company Inc. as Collateral Agent.
4.3 Pledge Agreement, dated as of April 15, 1998, by and between
Shared Technologies Cellular, Inc., as Pledgor, Anthony D.
Autorino and Salomon Brothers Holding Company Inc. as Lenders and
Salomon Brothers Holding Company Inc. as Collateral Agent.
4.4 Form of Registration Rights Agreement dated as of April 15,
1998, between Shared Technologies Cellular, Inc., and Salomon
Brothers Holding Company Inc.
4.5 Form of Warrant Purchase Agreement, dated as of April 15,
1998, between Shared Technologies Cellular, Inc., and Salomon
Brothers Holding Company Inc.
4.6 Form of Shared Technologies Cellular, Inc., Common Stock
Purchase Warrant, dated April 15, 1998, in favor of Salomon
Brothers Holding Company Inc. or its registered assigns.
4.7 Form of Subscription Agreement dated May 1998 between Shared
Technologies Cellular, Inc., and the Purchasers (as defined
therein), including form
of Convertible Note.
27. Financial Data Schedule (filed only electronically with the
SEC)
(b) Reports on Form 8-K.
None
SIGNATURE
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 and thereunto duly authorized.
SHARED TECHNOLOGIES CELLULAR, INC.
May 15, 1998 By: /s/ Vincent DiVincenzo
Vincent DiVincenzo
Chief Financial Officer
(Chief Accounting Officer and
Duly Authorized Officer)
AMENDED AND RESTATED BY-LAWS
OF
SHARED TECHNOLOGIES CELLULAR, INC.
AMENDED AND RESTATED BY-LAWS
OF
SHARED TECHNOLOGIES CELLULAR, INC.
TABLE OF CONTENTS
ARTICLE 1 - STOCKHOLDERS 1
Section 1.1
Place of Meetings 1
Section 1.2
Annual Meeting 1
Section 1.3
Special Meetings 1
Section 1.4
Notice of Meetings 1
Section 1.5
Voting List 2
Section 1.6
Quorum 2
Section 1.7
Adjournments 2
Section 1.8
Voting and Proxies 2
Section 1.9
Action at Meeting 2
Section 1.10
Action without Meeting 3
ARTICLE 2 - DIRECTORS 3
Section 2.1
General Powers 3
Section 2.2
Number; Election and Qualification 3
Section 2.3
Enlargement of the Board 3
Section 2.4
Tenure 3
Section 2.5
Vacancies 3
Section 2.6
Resignation 4
Section 2.7
Regular Meetings 4
Section 2.8
Special Meetings 4
Section 2.9
Notice of Special Meetings 4
Section 2.10
Meetings by Telephone Conference Calls 4
Section 2.11
Quorum 4
Section 2.12
Action at Meeting 5
Section 2.13
Action by Consent 5
Section 2.14
Removal 5
Section 2.15
Committees 5
Section 2.16
Compensation of Directors 5
ARTICLE 3 - OFFICERS 6
Section 3.1
Enumeration 6
Section 3.2
Election 6
Section 3.3
Qualification 6
Section 3.4
Tenure 6
Section 3.5
Resignation and Removal 6
Section 3.6
Vacancies 6
Section 3.7
Chairman of the Board and Vice-Chairman of the Board 7
Section 3.8
President 7
Section 3.9
Vice Presidents 7
Section 3.10
Secretary and Assistant Secretaries 7
Section 3.11
Treasurer and Assistant Treasurers 8
Section 3.12
Salaries 8
ARTICLE 4 - CAPITAL STOCK 8
Section 4.1
Issuance of Stock 8
Section 4.2
Certificates of Stock 8
Section 4.3
Transfers 9
Section 4.4
Lost, Stolen or Destroyed Certificates 9
Section 4.5
Record Date 9
ARTICLE 5 - GENERAL PROVISIONS 10
Section 5.1
Fiscal Year 10
Section 5.2
Corporate Seal 10
Section 5.3
Waiver of Notice 10
Section 5.4
Voting of Securities 10
Section 5.5
Evidence of Authority 10
Section 5.6
Certificate of Incorporation 10
Section 5.7
Transactions with Interested Parties 11
Section 5.8
Severability 11
Section 5.9
Pronouns 11
ARTICLE 6 - AMENDMENTS 11
Section 6.1 By
the Board of Directors 11
Section 6.2 By
the Stockholders 12
AMENDED AND RESTATED BY-LAWS
OF
SHARED TECHNOLOGIES CELLULAR, INC.
ARTICLE 1
STOCKHOLDERS
1.1 Place of Meetings. All meetings of stockholders
shall be held at such place within or without the State of
Delaware as may be designated from time to time by the Board
of Directors or the President or, if not so designated, at
the registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders
for the election of directors and for the transaction of such
other business as may properly be brought before the meeting
shall be held on the third Tuesday in May in each year, at a
time fixed by the Board of Directors or the President. If
this date shall fall upon a legal holiday at the place of the
meeting, then such meeting shall be held on the next
succeeding business day at the same hour. If no annual
meeting is held in accordance with the foregoing provisions,
the Board of Directors shall cause the meeting to be held as
soon thereafter as convenient. If no annual meeting is held
in accordance with the foregoing provisions, a special
meeting may be held in lieu of the annual meeting, and any
action taken at that special meeting shall have the same
effect as if it had been taken at the annual meeting, and in
such case all references in these By-Laws to the annual
meeting of the stockholders shall be deemed to refer to such
special meeting.
1.3 Special Meetings. Special meetings of stockholders
may be called at any time by the President, by the Board of
Directors or by the holders of record of no less than 10% of
the then outstanding shares of stock entitled to vote.
1.4 Notice of Meetings. Except as otherwise provided
by law, written notice of each meeting of stockholders,
whether annual or special, shall be given not less than 10
nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting. The notices of
all meetings shall state the place, date and hour of the
meeting. The notice of a special meeting shall state, in
addition, the purpose or purposes for which the meeting is
called. If mailed, notice is given when deposited in the
United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of
the corporation.
1.5 Voting List. The officer who has charge of the
stock ledger of the corporation shall prepare, at least 10
days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of
at least 10 days prior to the meeting, at a place within the
city where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during
the whole time of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws, the holders of
a majority of the shares of the capital stock of other
corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall
constitute a quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be
adjourned to any other time and to any other place at which a
meeting of stockholders may be held under these By-Laws by
the stockholders present or represented at the meeting and
entitled to vote, although less than a quorum, or, if no
stockholder is present, by any officer entitled to preside at
or to act as Secretary of such meeting. It shall not be
necessary to notify any stockholder of any adjournment of
less than 30 days if the time and place of the adjourned
meeting are announced at the meeting at which adjournment is
taken, unless after the adjournment a new record date is
fixed for the adjourned meeting. At the adjourned meeting,
the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have
one vote for each share of stock entitled to vote held of
record by such stockholder and a proportionate vote for each
fractional share so held, unless otherwise provided in the
Certificate of Incorporation. Each stockholder of record
entitled to vote at a meeting of stockholders, or to express
consent or dissent to corporate action in writing without a
meeting, may vote or express such consent or dissent in
person or may authorize another person or persons to vote or
act for him by written proxy executed by the stockholder or
his authorized agent and delivered to the Secretary of the
corporation. No such proxy shall be voted or acted upon
after three years from the date of its execution, unless the
proxy expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any
meeting, the holders of a majority of the stock present or
represented and voting on a matter (or if there are two or
more classes of stock entitled to vote as separate classes,
then in the case of each such class, the holders of a
majority of the stock of that class present or represented
and voting on a matter) shall decide any matter to be voted
upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the
Certificate of Incorporation or these By-Laws. Any election
by stockholders shall be determined by a plurality of the
votes cast by the stockholders entitled to vote at the
election.
1.10 Action without Meeting. Any action required or
permitted to be taken at any annual or special meeting of
stockholders of the corporation may be taken without a
meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all
shares entitled to vote on such action were present and
voted. Prompt notice of the taking of corporate action
without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented
in writing.
ARTICLE 2
DIRECTORS
2.1 General Powers. The business and affairs of the
corporation shall be managed by or under the direction of a
Board of Directors, who may exercise all of the powers of the
corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the event
of a vacancy in the Board of Directors, the remaining
directors, except as otherwise provided by law, may exercise
the powers of the full Board until the vacancy is filled.
2.2 Number; Election and Qualification. The number of
directors which shall constitute the whole Board of Directors
shall be determined by resolution of the stockholders or the
Board of Directors, but in no event shall be less than one.
The number of directors may be increased at any time and from
time to time either by the stockholders or by a majority of
the directors then in office. The directors shall be elected
at the annual meeting of stockholders by such stockholders as
have the right to vote on such election. Directors need not
be stockholders of the corporation.
2.3 Enlargement of the Board. The number of directors
may be increased at any time and from time to time by the
stockholders or by a majority of the directors then in
office.
2.4 Tenure. Each director shall hold office until the
next annual meeting and until his successor is elected and
qualified, or until his earlier death, resignation or
removal.
2.5 Vacancies. Unless and until filled by the
stockholders, any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement
of the Board, may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by
a sole remaining director. A director elected to fill a
vacancy shall be elected for the unexpired term of his
predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of
directors shall hold office until the next annual meeting of
stockholders and until his successor is elected and
qualified, or until his earlier death, resignation or
removal.
2.6 Resignation. Any director may resign by delivering
his written resignation to the corporation at its principal
office or to the President or Secretary. Such resignation
shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some
other event.
2.7 Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place,
either within or without the State of Delaware, as shall be
determined from time to time by the Board of Directors;
provided that any director who is absent when such a
determination is made shall be given notice of the
determination. A regular meeting of the Board of Directors
may be held without notice immediately after and at the same
place as the annual meeting of stockholders.
2.8 Special Meetings. Special meetings of the Board of
Directors may be held at any time and place, within or
without the State of Delaware, designated in a call by the
Chairman of the Board, President, two or more directors, or
by one director in the event that there is only a single
director in office.
2.9 Notice of Special Meetings. Notice of any special
meeting of directors shall be given to each director by the
Secretary or by the officer or one of the directors calling
the meeting. Notice shall be duly given to each director (i)
by giving notice to such director in person or by telephone
at least 48 hours in advance of the meeting, (ii) by sending
a telegram or telex, or delivering written notice by hand, to
his last known business or home address at least 48 hours in
advance of the meeting, or (iii) by mailing written notice to
his last known business or home address at least 72 hours in
advance of the meeting. A notice or waiver of notice of a
meeting of the Board of Directors need not specify the
purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors
or any members of any committee designated by the directors
may participate in a meeting of the Board of Directors or
such committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and
participation by such means shall constitute presence in
person at such meeting.
2.11 Quorum. A majority of the total number of the
whole Board of Directors shall constitute a quorum at all
meetings of the Board of Directors. In the event one or more
of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for
each such director so disqualified; provided, however, that
in no case shall less than one-third (1/3) of the number so
fixed constitute a quorum. In the absence of a quorum at any
such meeting, a majority of the directors present may adjourn
the meeting from time to time without further notice other
than announcement at the meeting, until a quorum shall be
present.
2.12 Action at Meeting. At any meeting of the Board of
Directors at which a quorum is present, the vote of a
majority of those present shall be sufficient to take any
action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or
permitted to be taken at any meeting of the Board of
Directors or of any committee of the Board of Directors may
be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in
writing, and the written consents are filed with the minutes
of proceedings of the Board or committee.
2.14 Removal. Any one or more or all of the directors
may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election
of directors, except that the directors elected by the
holders of a particular class or series of stock may be
removed without cause only by vote of the holders of a
majority of the outstanding shares of such class or series.
2.15 Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate
one or more committees, each committee to consist of one or
more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member
at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or
members of the committee present at any meeting and not
disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place
of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the
Board of Directors and subject to the provisions of the
General Corporation Law of the State of Delaware, shall have
and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of
the corporation and may authorize the seal of the corporation
to be affixed to all papers which may require it. Each such
committee shall keep minutes and make such reports as the
Board of Directors may from time to time request. Except as
the Board of Directors may otherwise determine, any committee
may make rules for the conduct of its business, but unless
otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same
manner as is provided in these By-Laws for the Board of
Directors.
2.16 Compensation of Directors. Directors may be paid
such compensation for their services and such reimbursement
for expenses of attendance at meetings as the Board of
Directors may from time to time determine. No such payment
shall preclude any director from serving the corporation or
any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE 3
OFFICERS
3.1 Enumeration. The officers of the corporation shall
consist of a President, a Secretary, a Treasurer and such
other officers with such other titles as the Board of
Directors shall determine, including a Chairman of the Board,
a Vice-Chairman of the Board, and one or more Vice
Presidents, Assistant Treasurers, and Assistant Secretaries.
The Board of Directors may appoint such other officers as it
may deem appropriate.
3.2 Election. The President, Treasurer and Secretary
shall be elected annually by the Board of Directors at its
first meeting following the annual meeting of stockholders.
Other officers may be appointed by the Board of Directors at
such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder.
Any two or more offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by
the Certificate of Incorporation or by these By-Laws, each
officer shall hold office until his successor is elected and
qualified, unless a different term is specified in the vote
choosing or appointing him, or until his earlier death,
resignation or removal.
3.5 Resignation and Removal. Any officer may resign by
delivering his written resignation to the corporation at its
principal office or to the President or Secretary. Such
resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the
happening of some other event.
Any officer may be removed at any time, with or without
cause, by vote of a majority of the entire number of
directors then in office.
Except as the Board of Directors may otherwise
determine, no officer who resigns or is removed shall have
any right to any compensation as an officer for any period
following his resignation or removal, or any right to damages
on account of such removal, whether his compensation be by
the month or by the year or otherwise, unless such
compensation is expressly provided in a duly authorized
written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any
vacancy occurring in any office for any reason and may, in
its discretion, leave unfilled for such period as it may
determine any offices other than those of President,
Treasurer and Secretary. Each such successor shall hold
office for the unexpired term of his predecessor and until
his successor is elected and qualified, or until his earlier
death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the
Board. The Board of Directors may appoint a Chairman of the
Board and may designate the Chairman of the Board as Chief
Executive Officer. If the Board of Directors appoints a
Chairman of the Board, he shall perform such duties and
possess such powers as are assigned to him by the Board of
Directors. If the Board of Directors appoints a Vice-
Chairman of the Board, he shall, in the absence or disability
of the Chairman of the Board, perform the duties and exercise
the powers of the Chairman of the Board and shall perform
such other duties and possess such other powers as may from
time to time be vested in him by the Board of Directors.
3.8 President. The President shall, subject to the
direction of the Board of Directors, have general charge and
supervision of the business of the corporation. Unless
otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders, if he is a
director, at all meetings of the Board of Directors. Unless
the Board of Directors has designated the Chairman of the
Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the
corporation. The President shall perform such other duties
and shall have such other powers as the Board of Directors
may from time to time prescribe.
3.9 Vice-Presidents. Any Vice President shall perform
such duties and possess such powers as the Board of Directors
or the President may from time to time prescribe. In the
event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than
one, the Vice Presidents in the order determined by the Board
of Directors) shall perform the duties of the President and
when so performing shall have all the powers of and be
subject to all the restrictions upon the President. The
Board of Directors may assign to any Vice President the
title of Executive Vice President, Senior Vice President or
any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary
shall perform such duties and shall have such powers as the
Board of Directors or the President may from time to time
prescribe. In addition, the Secretary shall perform such
duties and have such powers as are incident to the office of
the secretary, including without limitation the duty and
power to give notices of all meetings of stockholders and
special meetings of the Board of Directors, to attend all
meetings of stockholders and the Board of Directors and keep
a record of the proceedings, to maintain a stock ledger and
prepare lists of stockholders and their addresses as
required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on
documents.
Any Assistant Secretary shall perform such duties and
possess such powers as the Board of Directors, the President
or the Secretary may from time to time prescribe. In the
event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary, (or if there shall be
more than one, the Assistant Secretaries in the order
determined by the Board of Directors) shall perform the
duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant
Secretary at any meeting of stockholders or directors, the
person presiding at the meeting shall designate a temporary
secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer
shall perform such duties and shall have such powers as may
from time to time be assigned to him by the Board of
Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to
the office of Treasurer, including without limitation the
duty and power to keep and be responsible for all funds and
securities of the corporation, to deposit funds of the
corporation in depositories selected in accordance with these
By-Laws, to disburse such funds as ordered by the Board of
Directors, to make proper accounts of such funds, and to
render as required by the Board of Directors statements of
all such transactions and of the financial condition of the
corporation.
Any Assistant Treasurers shall perform such duties and
possess such powers as the Board of Directors, the President
or the Treasurer may from time to time prescribe. In the
event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer, (or if there shall be
more than one, the Assistant Treasurers in the order
determined by the Board of Directors) shall perform the
duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be
entitled to such salaries, compensation or reimbursement as
shall be fixed or allowed from time to time by the Board of
Directors.
ARTICLE 4
CAPITAL STOCK
4.1 Issuance of Stock. Unless otherwise voted by the
stockholders and subject to the provisions of the Certificate
of Incorporation, the whole or any part of any unissued
balance of the authorized capital stock of the corporation or
the whole or any part of any unissued balance of the
authorized capital stock of the corporation held in its
treasury may be issued, sold, transferred or otherwise
disposed of by vote of the Board of Directors in such manner,
for such consideration and on such terms as the Board of
Directors may determine.
4.2 Certificates of Stock. Every holder of stock of
the corporation shall be entitled to have a certificate, in
such form as may be prescribed by law and by the Board of
Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be
signed by, or in the name of the corporation by, the Chairman
or Vice-Chairman, if any, of the Board of Directors, or the
President or a Vice President, and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant
Secretary of the corporation. Any or all of the signatures
on the certificate may be a facsimile.
Each certificate for shares of stock which are subject
to any restriction on transfer pursuant to the Certificate of
Incorporation, the By-Laws, applicable securities laws or any
agreement among any number of shareholders or among such
holders and the corporation shall have conspicuously noted on
the face or back of the certificate either the full text of
the restriction or a statement of the existence of such
restriction.
4.3 Transfers. Except as otherwise established by
rules and regulations adopted by the Board of Directors, and
subject to applicable law, shares of stock may be transferred
on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by
a written assignment or power of attorney properly executed,
and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may
reasonably require. Except as may be otherwise required by
law, by the Certificate of Incorporation or by these By-Laws,
the corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the
right to vote with respect to such stock, regardless of any
transfer, pledge or other disposition of such stock until the
shares have been transferred on the books of the corporation
in accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The
corporation may issue a new certificate of stock in place of
any previously issued certificate alleged to have been lost,
stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation
of reasonable evidence of such loss, theft or destruction and
the giving of such indemnity as the Board of Directors may
require for the protection of the corporation or any transfer
agent or registrar.
4.5 Record Date. The Board of Directors may fix in
advance a date as a record date for the determination of the
stockholders entitled to notice of or to vote at any meeting
of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or
allotment of any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than
60 days prior to any other action to which such record date
relates.
If no record date is fixed, the record date for
determining stockholders entitled to notice of or vote at a
meeting of stockholders shall be at the close of business on
the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before
the day on which the meeting is held. The record date for
determining stockholders entitled to express consent to
corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the
day on which the first written consent is expressed. The
record date for determining stockholders for any other
purpose shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating to such
purpose.
A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that
the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5
GENERAL PROVISIONS
5.1 Fiscal Year. Except as from time to time otherwise
designated by the Board of Directors, the fiscal year of the
corporation shall begin on the first day of January in each
year and end on the last day of December in each year.
5.2 Corporate Seal. The corporate seal shall be in
such form as shall be approved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever
is required to be given by law, by the Certification of
Incorporation or by these By-Laws, a waiver of such notice
either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by
telegraph, cable or any other available method, whether
before, at or after the time stated in such waiver, or the
appearance of such person or persons at such meeting in
person or by proxy, shall be deemed equivalent to such
notice.
5.4 Voting of Securities. Except as the directors may
otherwise designate, the President or Treasurer may waive
notice of , and act as, or appoint any person or persons to
act as, proxy or attorney-in-fact for this corporation (with
or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or
organization, the securities of which may be held by this
corporation.
5.5 Evidence of Authority. A certificate by the
Secretary, or an Assistant Secretary, or a temporary
Secretary, as to any action taken by the stockholders,
directors, a committee or any officer or representative of
the corporation shall as to all persons who rely on the
certificate in good faith by conclusive evidence of such
action.
5.6 Certificate of Incorporation. All references in
these By-Laws to the Certificate of Incorporation shall be
deemed to refer to the Certificate of Incorporation of the
corporation, as amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract
or transaction between the corporation and one or more of the
directors or officers, or between the corporation and any
other corporation, partnership, association, or other
organization in which one or more of the directors or
officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason,
or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a
committee of the Board of Directors which authorizes the
contract or transaction or solely because his or their votes
are counted for such purpose, if:
(1) The material facts as to his relationship or
interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith
authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be
less than a quorum;
(2) The material facts as to his relationship or
interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to
vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the
stockholders; or
(3) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, a committee of the
Board of Directors, or the stockholders.
Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the
Board of Directors or of a committee which authorizes the
contract or transaction.
5.8 Severability. Any determination that any provision
of these By-Laws is for any reason inapplicable, illegal or
ineffective shall not affect or invalidate any other
provision of these By-Laws.
5.9 Pronouns. All pronouns used in these By-Laws shall
be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person or persons
may require.
ARTICLE 6
AMENDMENTS
6.1 By the Board of Directors. These By-Laws may be
altered, amended or repealed or new by-laws may be adopted by
the affirmative vote of a majority of the directors present
at any regular or special meeting of the Board of Directors
at which a quorum is present.
6.2 By the Stockholders. These By-Laws may be altered,
amended or repealed or new by-laws may be adopted by the
affirmative vote of the holders of a majority of the shares
of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of
stockholders, or at any special meeting of stockholders,
provided notice of such alteration, amendment, repeal or
adoption of new by-laws shall have been stated in the notice
of such special meeting.
=================================================================
CREDIT AGREEMENT
Dated as of April 15, 1998
between
SHARED TECHNOLOGIES CELLULAR, INC.,
as Borrower
and
SALOMON BROTHERS HOLDING COMPANY INC,
as Lender
=================================================================
ARTICLE I DEFINITIONS
1.01. Certain Defined Terms. 1
1.02. Computation of Time Periods. 17
1.03. Accounting Terms. 17
1.04. Other Terms. 17
ARTICLE II AMOUNT AND TERMS OF LOAN; AUTHORIZED
REPRESENTATIVES
2.01. Making of the Loan. 18
2.02. Use of Proceeds of Loan. 18
2.03. Repayment of the Loan. 18
2.04. Authorized Officers and Agents. 20
ARTICLE III INTEREST AND FEE
3.01. Interest on the Loan and other Obligations.. 21
3.02. Facility Fee. 21
ARTICLE IV CONDITIONS TO THE LOAN
4.01. Conditions Precedent to the Loan. 21
ARTICLE V REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties of the Borrower. 23
ARTICLE VI REPORTING COVENANTS
6.01. Financial Statements. 31
6.02. Events of Default. 32
6.03. Lawsuits. 32
6.04. Environmental Notices. 33
6.05. Other Indebtedness. 33
6.06. Other Reports. 33
6.07. Other Information. 34
ARTICLE VII AFFIRMATIVE COVENANTS
7.01. Corporate Existence, Etc. 34
7.02. Corporate Powers; Conduct of Business. 34
7.03. Compliance with Laws, Etc. 34
7.04. Payment of Taxes and Claims; Tax Consolidation. 34
7.05. Insurance. 35
7.06. Inspection of Property; Books and Records;
Discussions
. 35
7.07. Insurance Proceeds. 36
7.08. ERISA Compliance. 36
7.09. Maintenance of Property. 36
ARTICLE VIII NEGATIVE COVENANTS
8.01. Indebtedness. 37
8.02. Sales of Assets. 38
8.03. Liens. 39
8.04. Investments. 39
8.05. Restricted Junior Payments 40
8.06. Conduct of Business. 40
8.07. Transactions with Shareholders and Affiliates. 40
8.08. Restriction on Fundamental Changes 41
8.09. Sales and Leasebacks. 41
8.10. Margin Regulations; Securities Laws. 41
8.11. Issuance of Equity Securities. 41
8.12. Organizational Documents; Documents Pertaining to
Other
Indebtedness for Borrowed Money. 41
ARTICLE IX FINANCIAL COVENANTS
9.01. Net Worth. 42
9.02. Interest Coverage Ratio. 42
ARTICLE X EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.01. Events of Default. 42
10.02. Rights and Remedies. 45
ARTICLE XI YIELD PROTECTION
11.01. Taxes. 46
11.02. Changes; Legal Restrictions. 47
11.03. Illegality. 48
11.04. Limitation on Additional Amounts Payable by
the Borrower. 48
ARTICLE XII MISCELLANEOUS
12.01. Assignments and Participations. 49
12.02. Expenses. 49
12.03. Indemnity. 50
12.04. Change in Accounting Principles. 51
12.05. Setoff; Protective Advances. 52
12.06. Amendments and Waivers. 52
12.07. Notices. 53
12.08. Survival of Warranties and Agreements. 53
12.09. Failure or Indulgence Not Waiver; Remedies
Cumulative
53
12.10. Marshalling; Payments Set Aside. 53
12.11. Severability. 54
12.12. Headings. 54
12.13. Governing Law. 54
12.14. Limitation of Liability. 54
12.15. Successors and Assigns 54
12.16. Certain Consents and Waivers of the Borrower. 54
12.17. Counterparts; Effectiveness; Inconsistencies. 55
12.18. Limitation on Agreements 56
12.19. Confidentiality. 56
12.20. Entire Agreement. 56
12.21. Advice of Counsel. 56
CREDIT AGREEMENT
This Credit Agreement dated as of April 15, 1998 (as
amended, supplemented or modified from time to time, the
"Agreement") is entered into between Shared Technologies Cellular,
Inc., a Delaware corporation (the "Borrower") and Salomon
Brothers Holding Company Inc., a Delaware corporation (the
"Lender").
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. The following terms used
in this Agreement shall have the following meanings, applicable
both to the singular and the plural forms of the terms defined:
"Accommodation Obligation" means any Contractual
Obligation, contingent or otherwise, of one Person with respect to
any Indebtedness, obligation or liability of another, if the
primary purpose or intent thereof by the Person incurring the
Accommodation Obligation is to provide assurance to the obligee of
such Indebtedness, obligation or liability of another that such
Indebtedness, obligation or liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or
that the holders thereof will be protected (in whole or in part)
against loss in respect thereof including, without limitation,
direct and indirect guarantees, endorsements (except for
collection or deposit in the ordinary course of business), notes
co-made or discounted, recourse agreements, take-or-pay
agreements, keep-well agreements, agreements to purchase or
repurchase such Indebtedness, obligation or liability or any
security therefor or to provide funds for the payment or discharge
thereof, agreements to maintain solvency, assets, level of income,
or other financial condition, and agreements to make payment other
than for value received. The amount of any Accommodation
Obligation shall be equal to the amount of the Indebtedness,
obligation or liability so guaranteed or otherwise supported;
provided, that (i) if the liability of the Person extending such
guaranty or support is limited with respect thereto to an amount
less than the Indebtedness, obligation or liability guaranteed or
supported, or is limited to recourse against a particular
asset or assets of such Person, the amount of the corresponding
Accommodation Obligation shall be limited (in the case of a
guaranty or other support limited by amount) to such lesser amount
or (in the case of a guaranty or other support limited
by recourse to a particular asset or assets) to the higher of the
fair market value of such asset or assets at the date for
determination of the amount of the Accommodation Obligation or the
value at which such asset or assets would, in conformity with
GAAP, be reflected on or valued for the purposes of preparing a
consolidated balance sheet of such Person as at such determination
date; and (ii) if any obligation or liability is guaranteed or
otherwise supported jointly and severally by a Person and others,
then the amount of the obligation or liability of such Person with
respect to such guaranty or other support to be included in the
amount of such Person's Accommodation Obligation shall be the
whole principal amount so guaranteed or otherwise supported.
"Affiliate", as applied to any Person, means any other
Person that directly or indirectly controls, is controlled by, or
is under common control with, that Person. For purposes of this
definition, "control" (including, with correlative meanings, the
terms "controlling", "controlled by" and "under common control
with"), as applied to any Person, means the possession, directly
or indirectly, of the power to vote five percent (5.0%) or more of
the Securities having voting power for the election of directors
of such Person or otherwise to direct or cause the direction
of the management and policies of that Person, whether through the
ownership of voting Securities or by contract or otherwise.
"Agreement" is defined in the preamble hereto.
"Base Rate" means , for any period, a fluctuating
interest rate per annum as shall be in effect from time to time,
which rate per annum shall at all times be equal to the highest
of:
(i) the rate of interest announced publicly by
Citibank, N.A. in New York, New York from time to time, as
Citibank, N.A.'s base rate; and
(ii) the sum (adjusted to the nearest one-quarter of one
percent (0.25%) or, if there is no nearest one-quarter of one
percent (0.25%), to the next higher one-quarter of one percent
(0.25%)) of (A) one-half of one percent (0.50%) per annum plus (B)
the rate per annum obtained by dividing (I) the latest three-week
moving average of secondary market morning offering rates in
the United States for three-month certificates of deposit of major
United States money market banks, such three-week moving average
(adjusted to the basis of a year of 360 days) being determined
weekly on each Monday (or, if any such day is not a Business Day,
on the next succeeding Business Day) for the three-week
period ending on the previous Friday (or, if such day is not a
Business Day, on the next preceding Business Day) by Citibank,
N.A. on the basis of such rates reported by certificate of deposit
dealers to, and published by, the Federal Reserve Bank of New
York, or, if such publication shall be suspended or terminated, on
the basis of quotations for such rates received by Citibank, N.A.
from three (3) New York certificate of deposit dealers of
recognized standing selected by Citibank, N.A., by (II) a
percentage equal to 100% minus the average of the daily
percentages specified during such three-week period by the Federal
Reserve Board (or any successor) for determining the maximum
reserve requirement (including, but not limited to, any emergency,
supplemental or other marginal reserve requirement) for Citibank,
N.A. in respect of liabilities consisting of or including (among
other liabilities) three-month Dollar nonpersonal time
deposits in the United States plus (C) the average during such
three-week period of the annual assessment rates estimated by
Citibank, N.A. for determining the then current annual assessment
payable by Citibank, N.A. to the Federal Deposit Insurance
Corporation (or any successor) for insuring Dollar deposits of
Citibank, N.A. in the United States; and
(iii) the sum of (A) one-half of one percent (0.50%)
per annum plus (B) the Federal Funds Rate in effect from time to
time during such period.
"Base Rate Margin" means a rate equal to two and one-
half percent (2.50%) per annum.
"Borrower" is defined in the preamble of this Agreement.
"Business Activity Report" means (A) a Notice of
Business Activities Report from the State of New Jersey Division
of Taxation or (B) a Minnesota Business Activity Report from the
Minnesota Department of Revenue.
"Business Day" means a day, in the applicable local
time, which is not a Saturday or Sunday or a legal holiday and on
which banks are not required or permitted by law or other
governmental action to close in New York, New York.
"Capital Lease" means any lease of any property (whether
real, personal or mixed) by a Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Capital Stock" means, with respect to any Person, any
capital stock of such Person, regardless of class or designation,
and all warrants, options, purchase rights, conversion or exchange
rights, voting rights, calls or claims of any
character with respect thereto.
"Cash Equivalents" means (i) marketable direct
obligations issued or unconditionally guaranteed by the United
States government and backed by the full faith and credit of the
United States government; and (ii) domestic and Eurodollar
certificates of deposit and time deposits, bankers' acceptances
and floating rate certificates of deposit issued by any commercial
bank organized under the laws of the United States, any state
thereof, the District of Columbia, any foreign bank, or its
branches or agencies (fully protected against currency
fluctuations), which, at the time of acquisition, are rated A-1
(or better) by Standard & Poor's Corporation or
P-
1 (or better) by Moody's Investors Services, Inc.; provided, that
the maturities of such Cash Equivalents shall not exceed one (1)
year.
"Cash Interest Expense" means, for any period, total
interest expense, whether paid or accrued, but without
duplication, (including the interest component of Capital Leases)
of the Borrower and its Subsidiaries, which is payable in cash,
all as determined in conformity with GAAP.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 9601 et seq.,
any amendments thereto, any successor statutes, and any
regulations promulgated thereunder.
"Change of Control" means the occurrence of any of the
following: (i) the percentage of the Capital Stock of the Borrower
and voting rights with respect thereto owned or controlled by
Anthony Autorino or Vincent DiVincenzo, respectively, as of the
Closing Date decreasing by more than five percent (5%) or (ii) any
transaction or series of transactions (including, without
limitation, a tender offer, merger or consolidation) the result of
which is that any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act)
becomes the "beneficial owner" (as defined in Rule 13(d)(3) under
the Securities Exchange Act) of more than fifty percent (50%) of
the total aggregate voting power of all classes of the Capital
Stock of the Borrower which is voting stock and/or warrants
or options to acquire such Capital Stock, calculated on a fully
diluted basis.
"Claim" means any claim or demand, by any Person, of
whatsoever kind or nature for any alleged Liabilities and Costs,
whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute, Permit, ordinance or
regulation, common law or otherwise.
"Closing Date" means April 15, 1998.
"Collateral" means all Property and interests in
Property now owned or hereafter acquired by the Borrower or any of
its Subsidiaries upon which a Lien is granted under any of the
Loan Documents.
"Collateral Agent" means Salomon Brothers Holding
Company Inc in its capacity as "Collateral Agent" under that
certain Security Agreement of even date with this Agreement among
the Borrower, the Lender, the Other Bridge Lenders, and
Salomon Brothers Holding Company Inc in such capacity.
"Commission" means the Securities and Exchange
Commission and any Person succeeding to the functions thereof.
"Compliance Certificate" is defined in Section 7.01(d).
"Contaminant" means any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special waste,
petroleum or petroleum-derived substance or waste, radioactive
materials, asbestos (in any form or condition), polychlorinated
biphenyls (PCBs), or any constituent of any such substance or
waste, and includes, but is not limited to, these terms as defined
in federal, state or local laws or regulations.
"Contractual Obligation", as applied to any Person,
means any provision of any Securities issued by that Person or any
indenture, mortgage, deed of trust, security agreement, pledge
agreement, guaranty, contract, undertaking, agreement or
instrument to which that Person is a party or by which it or any
of its properties is bound, or to which it or any of its
properties is subject.
"Customary Permitted Liens" means
(i) Liens (other than Environmental Liens and Liens in
favor of the PBGC) with respect to the payment of taxes,
assessments or governmental charges in all cases which are not yet
due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance
with GAAP;
(ii) statutory Liens of landlords and Liens of
suppliers, mechanics, carriers, materialmen, warehousemen or
workmen and other Liens imposed by law created in the ordinary
course of business for amounts not yet due or which are being
contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions
are
being maintained in accordance with GAAP;
(iii) Liens (other than any Lien in favor of the PBGC)
incurred or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance or
other types of social security benefits or to secure the
performance of bids, tenders, sales, contracts (other than for the
repayment of borrowed money), surety, appeal and performance
bonds; provided that (A) all such Liens do not in the aggregate
materially detract from the value of the Borrower's or any of its
Subsidiaries' assets or Property or materially impair the use
thereof in the operation of their respective businesses, and (B)
all Liens of attachment or judgment and Liens securing bonds to
stay judgments or in connection with appeals do not secure at any
time an aggregate amount exceeding $100,000; and
(iv) Liens arising with respect to zoning restrictions,
easements, licenses, reservations, covenants, rights-of-way,
utility easements, building restrictions and other similar charges
or encumbrances on the use of Real Property which do not interfere
with the ordinary conduct of the business of the Borrower or any
of its Subsidiaries.
"Designated Prepayment" means any mandatory prepayment
required by Section 2.03(d)(i) or Section 2.03(d)(ii).
"DOL" means the United States Department of Labor and
any Person succeeding to the functions thereof.
"Dollars" and "$" mean the lawful money of the United
States.
"EBITDA" means, for any period, the amount calculated,
without duplication, for such period as (i) the Borrower's
consolidated net income, plus (ii) the Borrower's consolidated
depreciation and amortization expense and other non-cash
expenses, plus (iii) Cash Interest Expense, plus (iv) the
Borrower's consolidated federal, state, and local income taxes
deducted from net income in accordance with GAAP, plus (v)
extraordinary losses (and any unusual losses arising in or outside
of the ordinary course of business of the Borrower and its
Subsidiaries not included in extraordinary losses determined in
accordance with GAAP) which have been included in the
determination of the Borrower's consolidated net income minus
extraordinary gains (and any unusual gains arising in or outside
of the ordinary course of business of the Borrower and its
Subsidiaries not included in extraordinary gains determined in
accordance with GAAP) which have been included in the
determination of the Borrower's consolidated net income.
"Employee Pension Benefit Plan" means an employee
benefit plan within the meaning of Section 3(2) of ERISA.
"Environmental, Health or Safety Requirements of Law"
means all Requirements of Law derived from or relating to any
federal, state or local law, ordinance, rule, regulation, Permit,
license or other binding determination of any Governmental
Authority relating to, imposing liability or standards concerning,
or otherwise addressing, the environment, health and/or safety,
including, but not limited to the Clean Air Act, the Clean Water
Act, CERCLA, RCRA, any so-called "Superfund" or "Superlien" law,
the Toxic Substances Control Act and OSHA, and public
health codes, each as from time to time in effect.
"Environmental Lien" means a Lien in favor of any
Governmental Authority for any (i) liabilities under any
Environmental, Health or Safety Requirement of Law, or (ii)
damages arising from, or costs incurred by such Governmental
Authority in response to, a Release or threatened Release of a
Contaminant into the environment.
"Equipment" means, with respect to any Person, all of
such Person's present and future (i) equipment, including, without
limitation, machinery, manufacturing, distribution, selling, data
processing and office equipment, assembly systems, tools,
molds, dies, fixtures, appliances, furniture, furnishings,
vehicles, vessels, aircraft, aircraft engines, and trade fixtures,
(ii) other tangible personal property (other than such Person's
Inventory), and (iii) any and all accessions, parts and
appurtenances attached to any of the foregoing or used in
connection therewith, and any substitutions therefor and
replacements, products and proceeds thereof.
"ERISA" means the Employee Retirement Income Security
Act of 1974, 29 U.S.C. 1000 et seq., any amendments thereto,
any successor statutes, and any regulations or guidance
promulgated thereunder.
"ERISA Affiliate" means (i) any corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Internal Revenue Code) as the
Borrower; (ii) a partnership or other trade or business
(whether or not incorporated) which is under common control
(within the meaning of Section 414(c) of the Internal Revenue
Code) with the Borrower; and (iii) a member of the same affiliated
service group (within the meaning of Section 414(m) of the
Internal Revenue Code) as the Borrower, any corporation described
in clause (i) above or any partnership or trade or business
described in clause (ii) above.
"Event of Default" means any of the occurrences set
forth in Section 10.01 after the expiration of any applicable
grace period, as expressly provided in Section
10.01.
"Facility Fee" is defined in Section 3.02.
"Federal Reserve Board" means the Board of Governors of
the Federal Reserve System or any Governmental Authority
succeeding to its functions.
"Financial Statements" means (i) statements of income
and retained earnings, statements of cash flow, and balance
sheets, (ii) such other financial statements as the Borrower and
its Subsidiaries shall routinely and regularly prepare and (iii)
such other financial statements as the Lender may from time to
time reasonably specify.
"GAAP" means generally accepted accounting principles
set forth in the
opinions and pronouncements of the American Institute of Certified
Public
Accountants' Accounting Principles Board and Financial Accounting
Standards Board or
in such other statements by such other entity as may be in general
use by
significant
segments of the accounting profession as in effect on the date
hereof (unless
otherwise specified herein as in effect on another date or dates).
"General Intangibles" means, with respect to any Person,
all of such
Person's present and future (i) general intangibles, (ii)
trademarks, registered
trademarks, trademark applications, service marks, registered
service marks, service
mark applications, patents, registered patents, patent
applications, trade names,
rights of use of any name, labels, fictitious names, inventions,
designs, trade
secrets, computer programs, software, printouts and other computer
materials,
goodwill, registrations, copyrights, copyright applications,
permits, licenses,
franchises, customer lists, credit files, correspondence, and
advertising materials,
and (iii) rights under license and franchise agreements, and other
contracts and
contract rights.
"Governmental Authority" means any nation or government,
any federal,
state, local or other political subdivision thereof and any entity
exercising
executive, legislative, judicial, regulatory or administrative
functions of or
pertaining to government.
"Holder" means any Person entitled to enforce any of the
Obligations,
whether or not such Person holds any evidence of Indebtedness,
including, without
limitation, the Lender.
"Indebtedness", as applied to any Person, means, at any
time, without
duplication, (a) all indebtedness, obligations or other
liabilities of such Person
(i) for borrowed money or evidenced by debt Securities,
debentures, acceptances,
notes or other similar instruments, and any accrued interest, fees
and charges
relating thereto, (ii) with respect to letters of credit issued
for such Person's
account, (iii) to pay the deferred purchase price of property or
services, except
accounts payable and accrued expenses arising in the ordinary
course of business,
(iv) in respect of Capital Leases, (v) which are Accommodation
Obligations, or (vi)
under warranties and indemnities arising outside of the ordinary
course of such
Person's business; (b) all indebtedness, obligations or other
liabilities of such
Person or others secured by a Lien on any property of such Person,
whether or not
such indebtedness, obligations or liabilities are assumed by such
Person, all as of
such time; (c) all indebtedness, obligations or other liabilities
of such Person in
respect of interest rate contracts and foreign exchange contracts,
net of
liabilities
owed to such Person by the counterparties thereon; (d) all
preferred stock subject
(upon the occurrence of any contingency or otherwise) to mandatory
redemption; and
(e) all contingent Contractual Obligations with respect to any of
the foregoing.
"Indemnified Matters" is defined in Section 12.03.
"Indemnitees" is defined in Section 12.03.
"Interest Coverage Ratio" means, for any period, the
ratio of (i) EBITDA
to
(ii) Cash Interest Expense.
"Internal Revenue Code" means the Internal Revenue Code
of 1986, as
amended
to the date hereof and from time to time hereafter, any successor
statute and any
regulations or guidance promulgated thereunder.
"Inventory" means, with respect to any Person, all of
such Person's
present
and future (i) inventory, (ii) goods, merchandise and other
personal property
furnished or to be furnished under any contract of service or
intended for sale or
lease, and all consigned goods and all other items which have
previously constituted
Equipment of such Person but are then currently being held for
sale or lease in the
ordinary course of such Person's business, (iii) raw materials,
work-in-process and
finished goods, (iv) materials and supplies of any kind, nature or
description used
or consumed in such Person's business or in connection with the
manufacture,
production, packing, shipping, advertising, finishing or sale of
any of the property
described in clauses (i) through (iii) above, (v) goods in which
such Person has a
joint or other interest or right of any kind (including, without
limitation, goods
in
which such Person has an interest or right as consignee), and (vi)
goods which are
returned to or repossessed by such Person; in each case whether in
the possession of
such Person, a bailee, a consignee, or any other Person for sale,
storage, transit,
processing, use or otherwise, and any and all documents for or
relating to any of
the
foregoing.
"Investment" means, with respect to any Person, (i) any
purchase or other
acquisition by that Person of Securities, or of a beneficial
interest in Securities,
issued by any other Person, (ii) any purchase by that Person of
all or substantially
all of the assets of a business conducted by another Person, and
(iii) any loan,
advance (other than deposits with financial institutions available
for withdrawal on
demand, prepaid expenses, accounts receivable, advances to
employees and similar
items made or incurred in the ordinary course of business) or
capital contribution
by
that Person to any other Person, including all Indebtedness to
such Person arising
from a sale of property by such Person other than in the ordinary
course of its
business. The amount of any Investment shall be the original cost
of such
Investment, plus the cost of all additions thereto less the amount
of any return of
capital or principal to the extent such return is in cash with
respect to such
Investment without any adjustments for increases or decreases in
value or write-ups,
write-downs or write-offs with respect to such Investment.
"IRS" means the Internal Revenue Service and any Person
succeeding to the
functions thereof.
"Lender" is defined in the preamble of this Agreement.
"Liabilities and Costs" means all liabilities,
obligations,
responsibilities, losses, damages, personal injury, death,
punitive damages,
economic
damages, consequential damages, treble damages, intentional,
willful or wanton
injury, damage or threat to the environment, natural resources or
public health or
welfare, costs and expenses (including, without limitation,
attorney, expert and
consulting fees and costs and fees and costs associated with any
investigation,
feasibility or Remedial Action studies), fines, penalties and
monetary sanctions,
interest, direct or indirect, known or unknown, absolute or
contingent, past,
present
or future.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation,
assignment, conditional sale agreement, deposit arrangement,
security interest,
encumbrance, lien (statutory or other and including, without
limitation, any
Environmental Lien), preference, priority or other security
agreement or
preferential
arrangement of any kind or nature whatsoever in respect of any
property of a Person,
whether granted voluntarily or imposed by law, and includes the
interest of a lessor
under a Capital Lease or under any financing lease having
substantially the same
economic effect as any of the foregoing and the filing of any
financing statement or
similar notice (other than a financing statement filed by a "true"
lessor pursuant
to
9-408 of the Uniform Commercial Code), naming the owner of such
property as
debtor,
under the Uniform Commercial Code or other comparable law of any
jurisdiction.
"Loan" is defined in Section 2.01.
"Loan Account" is defined in Section 2.03(i).
"Loan Documents" means this Agreement and all other
instruments,
agreements
and written Contractual Obligations between the Borrower or any
Subsidiary of the
Borrower and the Lender delivered to the Lender pursuant to or in
connection with
the
transactions contemplated hereby.
"Margin Stock" means "margin stock" as such term is
defined in Regulation
U
and Regulation G.
"Material Adverse Effect" means a material adverse
effect upon (i) the
financial condition, operations, assets or prospects of the
Borrower or any of its
Subsidiaries, (ii) the ability of the Borrower or any of its
Subsidiaries to perform
their respective obligations under the Loan Documents, or (iii)
the ability of the
Lender to enforce any of the Loan Documents.
"Maturity Date" means the earlier to occur of (i) July
1, 1999 (or, if not
a Business Day, the next preceding Business Day) and (ii) the date
of acceleration
of
the Obligations pursuant to Section 10.02.
"MIS" means computerized management information system
for recording and
maintenance of information regarding purchases, sales, aging,
categorization, and
locations of Inventory, creation and aging of Receivables, and
accounts payable
(including agings thereof).
"Net Cash Proceeds of Issuance of Equity Securities or
Indebtedness" means
(i) net cash proceeds (including cash, equivalents readily
convertible into cash,
and
such proceeds of any notes received as consideration or any other
non-cash
consideration) received by the Borrower or any of its Subsidiaries
at any time after
the Closing Date on account of the issuance of (a) equity
Securities of the Borrower
or any of its Subsidiaries (other than Capital Stock of a
Subsidiary issued to the
Borrower or to a Subsidiary of the Borrower and Capital Stock
issued as a result of
conversion of Indebtedness permitted under Section 8.01(i)) or (b)
Indebtedness
(other than Indebtedness permitted under Section 8.01) of the
Borrower or any of its
Subsidiaries, in each case net of all transaction costs and
underwriters' discounts
with respect thereto; and (ii) proceeds (other than proceeds
received as a result of
conversion of Indebtedness permitted under Section 8.01(i))
received by the Borrower
at any time after the Closing Date as a contribution to its
capital on account of
the
issuance of equity Securities of the Borrower; provided however
that proceeds
described in clauses (i) and (ii) shall not be deemed to be "Net
Cash Proceeds of
Issuance of Equity Securities or Indebtedness" unless the
aggregate amount of such
proceeds received after the Closing Date exceeds $100,000.
"Net Cash Proceeds of Sale" means (i) proceeds received
by the Borrower or
any of its Subsidiaries in cash (including cash, equivalents
readily convertible
into
cash, and such proceeds of any notes received as consideration of
any other non-cash
consideration) from the sale, assignment or other disposition of
(but not the lease
or license of) any Property, other than sales permitted under
Section 8.02, net of
(a) the costs of sale, assignment or other disposition, (b) any
income, franchise,
transfer or other tax liability arising from such transaction and
(c) amounts
applied
to the repayment of Indebtedness (other than the Obligations)
secured by a Lien
permitted by Section 8.03 on the asset disposed of, if such net
proceeds arise from
any individual sale, assignment or other disposition or from any
group of related
sales, assignments or other dispositions; and (ii) proceeds of
insurance on account
of the loss of or damage to any Property of, or interruption of
the business of, the
Borrower with respect to which the Lender is named as loss payee;
provided however
that proceeds described in clauses (i) and (ii) shall not be
deemed to be "Net Cash
Proceeds of Sale" unless the aggregate amount of such proceeds
received after the
Closing Date exceeds $100,000.
"Obligations" means all loans (including, without
limitation, the Loan),
advances, debts, liabilities, obligations, covenants and duties
owing by the
Borrower
to the Lender, any Affiliate of the Lender, or any Person entitled
to
indemnification
pursuant to Section 12.03 of this Agreement, of any kind or
nature, present or
future, whether or not evidenced by any note, guaranty or other
instrument, arising
under this Agreement or any other Loan Document, whether or not
for the payment of
money, whether arising by reason of an extension of credit,
opening or amendment of
a
Letter of Credit or payment of any draft drawn thereunder, loan,
guaranty,
indemnification, foreign exchange contract, or in any other
manner, whether direct
or
indirect (including those acquired by assignment), absolute or
contingent, due or to
become due, now existing or hereafter arising and however
acquired. The term
includes, without limitation, all interest, charges, expenses,
fees, attorneys' fees
and disbursements and any other sum chargeable to the Borrower
under this Agreement
or any other Loan Document.
"Officer's Certificate" means a certificate executed on
behalf of the
Borrower by the chairman or vice-chairman of its board of
directors (if an officer
of
such corporation) or its president, any of its vice-presidents,
its chief financial
officer, or its treasurer.
"Operating Lease" means, as applied to any Person, any
lease of any
property (whether real, personal or mixed) by that Person as
lessee which is not a
Capital Lease.
"Organizational Documents" means, with respect to any
corporation, limited
liability company, or partnership (i) the articles/certificate of
incorporation (or
the equivalent organizational documents) of such corporation or
limited liability
company, (ii) the partnership agreement executed by the partners
in the partnership,
(iii) the by-laws (or the equivalent governing documents) of the
corporation,
limited
liability company or partnership, and (iv) any document setting
forth the
designation, amount and/or relative rights, limitations and
preferences of any class
or series of such corporation's Capital Stock or such limited
liability company's or
partnership's equity or ownership interests.
"OSHA" means the Occupational Safety and Health Act of
1970, 29 U.S.C.
651 et seq., any amendments thereto, any successor statutes and
any regulations or
guidance promulgated thereunder.
"Other Bridge Financing" means the provision of loans to
the Borrower by
Anthony D. Autorino and such other Person(s) as is(are)
satisfactory to Lender in an
aggregate principal amount of $2,000,000 maturing on the Maturity
Date and subject
to
substantially similar terms and conditions to those set forth in
this Agreement and
in any event on terms and conditions no more favorable to the
lenders than those set
forth in this Agreement.
"Other Bridge Lenders" means Anthony D. Autorino and the
other Person(s)
described in the definition of "Other Bridge Financing".
"Permits" means any permit, approval, authorization
license, variance, or
permission required from a Governmental Authority or other Person
under an
applicable
Requirement of Law.
"Permitted Equity Securities Options" means the
subscriptions, options,
warrants, rights, convertible securities and other agreements or
commitments
relating
to the issuance of equity Securities of the Borrower or any
Subsidiary of the
Borrower identified as such on Schedule 1.01.1.
"Permitted Existing Accommodation Obligations" means
those Accommodation
Obligations of the Borrower and its Subsidiaries identified as
such on Schedule
1.01.2.
"Permitted Existing Indebtedness" means the Indebtedness
of the Borrower
and its Subsidiaries identified as such on Schedule 1.01.3.
"Permitted Existing Investments" means those Investments
identified as
such
on Schedule 1.01.4.
"Permitted Existing Liens" means the Liens on assets of
the Borrower or
any
of its Subsidiaries identified as such on Schedule 1.01.5.
"Person" means any natural person, corporation, limited
liability company,
limited partnership, general partnership, joint stock company,
joint venture,
association, company, trust, bank, trust company, land trust,
business trust or
other
organization, whether or not a legal entity, and any Governmental
Authority.
"Potential Event of Default" means an event which, with
the giving of
notice or the lapse of time, or both, would constitute an Event of
Default.
"Pro Rata Share" means, with respect to any Other Bridge
Lender, the
percentage obtained by dividing (i) the principal amount of the
loan made by such
Other Bridge Lender with respect to the Other Bridge Financing by
(ii) the sum of
(a)
the aggregate principal amount of the loans made by the Other
Bridge Lenders with
respect to the Other Bridge Financing plus (b) $2,000,000.
"Projections" means the financial projections
(including, without
limitation, capital expenditure budget) and assumptions prepared
by the Borrower
dated as of the Closing Date and attached hereto as Exhibit A.
"Property" means any Real Property or personal property,
plant, building,
facility, structure, underground storage tank or unit, Equipment,
Inventory, General
Intangible, Receivable, or other asset owned, leased or operated
by the Borrower or
any Subsidiary of the Borrower, as applicable, (including any
surface water thereon,
and soil and groundwater thereunder).
"Protective Advance" is defined in Section 12.05(b).
"RCRA" means the Resource Conservation and Recovery Act
of 1976, 42 U.S.C.
6901 et seq., any amendments thereto, any successor statutes,
and any regulations
promulgated thereunder.
"Real Property" means, with respect to any Person, all
of such Person's
present and future right, title and interest (including, without
limitation, any
leasehold estate) in (i) any plots, pieces or parcels of land,
(ii) any
improvements,
buildings, structures and fixtures now or hereafter located or
erected thereon or
attached thereto of every nature whatsoever (the rights and
interests described in
clauses (i) and (ii) above being the "Premises"), (iii) all
easements, rights of
way,
gores of land or any lands occupied by streets, ways, alleys,
passages, sewer
rights,
water courses, water rights and powers, and public places
adjoining such land, and
any other interests in property constituting appurtenances to the
Premises, or which
hereafter shall in any way belong, relate or be appurtenant
thereto, (iv) all
hereditaments, gas, oil, minerals (with the right to extract,
sever and remove such
gas, oil and minerals), and easements, of every nature whatsoever,
located in or on
the Premises and (v) all other rights and privileges thereunto
belonging or apper-
taining and all extensions, additions, improvements, betterments,
renewals,
substitutions and replacements to or of any of the rights and
interests described in
clauses (iii) and (iv) above.
"Receivables" means, with respect to any Person, all of
such Person's
present and future (i) accounts, (ii) contract rights, chattel
paper, instruments,
documents, deposit accounts, and other rights to payment of any
kind, whether or not
arising out of or in connection with the sale or lease of goods or
the rendering of
services, and whether or not earned by performance, (iii) any of
the foregoing which
are not evidenced by instruments or chattel paper, (iv)
intercompany receivables,
and
any security documents executed in connection therewith, (v)
proceeds of any letters
of credit or insurance policies on which such Person is named as
beneficiary, (vi)
claims against third parties for advances and other financial
accommodations and any
other obligations whatsoever owing to such Person, (vii) rights in
and to all
security agreements, leases, guarantees, instruments, securities,
documents of title
and other contracts securing, evidencing, supporting or otherwise
relating to any of
the foregoing, together with all rights in any goods, merchandise
or Inventory which
any of the foregoing may represent, and (viii) rights in returned
and repossessed
goods, merchandise and Inventory which any of the same may
represent, including,
without limitation, any right of stoppage in transit.
"Regulation D" means Regulation D of the Federal Reserve
Board as in
effect
from time to time.
"Regulation G" means Regulation G of the Federal Reserve
Board as in
effect
from time to time.
"Regulation T" means Regulation T of the Federal Reserve
Board as in
effect
from time to time.
"Regulation U" means Regulation U of the Federal Reserve
Board as in
effect
from time to time.
"Regulation X" means Regulation X of the Federal Reserve
Board as in
effect
from time to time.
"Release" means any release, spill, emission, leaking,
pumping, pouring,
dumping, injection, deposit, disposal, abandonment, or discarding
of barrels,
containers or other receptacles, discharge, emptying, escape,
dispersal, leaching or
migration into the indoor or outdoor environment or into or out of
any Property,
including the movement of Contaminants through or in the air,
soil, surface water,
groundwater or Property.
"Remedial Action" means actions required to (i) clean
up, remove, treat or
in any other way address Contaminants in the indoor or outdoor
environment; (ii)
pre-
vent the Release or threat of Release or minimize the further
Release of
Contaminants; or (iii) investigate and determine if a remedial
response is needed
and
to design such a response and post-remedial investigation,
monitoring, operation and
maintenance and care.
"Requirements of Law" means, as to any Person, the
charter and by-laws or
other organizational or governing documents of such Person, and
any law, rule or
regulation, or determination of an arbitrator or a court or other
Governmental
Authority, in each case applicable to or binding upon such Person
or any of its
property or to which such Person or any of its property is subject
including,
without
limitation, the Securities Act, the Securities Exchange Act,
Regulations G, T, U and
X, ERISA, the Fair Labor Standards Act, the Worker Adjustment and
Retraining
Notification Act, Americans with Disabilities Act of 1990, and any
certificate of
occupancy, zoning ordinance, building, environmental or land use
requirement or
Permit or and Environmental, Health or Safety Requirement of Law.
"Restricted Junior Payment" means (i) any dividend or
other distribution,
direct or indirect, on account of any shares of any class of
Capital Stock of the
Borrower or any of its Subsidiaries now or hereafter outstanding,
except a dividend
payable solely in shares of that class of stock or in any junior
class of stock to
the holders of that class, (ii) any redemption, retirement,
sinking fund or similar
payment, purchase or other acquisition for value, direct or
indirect, of any shares
of any class of equity Securities of the Borrower or any of its
Subsidiaries now or
hereafter outstanding, (iii) any payment or prepayment of
principal of, premium, if
any, or interest, fees or other charges on or with respect to, and
any redemption,
purchase, retirement, defeasance, sinking fund or similar payment
and any claim for
rescission with respect to, the Indebtedness subordinated to the
Obligations in
right
of payment, or any other Indebtedness for borrowed money, and (iv)
any payment made
to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any out-
standing warrants, options or other rights to acquire shares of
any class of Capital
Stock of the Borrower or any of its Subsidiaries now or hereafter
outstanding.
"Securities" means any Capital Stock, shares, investment
property, voting
trust certificates, limited partnership certificates, bonds,
debentures, notes or
other evidences of indebtedness, secured or unsecured,
convertible, subordinated or
otherwise, or in general any instruments commonly known as
"securities", including,
without limitation, any "security" as such term is defined in
Section 8-102 of the
Uniform Commercial Code, or any certificates of interest, shares,
or participations
in temporary or interim certificates for the purchase or
acquisition of, or any
right
to subscribe to, purchase or acquire any of the foregoing, but
shall not include the
Notes or any other evidence of the Obligations.
"Securities Act" means the Securities Act of 1933, as
amended from time to
time, and any successor statute.
"Securities Exchange Act" means the Securities Exchange
Act of 1934, as
amended from time to time, and any successor statute.
"Solvent", when used with respect to any Person, means
that at the time of
determination:
(i) the fair market value of its assets is in excess of
the total
amount of its liabilities (including, without limitation,
contingent
liabilities); and
(ii) the present fair saleable value of its assets is
greater than its
probable liability on its existing debts as such debts become
absolute and
matured; and
(iii) it is then able and expects to be able to pay its
debts (including,
without limitation, contingent debts and other commitments) as
they mature; and
(iv) it has capital sufficient to carry on its business
as conducted and
as
proposed to be conducted.
"Subsidiary" of a Person means any corporation, limited
liability company,
general or limited partnership, or other entity of which
securities or other owner-
ship interests having ordinary voting power to elect a majority of
the board of
directors or other Persons performing similar functions with
respect to such entity
are at the time directly or indirectly owned or controlled by such
Person, one or
more of the other subsidiaries of such Person or any combination
thereof.
"Taxes" is defined in Section 11.01(a).
"Uniform Commercial Code" means the Uniform Commercial
Code as enacted in
the State of New York, as it may be amended from time to time.
1.02. Computation of Time Periods. In this Agreement,
in the computation
of periods of time from a specified date to a later specified
date, the word "from"
means "from and including" and the words "to" and "until" each
mean "to but
excluding". Periods of days referred to in this Agreement shall
be counted in
calendar days unless Business Days are expressly prescribed. Any
period determined
hereunder by reference to a month or months or year or years shall
end on the day in
the relevant calendar month in the relevant year, if applicable,
immediately
preceding the date numerically corresponding to the first day of
such period;
provided that if such period commences on the last day of a
calendar month (or on a
day for which there is no numerically corresponding day in the
calendar month during
which such period is to end), such period shall, unless otherwise
expressly required
by the other provisions of this Agreement, end on the last day of
the calendar
month.
1.03. Accounting Terms. Subject to Section 12.04, for
purposes of this
Agreement, all accounting terms not otherwise defined herein shall
have the meanings
assigned to them in conformity with GAAP.
1.04. Other Terms. All other terms contained in this
Agreement shall,
unless the context indicates otherwise, have the meanings assigned
to such terms by
the Uniform Commercial Code to the extent the same are defined
therein.
ARTICLE II
AMOUNT AND TERMS OF LOAN; AUTHORIZED REPRESENTATIVES
2.01. Making of the Loan. Subject to the terms and
conditions set forth
in this Agreement, the Lender hereby agrees to make a loan, in
Dollars (the "Loan")
to the Borrower in the principal amount of $2,000,000 on April 17,
1998 and shall
make the proceeds of the Loan available to the Borrower at the
Lender's office in
New
York, New York and shall disburse such proceeds in accordance with
the Borrower's
written disbursement instructions delivered to the Lender on such
date.
2.02. Use of Proceeds of Loan. The proceeds of the
Loan made hereunder
shall be used for working capital in the ordinary course of the
respective
businesses
of the Borrower and its Subsidiaries and for other lawful general
corporate purposes
not otherwise prohibited by the terms of this Agreement.
2.03. Repayment of the Loan. (a) Maturity. The Loan
shall be payable
in
full on the Maturity Date.
(b) Voluntary Prepayments. The Borrower may, at any
time and from time
to
time, upon at least one (1) Business Day's prior written notice to
the Lender,
prepay
the Loan, in whole or in part. Any partial prepayment of the Loan
shall be in a
minimum amount of $100,000 and integral multiples of $50,000 in
excess of that
amount. Any notice of prepayment given to the Lender under this
Section 2.03(b)
shall
specify the date (which shall be a Business Day) of such
prepayment and, with
respect
to a partial prepapyment, the principal amount thereof. When
notice of prepayment
is
delivered as provided herein, the principal amount of the Loan
specified in the
notice shall become due and payable on the payment date specified
in such notice.
The
Borrower shall have no right to reborrow any amount of the Loan
prepaid.
(c) No Prepayment Fee. All prepayments in respect of
the Loan described
in this Section 2.03 may be made without premium or penalty.
(d) Mandatory Prepayments/Reductions.
(i) Net Cash Proceeds of Sale. Immediately upon the
Borrower's or any of
its Subsidiaries' receipt of any Net Cash Proceeds of Sale, the
Borrower shall make
or cause to be made a mandatory prepayment of the Obligations in
an amount equal to
one hundred percent (100%) of such Net Cash Proceeds of Sale.
(ii) Net Cash Proceeds of Issuance of Equity Securities
or Indebtedness.
Immediately upon the Borrower's or any of its Subsidiaries'
receipt of any Net Cash
Proceeds of Issuance of Equity Securities or Indebtedness, the
Borrower shall make
or
cause to be made a mandatory prepayment in an amount equal to one
hundred percent
(100%) of such Net Cash Proceeds of Issuance of Equity Securities
or Indebtedness.
(iii) No Waiver or Consent. Nothing in this Section
2.03(d) shall be
construed to constitute the Lender's consent to any transaction
referenced in clause
(d) above which is not expressly permitted by Article VIII.
(iv) Notice. The Borrower shall give the Lender prior
written notice or
telephonic notice promptly confirmed in writing when a Designated
Prepayment will be
made (which date of prepayment shall be no later than the date on
which such
Designated Payment becomes due and payable pursuant to this
Section 2.03(d).
(v) Sharing of Mandatory Prepayments. Notwithstanding
the foregoing, in
the event any amounts are owing with respect to the Other Bridge
Financing at the
time any Designated Prepayment is to be made as aforesaid, the
amount of such
Designated Prepayment shall be reduced by the amount of each Other
Bridge Lender's
Pro Rata Share thereof which is paid to such Other Bridge Lender
in permanent
reduction of the Other Bridge Financing.
(e) Manner and Time of Payment. All payments of
principal of and
interest
on the Loan and other Obligations (including, without limitation,
fees and expenses)
which are payable to the Lender shall be made without condition or
reservation of
right, and in immediately available funds, delivered to the Lender
not later than
11:00 a.m. (New York time) on the date and at the place due, to
such account of the
Lender as it may designate; and funds received by the Lender,
including, without
limitation, funds in respect of the Loan to be made on that date,
not later than
11:00 a.m. (New York time) on any given Business Day shall be
credited against
payment to be made that day and funds received by the Lender after
that time shall
be
deemed to have been paid on the next succeeding Business Day.
(f) Apportionment of Payments. All payments, proceeds
of Collateral, and
any other amounts received by the Lender from or for the benefit
of the Borrower
shall be applied
(i) first, to pay principal of and interest on any
Protective Advance which
has
not then been paid by the Borrower,
(ii) second, to pay accrued interest on any Loan then due
and payable,
(iii) third, to pay the principal of the Loan then due and
payable, and
(iv) fourth, to pay all other Obligations then due and
payable;
and any amount in excess of the foregoing shall be promptly
refunded to the
Borrower.
(g) Payments on Non-Business Days. Whenever any
payment to be made by
the
Borrower hereunder is stated to be due on a day which is not a
Business Day, the
payment shall instead be due on the next succeeding Business Day
and any such
extension of time shall be included in the computation of the
payment of interest
and
fees hereunder.
(h) Promise to Repay. The Borrower hereby agrees to
pay when due the
principal amount of the Loan, the Facility Fee, and all unpaid
interest accrued
thereon, in accordance with the terms of this Agreement.
(i) Loan Account. The Lender shall maintain in
accordance with its usual
practice an account or accounts (a "Loan Account") evidencing the
Obligations owing
from time to time, including the amount of principal and interest
payable and paid
to
the Lender from time to time hereunder. The Loan Account shall
include (i) the date
and amount of the Loan made hereunder, (ii) the amount of any
principal or interest
due and payable or to become due and payable from the Borrower
hereunder, and (iii)
the amount of any sum received by the Lender from the Borrower
hereunder or from
proceeds of Collateral. The entries made in the Loan Account shall
be conclusive and
binding for all purposes, absent manifest error.
2.04. Authorized Officers and Agents. On the Closing
Date the Borrower
shall deliver, and from time to time thereafter the Borrower may
deliver, to the
Lender an Officer's Certificate setting forth the names of the
Borrower's officers,
employees and agents, in each instance containing a specimen
signature of each such
officer, employee or agent, authorized to act for the Borrower in
respect of all
matters relating to the Loan Documents. The Lender shall be
entitled to rely
conclusively on such officer's, employee's, or agent's authority
until the Lender
receives written notice to the contrary. The Lender shall have no
duty to verify
the
authenticity of the signature appearing on any such Officer's
Certificate or any
other document or to verify the identity of any person
representing himself or
herself as one of the officers, employees or agents authorized to
act on behalf of
the Borrower. The Lender shall not incur any liability to the
Borrower or any other
Person in acting upon any telephonic or facsimile notice referred
to above which the
Lender believes to have been given by a duly authorized officer or
other person
authorized to borrow on behalf of the Borrower.
ARTICLE III
INTEREST AND FEE
3.01. Interest on the Loan and other Obligations. (a)
Rate of Interest.
(i) The Loan and the outstanding principal balance of all other
Obligations shall
bear interest on the unpaid principal amount thereof from the date
such Loan is made
and such other Obligations are incurred until paid in full, except
as otherwise
provided in Section 3.01(c), at a rate per annum equal to the sum
of (1) the Base
Rate, as in effect from time to time as interest accrues plus (2)
the Base Rate
Margin.
(b) Interest Payments. Interest accrued on the Loan
and other
Obligations
shall be payable in arrears (A) on the first day of each calendar
month, commencing
on the first such day following the Closing Date, and (B) if not
theretofore paid in
full, on the Maturity Date.
(c) Default Interest. Notwithstanding the rate of
interest specified in
Section 3.01(a), effective immediately upon the occurrence of an
Event of Default,
and for as long thereafter as such Event of Default shall be
continuing unwaived,
the
principal balance of the Loan and other Obligations shall bear
interest at a rate
which is two percent (2.0%) per annum in excess of the rate of
interest specified in
Section 3.01(a).
(d) Computation of Interest. Interest on all
Obligations shall be
computed on the basis of the actual number of days elapsed in the
period during
which
interest accrues and a year of 365 days. In computing interest on
the Loan, the
date
of the making of the Loan shall be included and the date of
payment shall be
excluded.
3.02. Facility Fee. The Borrower shall pay to the
Lender, on the Closing
Date, a fee in the amount of $50,000 (the "Facility Fee"). The
Facility Fee shall be
payable in addition to, and not in lieu of, interest,
compensation, expense
reimbursements, indemnification and other Obligations, to the
Lender at its office
in
New York, New York in immediately available funds, and shall be
fully earned and
nonrefundable when paid. Such fee shall bear interest, if not
paid when due, at the
interest rate set forth in Section 3.01(c), shall constitute
Obligations, and shall
be secured by all of the Collateral.
ARTICLE IV
CONDITIONS TO THE LOAN
4.01. Conditions Precedent to the Loan. The obligation
of the Lender to
make the Loan shall be subject to the satisfaction of all of the
following
conditions
precedent:
(a) Documents. The Lender shall have received on or
before the Closing
Date all of the following:
(i) this Agreement and all other agreements, documents
and
instruments relating to the loan and other credit transactions
contemplated
by this Agreement and described in the List of Closing Documents
attached
hereto as Exhibit B attached hereto and made a part hereof, each
duly
executed where appropriate and in form and substance satisfactory
to the
Lender; without limiting the foregoing, the Borrower hereby
directs its
counsel, Shipman & Goodwin LLP, to prepare and deliver to the
Lender and
Sidley & Austin, the opinions referred to in such List of Closing
Documents;
(ii) the Projections, in form and substance
satisfactory to the
Lender;
(iii) an Officer's Certificate executed and delivered
by the
president or vice president of the Borrower certifying that, to
the best of
such officer's knowledge after diligent inquiry, all conditions
precedent
have been met and no Potential Event of Default or Event of
Default has
occurred or is continuing and setting forth the authorization
described in
Section 2.04; and
(iv) such additional documentation as the Lender may
reasonably request.
(b) Perfection of Liens. Evidence that all financing
statements relating
to the Collateral have been filed and certificates representing
Capital Stock
included in the Collateral have been delivered to the Collateral
Agent (with duly
executed stock powers).
(c) No Legal Impediments. No law, regulation, order,
judgment or decree
of any Governmental Authority shall, and the Lender shall not have
received any
notice that litigation is pending or threatened which is likely to
(i) enjoin,
prohibit or restrain the making of the Loan on the Closing Date or
(ii) result in a
Material Adverse Effect.
(d) No Change in Condition. No change in the business,
assets,
management, operations, financial condition or prospects of the
Borrower or any of
its Subsidiaries shall have occurred since December 31, 1997,
which change, in the
judgment of the Lender, will, or is reasonably likely to, result
in a Material
Adverse Effect. Since December 31, 1997, except to the extent
disclosed to the
Lender
prior to the Closing Date and not objected to by the Lender, the
Borrower shall not
have (i) entered into any material (as determined in good faith by
the Lender)
commitment or transaction, including, without limitation,
transactions for
borrowings
and capital expenditures, which are not in the ordinary course of
the Borrower's
business except with respect to the transactions contemplated
hereby, (ii) declared
or paid any dividends or distributions, (iii) established or
assumed any obligations
with respect to compensation or mployee benefit plans other than
the Employee
Pension
Benefit Plan in effect on December 31, 1997 or (iv) redeemed,
repurchased, or issued
any Capital Stock.
(e) No Loss of Material Agreements and Licenses. Since
December 31,
1997,
except to the extent disclosed to the Lender prior to the Closing
Date and not
objected to by the Lender, no agreement or license which, in the
judgment of the
Lender, is material to the business, operations or employee
relations of the
Borrower
or any of its Subsidiaries shall have been terminated, modified,
revoked, breached
or
declared to be in default.
(f) No Default. To the best of the Borrower's
knowledge, after diligent
inquiry, no Event of Default or Potential Event of Default shall
have occurred and
be
continuing or would result from the making of the Loan.
(g) Representations and Warranties. All of the
representations and
warranties contained in Section 5.01 and in any of the other Loan
Documents shall be
true and correct in all material respects on and as of the Closing
Date.
(h) Other Bridge Financing. The Borrower shall have
received proceeds of
loans under the Other Bridge Financing in the amount of at least
$1,000,000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties of the Borrower.
In order to induce
the Lender to enter into this Agreement and to make the Loan to
the Borrower
described herein, the Borrower hereby represents and warrants to
the Lender that the
following statements are true, correct and complete as of the
Closing Date:
(a) Organization; Corporate Powers. (i) The Borrower
and each of its
Subsidiaries (A) is a corporation duly organized, validly existing
and in good
standing under the laws of the jurisdiction of its organization,
(B) is duly
qualified to do business as a foreign corporation and is in good
standing under the
laws of each jurisdiction in which failure to be so qualified and
in good standing
will have or is reasonably likely to have a Material Adverse
Effect, and (C) has all
requisite corporate power and authority to own, operate and
encumber its Property
and
to conduct its business as presently conducted and as proposed to
be conducted in
connection with and following the consummation of the transactions
contemplated by
this Agreement.
(ii) True, correct and complete copies of the
Organizational Documents
identified on Schedule 5.01-A attached hereto have been delivered
to the Lender,
each
of which is in full force and effect, has not been modified or
amended except to the
extent indicated therein and, to the best of the Borrower's
knowledge, there are no
defaults under such Organizational Documents and no events which,
with the passage
of
time or giving of notice or both, would constitute a default under
such
Organizational Documents.
(b) Authority. (i) The Borrower and each of its
Subsidiaries have the
requisite corporate power and authority (A) to execute, deliver
and perform each of
the Loan Documents which are required to be executed by it in
connection herewith or
which have been executed by it as required by this Agreement on or
prior to the
Closing Date and (B) to file or record the Loan Documents which
are required to be
filed or recorded by it in connection herewith or which have been
filed or recorded
by it as required by this Agreement on or prior to the Closing
Date, with any
Governmental Authority.
(ii) The execution, delivery, performance and filing or
recording, as the
case may be, of each of the Loan Documents which are required to
be executed, filed
or recorded by the Borrower or any of its Subsidiaries in
connection with this
Agreement or which have been executed, filed or recorded as
required by this
Agreement on or prior to the Closing Date and to which the
Borrower or any of its
Subsidiaries is party and the consummation of the transactions
contemplated thereby,
have been duly approved by the respective boards of directors and,
if necessary, the
shareholders of the Borrower and its Subsidiaries and such
approvals have not been
rescinded. No other corporate action or proceedings on the part
of the Borrower or
any of its Subsidiaries are necessary to consummate such
transactions.
(iii) Each of the Loan Documents to which the Borrower
or any of its
Subsidiaries is a party (A) has been duly executed, delivered,
filed or recorded, as
the case may be, by it, (B) where applicable, creates valid Liens
in the Collateral
covered thereby securing the payment of all of the Obligations
purported to be
secured thereby, which Liens have been perfected in the states of
Connecticut and
Missouri and, except to the extent disclosed on Schedule 1.01.5,
to the best of the
Borrower's knowledge, are senior to all other Liens against the
Collateral which is
located in Connecticut or Missouri, (C) constitutes the Borrower's
legal, valid and
binding obligation, enforceable against it in accordance with its
terms, and (D) is
in full force and effect and no Potential Event of Default or
Event of Default
exists
thereunder.
(c) Subsidiaries; Ownership of Equity Securities.
Schedule 5.01-C
attached hereto (i) describes the corporate structure of the
Borrower, its
Subsidiaries and any other Person in which the Borrower or any of
its Subsidiaries
holds a direct or indirect partnership, joint venture or other
equity interest and
indicates the nature of such interest with respect to each Person
included in such
diagram; and (ii) accurately sets forth (A) the correct legal name
of such Person,
the jurisdiction of its incorporation or organization and the
jurisdictions in which
the Borrower and its Subsidiaries are qualified to transact
business as a foreign
corporation or otherwise and (B) the authorized, issued and
outstanding shares or
interests of each class of equity Securities of the Borrower and
each of its Sub-
sidiaries and the owners of such shares or interests in each of
the Borrower's
Subsidiaries. None of such issued and outstanding equity
Securities is subject to
any vesting, redemption, or repurchase agreement, and there are no
warrants or
options (other than Permitted Equity Securities Options)
outstanding with respect to
such equity Securities. The outstanding equity Securities of each
Subsidiary of the
Borrower are duly authorized, validly issued, fully paid and
nonassessable free and
clear of any Liens, except for the Liens granted pursuant to the
Loan Documents and
are not Margin Stock.
(d) No Conflict. The execution, delivery and
performance of each of the
Loan Documents to which the Borrower or any of its Subsidiaries is
a party do not
and
will not (i) conflict with the Organizational Documents of the
Borrower or any such
Subsidiary, (ii) to the best of the Borrower's knowledge,
constitute a tortious
interference with any Contractual Obligation of any Person or
conflict with, result
in a breach of or constitute (with or without notice or lapse of
time or both) a
default under any Requirement of Law or Contractual Obligation of
the Borrower or
any
such Subsidiary, or require termination of any Contractual
Obligation, the
consequences of which violation, breach, default or termination,
singly or in the
aggregate, will, or is reasonably likely to, result in a Material
Adverse Effect or
may subject the Lender to any liability, (iii) result in or
require the creation or
imposition of any Lien whatsoever upon any of the Property or
assets of the Borrower
or any such Subsidiary, other than Liens contemplated by the Loan
Documents, or
(iv) require any approval of the Borrower's or any such
Subsidiary's shareholders
which has not been obtained.
(e) Governmental Consents. Except as set forth on
Schedule 5.01-E
attached hereto, the execution, delivery and performance of each
of the Loan
Documents to which the Borrower or any of its Subsidiaries is a
party do not and
will
not require any registration with, consent or approval of, or
notice to, or other
action to, with or by any Governmental Authority, except (i)
filings, consents or
notices which have been made, obtained or given and (ii) filings
necessary to create
or perfect security interests in the Collateral.
(f) Governmental Regulation. Neither the Borrower, nor
any of its
Subsidiaries is subject to regulation under the Public Utility
Holding Company Act
of
1935, the Federal Power Act, or the Investment Company Act of
1940, or any other
federal or state statute or regulation which limits its ability to
incur
indebtedness
or its ability to consummate the transactions contemplated hereby
or by the Loan
Documents.
(g) Restricted Junior Payments. Since December 31,
1997, neither the
Borrower nor any of its Subsidiaries has directly or indirectly
declared, ordered,
paid or made or set apart any sum or Property for any Restricted
Junior Payment or
agreed to do so, except as permitted pursuant to Section 8.05 of
this Agreement.
(h) Financial Position. Complete and accurate copies
of the following
Financial Statements, materials and other information have been
delivered to the
Lender: (i) the Projections, (ii) the Borrower's Annual Report on
Form 10-K and
Annual Report to Shareholders (including audited financial
statements) for its
fiscal
year ended December 31, 1997, and (iii) the Borrower's Quarterly
Reports on Form 10-
Q
for the quarters ending March 31, 1997, June 30, 1997 and
September 30, 1997. All
Financial Statements included in such materials were prepared in
all material
respects in conformity with GAAP, except as otherwise noted
therein, and fairly
present in all material respects the respective consolidated
financial positions,
and
the consolidated results of operations and cash flows for each of
the periods
covered
thereby of the Borrower and its Subsidiaries as at the respective
dates thereof.
Neither the Borrower nor any of its Subsidiaries has any
Accommodation Obligation,
contingent liability or liability for any taxes, long-term leases
or commitments,
not
disclosed in writing to the Lender prior to the Closing Date or
not reflected in the
audited Financial Statements delivered to the Lender on or prior
to the Closing Date
as aforesaid, which will have or is reasonably likely to have a
Material Adverse
Effect.
(i) Projections. The Projections and the assumptions
expressed therein
are reasonable based on the information available to the Borrower
at the time so
furnished.
(j) Indebtedness. Schedule 1.01.3 sets forth all
Indebtedness for
borrowed money of the Borrower and its Subsidiaries and there are
no defaults in the
payment of principal or interest on any such Indebtedness and no
payments thereunder
have been deferred or extended beyond their stated maturity
(except as disclosed on
such Schedule).
(k) Litigation; Adverse Effects. Except as set forth
in Schedule 5.01-K
attached hereto, there is no action, suit, proceeding, Claim,
investigation or
arbitration before or by any Governmental Authority or private
arbitrator pending
or,
to the knowledge of the Borrower or any of its Subsidiaries,
threatened against the
Borrower or any of its Subsidiaries or any of the Property (i)
challenging the
validity or the enforceability of any of the Loan Documents, (ii)
which will, or is
reasonably likely to, result in any Material Adverse Effect, or
(iii) under the
Racketeering Influenced and Corrupt Organizations Act or any
similar federal or
state
statute where such Person is a defendant in a criminal indictment
that provides for
the forfeiture of assets to any Governmental Authority as a
criminal penalty. There
is no material loss contingency within the meaning of GAAP which
has not been
reflected in the consolidated Financial Statements of the
Borrower. To the best of
the Borrower's knowledge, neither the Borrower nor any of its
Subsidiaries is (A) in
violation of any applicable Requirements of Law which violation
will result, or is
reasonably likely to result, in a Material Adverse Effect, or (B)
subject to or in
default with respect to any final judgment, writ, injunction,
restraining order or
order of any nature, decree, rule or regulation of any court or
Governmental
Authority which will, or is reasonably likely to, result in a
Material Adverse
Effect.
(l) Compensation. Except (i) as disclosed in documents
filed with the
Commission, (ii) as set forth on Schedule 5.01-L attached hereto,
and (iii) for
increases in the ordinary course of business and in accordance
with past practices,
during the period commencing on October 1, 1997 and ending on the
Closing Date,
neither the Borrower nor any of its Subsidiaries has increased or
agreed to increase
the aggregate compensation or benefits (including severance
benefits) payable or
accruing to any past or present officer or employee of such
Persons having
management
responsibilities.
(m) No Material Adverse Effect. Except as disclosed on
Schedule 5.01-X,
since December 31, 1997, there has occurred no event with respect
to the Borrower or
any Affiliate of the Borrower which has resulted, or is reasonably
likely to result,
in a Material Adverse Effect.
(n) Tax Examinations. The IRS has examined (or is
foreclosed from
examining by applicable statutes) the Borrower's consolidated
federal income tax
returns for all tax periods prior to and including the taxable
year ending December
31, 1995. All deficiencies which have been asserted against the
Borrower or any of
its Subsidiaries as a result of any federal, state, local or
foreign tax examination
for each taxable year in respect of which an examination has been
conducted have
been
fully paid or finally settled, except as otherwise disclosed to
the Lender prior to
the Closing Date, or are being contested in good faith. To the
best of the
Borrower's
knowledge, neither the Borrower nor any of its Subsidiaries has
taken any reporting
positions for which it does not have a reasonable basis.
(o) Payment of Taxes. Except as otherwise disclosed to
the Lender on or
prior to the Closing Date, all tax returns and reports of each of
the Borrower and
its Subsidiaries required to be filed have been timely filed, and
all taxes,
assessments, fees and other charges of Governmental Authorities
thereupon and upon
or
relating to its their respective Property, assets, income and
franchises which are
shown in such returns or reports to be due and payable have been
paid, except to the
extent (i) such taxes, assessments, fees and other charges are
being contested in
good faith by an appropriate proceeding diligently pursued as
permitted by the terms
of Section 7.04 and (ii) non-payment of the amounts thereof would
not, individually
or in the aggregate, result in a Material Adverse Effect. The
Borrower has no
knowl-
edge of any proposed tax assessment against the Borrower or any of
its Subsidiaries
that will, or is reasonably likely to, result in a Material
Adverse Effect.
(p) Performance. Except as disclosed on Schedule 5.01-
X, neither the
Borrower nor any of its Subsidiaries has received any notice,
citation, or
allegation, nor has actual knowledge, that (i) it is in default in
the performance,
observance or fulfillment of any of the obligations, covenants or
conditions
contained in any Contractual Obligation applicable to it which is
material to its
ability to maintain or continue the operations of its core
business, (ii) any of its
Property is in violation of any Requirement of Law, or (iii) any
condition exists
which, with the giving of notice or the lapse of time or both,
would constitute a
default with respect to any such Contractual Obligation, in each
case, except where
such default or defaults, if any, will not, or is not reasonably
likely to, result
in
a Material Adverse Effect.
(q) Disclosure. The representations and warranties of
the Borrower and
its Subsidiaries contained in the Loan Documents, and all
certificates and other
documents delivered to the Lender pursuant to the terms thereof,
do not contain any
untrue statement of a material fact or omit to state a material
fact necessary in
order to make the statements contained herein or therein, in light
of the
circumstances under which they were made, not misleading. The
Borrower has not
intentionally withheld any fact from the Lender in regard to any
matter which will,
or is reasonably likely to, result in a Material Adverse Effect.
(r) Requirements of Law. To the best of the Borrower's
knowledge, the
Borrower and its Subsidiaries are in compliance with all
Requirements of Law
applicable to them and their respective businesses, in each case
where the failure
to
so comply individually or in the aggregate will, or is reasonably
likely to, result
in a Material Adverse Effect.
(s) Environmental Matters. To the best of the
Borrower's knowledge,
except as disclosed on Schedule 5.01-S attached hereto, the
operations of the
Borrower and its Subsidiaries and their respective Properties
comply in all material
respects with all applicable Environmental, Health or Safety
Requirements of Law and
the Borrower and each of its Subsidiaries are conducting and will
continue to
conduct
its respective business and operations in an environmentally
responsible manner in
material compliance with Environmental, Health or Safety
Requirements of Law, and
the
Borrower and its Subsidiaries, taken as a whole, have not been,
and have no reason
to
believe that they will be, subject to Liabilities and Costs
arising out of or
relating to environmental, health or safety matters that have or
will result in
material cash expenditures by the Borrower and its Subsidiaries
during the term of
this Agreement.
(t) ERISA. Neither the Borrower nor any ERISA
Affiliate maintains or
contributes to any Employee Pension Benefit Plan other than the
Employee Pension
Benefit Plan identified on Schedule 5.01-T attached hereto and
made a part hereof.
(u) Labor Matters. Except for individual employee
contracts, neither the
Borrower nor any of its Subsidiaries is a party to any labor
contract. There are no
strikes, lockouts or other grievances relating to any collective
bargaining or
similar agreement to which the Borrower or any of its Subsidiaries
is a party.
(v) Securities Activities. Neither the Borrower nor
any of its
Subsidiaries is engaged in the business of extending credit for
the purpose of
purchasing or carrying Margin Stock.
(w) Solvency. After giving effect to the extensions of
credit hereunder,
and the disbursement of the proceeds of the Loan pursuant to the
Borrower's
instructions, the Borrower is Solvent.
(x) Patents, Trademarks, Permits, Etc.; Government
Approvals. (i) The
Borrower and each of its Subsidiaries, as applicable, owns, is
licensed or otherwise
has the lawful right to use, or has all Permits and other
governmental approvals,
patents, trademarks, trade names, copyrights, technology, know-
how, permits and pro-
cesses used in or necessary for the conduct of its respective
business as currently
conducted which (A) are material to its condition (financial or
otherwise),
operations, performance and prospects, taken as a whole or (B) the
absence of which
would be reasonably likely to result in a Material Adverse Effect.
Except as set
forth on Schedule 5.01-X attached hereto, no claims are pending
or, to the best of
Borrower's knowledge, threatened that the Borrower or any of its
Subsidiaries is
infringing or otherwise adversely affecting the rights of any
Person with respect to
such Permits and other governmental approvals, patents,
trademarks, trade names,
copyrights, technology, know-how, permits and processes, except
for such claims and
infringements as do not, in the aggregate, give rise to any
liability on the part of
the Borrower or any of its Subsidiaries which will, or is
reasonably likely to,
result in a Material Adverse Effect.
(ii) The consummation of the transactions contemplated
by the Loan
Documents will not impair the ownership of or rights under (or the
license or other
right to use, as the case may be) any Permits and governmental
approvals, patents,
trademarks, trade names, copyrights, technology, know-how, permits
or processes by
the Borrower or any of its Subsidiaries in any manner which will,
or is reasonably
likely to, result in a Material Adverse Effect.
(y) Assets and Properties. The Borrower and each of
its Subsidiaries has
good and marketable title to all of the assets and Property
(tangible and
intangible)
owned by it (except insofar as marketability may be limited by any
laws or
regulations of any Governmental Authority affecting such assets),
and, to the best
of
Borrower's knowledge, all such assets and Property located in
Connecticut or
Missouri
are free and clear of all Liens except Liens securing the
Obligations and Liens
permitted under Section 8.03. Substantially all of the assets and
Property owned
by,
leased to, or used by the Borrower or a Subsidiary of the Borrower
is in adequate
operating condition and repair, ordinary wear and tear excepted,
is free and clear
of
any known defects except such defects as do not substantially
interfere with the
continued use thereof in the conduct of normal operations, and is
able to serve the
function for which they are currently being used, except in each
case where the
failure of such asset to meet such requirements would not, or is
not reasonably
likely to, result in a Material Adverse Effect. Neither this
Agreement nor any
other
Loan Document, nor any transaction contemplated under any such
agreement, will
affect
any right, title or interest of the Borrower or any Subsidiary of
the Borrower in
and
to any of such assets in a manner that would, or is reasonably
likely to, result in
a
Material Adverse Effect.
(z) Insurance. Schedule 5.01-Z attached hereto
accurately sets forth as
of the Closing Date all insurance policies and programs currently
in effect with
respect to the respective Property and assets and business of the
Borrower and its
Subsidiaries. Borrower has delivered to the Lender evidence of
all such insurance
policies relating to the Collateral and business interruption
coverage.
(aa) Pledge of Capital Stock. The grant and perfection
of the security
interest in the Capital Stock of the Subsidiaries of the Borrower
constituting a
portion of the Collateral for the benefit of the Holders as
contemplated by the
terms
of the Loan Documents is not made in violation of the registration
provisions of the
Securities Act, any applicable provisions of other federal
securities laws, state
securities or "Blue Sky" law, or applicable general corporation
law or in violation
of any other Requirement of Law.
ARTICLE VI
REPORTING COVENANTS
The Borrower covenants and agrees that until payment in
full of all of the
Obligations (other than indemnities not yet due), unless the
Lender shall otherwise
give their prior written consent thereto:
6.01. Financial Statements. The Borrower shall
maintain, and cause each
of its Subsidiaries to maintain, a system of accounting
established and administered
in accordance with sound business practices to permit preparation
of consolidated
and
consolidating Financial Statements in conformity with GAAP and
each of the Financial
Statements described below shall be prepared from such system and
records. The
Borrower shall deliver or cause to be delivered to the Lender:
(a) Monthly Reports. As soon as practicable, and in
any event within
forty-five (45) days after the end of each calendar month in each
Fiscal Year other
than months ending a fiscal quarter, the consolidated statement of
profit and loss
of
the Borrower and its Subsidiaries as at the end of such period
setting forth in com-
parative form the corresponding figures for the corresponding
calendar month of the
previous Fiscal Year and the corresponding figures from the
Projections delivered on
the Closing Date, certified by the chief financial officer of the
Borrower as fairly
presenting the consolidated financial position of the Borrower and
its Subsidiaries
as at the dates indicated and the results of their operations and
cash flow for the
calendar months indicated in accordance with GAAP, subject to
normal year end
adjustments.
(b) Annual Report. As soon as practicable, and in any
event within one
hundred (100) days after the end of Borrower's fiscal year ending
December 31, 1997,
(i) the consolidated balance sheets of the Borrower and its
Subsidiaries as at the
end of such fiscal year and the related consolidated statements of
income,
stockholders' equity and cash flow of the Borrower and its
Subsidiaries for such
fiscal year and (ii) a report thereon of Rothstein, Kass &
Company, P.C., Borrower's
independent certified public accountants, which report shall be
unqualified and
shall
state that such Financial Statements fairly present the
consolidated financial
position of the Borrower and each of its Subsidiaries as at the
dates indicated and
the results of their operations and cash flow for the periods
indicated in
conformity
with GAAP applied on a basis consistent with prior years (except
for changes with
which such independent accountants shall concur and which shall
have been disclosed
in the notes to the Financial Statements) and that the examination
by such
accountants in connection with such consolidated Financial
Statements has been made
in accordance with generally accepted auditing standards.
(c) Officer's Certificate. Together with each delivery
of the aforesaid
Financial Statements, (i) an Officer's Certificate of the Borrower
substantially in
the form of Exhibit C attached hereto and made a part hereof,
stating that the
executive officer signatory thereto has reviewed the terms of the
Loan Documents,
and
has made, or caused to be made under his/her supervision, a review
in reasonable
detail of the transactions and consolidated financial condition of
the Borrower and
its Subsidiaries during the accounting period covered by such
Financial Statements,
that such review has not disclosed the existence during or at the
end of such
accounting period, and that such Person does not have knowledge of
the existence as
at the date of such Officer's Certificate, of any condition or
event which
constitutes an Event of Default or Potential Event of Default, or,
if any such
condition or event existed or exists, specifying the nature and
period of existence
thereof and what action the Borrower or any of its Subsidiaries
has taken, is taking
and proposes to take with respect thereto; and (ii) a certificate
(the "Compliance
Certificate"), signed by the Borrower's chief financial officer,
setting forth
calculations (with such specificity as the Lender may reasonably
request) for the
period then ended which demonstrate compliance, when applicable,
with the provisions
of Article IX.
6.02. Events of Default. Promptly upon any of the
chief executive
officer, chief operating officer, chief financial officer,
treasurer or controller
of
the Borrower obtaining knowledge (a) of any condition or event
which constitutes an
Event of Default or Potential Event of Default, (b) that any
Person has given any
notice to the Borrower or any Subsidiary of the Borrower or taken
any other action
with respect to a claimed default or event or condition of the
type referred to in
Section 10.01(e), or (c) of any condition or event which is
reasonably likely to
result in a Material Adverse Effect or affect the value of, or the
Lender's interest
in, the Collateral in any material respect, the Borrower shall
deliver to the Lender
an Officer's Certificate specifying (i) the nature and period of
existence of any
such claimed default, Event of Default, Potential Event of
Default, condition or
event, (ii) the notice given or action taken by such Person in
connection therewith,
and (iii) what action the Borrower has taken, is taking and
proposes to take with
respect thereto.
6.03. Lawsuits. (a) Institution of Proceedings.
Promptly upon the
Borrower obtaining knowledge of the institution of, or written
threat of, any
action,
suit, proceeding, governmental investigation or arbitration
against or affecting the
Borrower or any of its Subsidiaries or any of the Property not
previously disclosed
pursuant to Section 5.01(k), which action, suit, proceeding,
governmental
investigation or arbitration exposes, or in the case of multiple
actions, suits,
proceedings, governmental investigations or arbitrations arising
out of the same
general allegations or circumstances which expose, in the
Borrower's reasonable
judgment, the Borrower and/or any of its Subsidiaries to liability
in an amount
aggregating $250,000 or more (exclusive of claims covered by
insurance policies of
the Borrower and its Subsidiaries unless the insurers of such
claims have disclaimed
coverage or reserved the right to disclaim coverage on such
claims), the Borrower
shall give written notice thereof to the Lender and provide such
other information
as
may be reasonably available to enable the Lender and its counsel
to evaluate such
matters.
(b) Additional Reports Upon Request. In addition to
the requirements set
forth in clause (a) of this Section 6.03, the Borrower upon
request of the Lender
shall promptly give written notice of the status of any action,
suit, proceeding,
governmental investigation or arbitration covered by a report
delivered pursuant to
either of such clause (a) and provide such other information as
may be reasonably
available to it to enable the Lender and its counsel to evaluate
such matters.
6.04. Environmental Notices. The Borrower shall notify
the Lender in
writing, promptly upon the Borrower's learning thereof, of any:
(i) notice that any Property is subject to an
Environmental Lien in
respect of a Claim in an amount greater than $100,000;
(ii) notice to the Borrower or any Subsidiary of the
Borrower of any
material violation of any Environmental, Health or Safety
Requirement of
Law;
(iii) condition which might reasonably result in a
material violation
of any Environmental, Health or Safety Requirement of Law; and
(iv) commencement or threat of any judicial or
administrative
proceeding alleging a material violation by the Borrower or any
Subsidiary
of the Borrower of any Environmental, Health or Safety Requirement
of Law.
6.05. Other Indebtedness. The Borrower shall deliver a
copy to the
Lender
of any material notice or other material communication received by
the Borrower from
any Person in connection with any Indebtedness for borrowed money
promptly after
such
notice or other communication is received by the Borrower.
6.06. Other Reports. The Borrower shall deliver or
cause to be delivered
to the Lender copies of all Financial Statements (in the case of
quarterly Financial
Statements, within forty-five days after the end of each fiscal
quarter of the
Borrower), reports and notices, if any, sent or made available
generally by the
Borrower to its Securities holders or filed with the Commission
and all press
releases made available generally by the Borrower or Subsidiary of
the Borrower to
the public concerning material developments in the business of the
Borrower or any
such Subsidiary of the Borrower, and all notifications received by
the Borrower or
any Subsidiary of the Borrower pursuant to the Securities Exchange
Act and the rules
promulgated thereunder.
6.07. Other Information. Promptly upon receiving a
request therefor from
the Lender, the Borrower shall prepare and deliver to the Lender
such other
information with respect to the Borrower, any of its Subsidiaries,
or the
Collateral,
including, without limitation, schedules identifying and
describing the Collateral
and any dispositions thereof, as from time to time may be
reasonably requested by
the
Lender.
ARTICLE VII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that until payment in full
of all of the
Obligations (other than indemnities not yet due), unless the
Lender shall otherwise
give prior written consent:
7.01. Corporate Existence, Etc. The Borrower shall,
and shall cause each
of its Subsidiaries (other than STC Europe Ltd.) to, at all times
maintain its
corporate existence and preserve and keep, or cause to be
preserved and kept, in
full
force and effect its rights and franchises material to its
businesses, except where
the loss or termination of such rights and franchises is not
likely to result in a
Material Adverse Effect.
7.02. Corporate Powers; Conduct of Business. The
Borrower shall, and
shall cause each of its Subsidiaries to, qualify and remain
qualified to do business
and maintain its good standing in each jurisdiction in which the
nature of its
business and the ownership of its Property requires it to be so
qualified and in
good
standing, except where a failure to be qualified is not likely to
result in a
Material Adverse Effect.
7.03. Compliance with Laws, Etc. The Borrower shall,
and shall cause
each
of its Subsidiaries to, (a) comply with all Requirements of Law
and all restrictive
covenants affecting it or its business, Property, assets or
operations and (b)
obtain
as needed all Permits necessary for its operations and maintain
such Permits in good
standing, except in the case where noncompliance with either
clause (a) or (b) above
is not reasonably likely to result in a Material Adverse Effect.
7.04. Payment of Taxes and Claims; Tax Consolidation.
The Borrower
shall,
and shall cause each of its Subsidiaries to, pay (a) all taxes,
assessments and
other
governmental charges imposed upon it or on any of its Property or
assets or in
respect of any of its franchises, business, income or Property
before any penalty or
interest accrues thereon, and (b) all Claims (including, without
limitation, claims
for labor, services, materials and supplies) for sums which have
become due and
payable and which by law have or may become a Lien (other than a
Lien permitted by
Section 8.03) upon any of the Borrower's or such Subsidiary's
Property or assets,
prior to the time when any penalty or fine shall be incurred with
respect thereto;
provided, however, that no such taxes, assessments and
governmental charges referred
to in clause (a) above or Claims referred to in clause (b) above
need be paid (i) if
being contested in good faith by appropriate proceedings
diligently instituted and
conducted and if such reserve or other appropriate provision, if
any, as shall be
required in conformity with GAAP shall have been made therefor or
(ii) with respect
to such taxes, assessments, and governmental charges of the type
disclosed to the
Lender prior to the Closing Date as referenced in Section 5.01(n),
if resolution of
the determination of an appropriate basis therefor is being
pursued by the Borrower
in a manner consistent with past practices as disclosed to the
Lender. The Borrower
will not, nor will it permit any of its Subsidiaries to, file or
consent to the
filing of any consolidated income tax return with any Person.
7.05. Insurance. The Borrower shall maintain for
itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain
in full force and
effect the insurance policies and programs listed on Schedule
5.01-Z or
substantially
similar policies and programs or other policies and programs
maintained with
responsible and reputable insurance companies. The Borrower shall
obtain an
endorsement, in form and substance acceptable to the Lender,
showing loss payable to
the Lender with respect to coverage relating to the Collateral,
for the benefit of
the Holders. In the event the Borrower or any of its
Subsidiaries, at any time or
times hereafter shall fail to obtain or maintain any of the
policies or insurance
required herein or to pay any premium in whole or in part relating
thereto, then the
Lender, without waiving or releasing any obligations or resulting
Event of Default
hereunder, may at any time or times thereafter (but shall be under
no obligation to
do so) obtain and maintain such policies of insurance and pay such
premiums and take
any other action with respect thereto which the Lender reasonably
deems advisable.
All sums so disbursed by the Lender shall constitute Protective
Advances hereunder
and be part of the Obligations, payable as provided in this
Agreement.
7.06. Inspection of Property; Books and Records;
Discussions. The
Borrower shall, and shall cause each of its Subsidiaries to,
permit any authorized
representative(s) designated by the Lender to visit and inspect,
whether by access
to
Borrower's and its Subsidiaries' MIS or otherwise, any of the
Property, to examine,
audit, check and make copies of its respective financial and
accounting records,
books, journals, orders, receipts and any correspondence (other
than privileged
correspondence with legal counsel) and other data relating to
their respective
businesses or the transactions contemplated hereby or referenced
herein (including,
without limitation, in connection with environmental compliance,
hazard or
liability), and to discuss their affairs, finances and accounts
with their officers,
management personnel, and independent certified public
accountants, all upon
reasonable written notice and no more frequently than once every
six (6) months at
reasonable times during normal business hours. Each such
visitation and inspection
by or on behalf of the Lender shall be at the Borrower's expense
not to exceed
$5,000. The Borrower shall keep and maintain, and cause each of
its Subsidiaries to
keep and maintain, in all material respects on its MIS and
otherwise proper books of
record and account in which entries in conformity with GAAP shall
be made of all
dealings and transactions in relation to its respective businesses
and activities,
including, without limitation, transactions and other dealings
with respect to the
Collateral. If an Event of Default has occurred and is
continuing, the Borrower,
upon the Lender's request, shall turn over any such records to the
Lender or its
representatives as may be necessary for the enforcement of any of
its rights and
remedies under this Agreement or the other Loan Documents or the
Collateral Agent's
rights and remedies with respect to the Collateral; provided,
however, that the
Borrower may, in its discretion, retain copies of such records,
the originals of
which are so requested by the Lender.
7.07. Insurance Proceeds. The Borrower hereby directs
(and, if
applicable, shall cause its Subsidiaries to direct) all insurers
under policies
insuring against loss of Inventory or business interruption to pay
all proceeds
payable under such policies in an amount not to exceed the
aggregate amount
determined by the Collateral Agent to be due and owing to the
Lender and the Other
Bridge Lenders under this Agreement and the credit agreement
evidencing the Other
Bridge Financing at the time such proceeds are payable directly to
the Collateral
Agent upon the Collateral Agent's written request therefor, for
the benefit of the
Lender and the Other Bridge Loan Lenders. In no case shall such
proceeds be payable
to the Borrower or one or more of its Subsidiaries and the
Collateral Agent. The
Lender shall, upon its receipt of such proceeds from the
Collateral Agent, apply all
of the proceeds so received in repayment of the Obligations in the
manner set forth
in Section 2.03.
7.08. ERISA Compliance. The Borrower shall, and shall
cause each of its
Subsidiaries and ERISA Affiliates to, establish, maintain and
operate all Employee
Pension Benefit Plans to comply in all material respects with the
provisions of
ERISA, the Internal Revenue Code, all other applicable laws, and
the regulations and
interpretations thereunder and the respective requirements of the
governing
documents
for such Employee Pension Benefit Plans.
7.09. Maintenance of Property. The Borrower shall, and
shall cause each
of its Subsidiaries to, maintain in all material respects all of
its respective
owned
and leased Property in good, safe and insurable condition and
repair, and not
permit,
commit or suffer any waste or abandonment of any such Property and
from time to time
shall make or cause to be made all material repairs, renewal and
replacements
thereof, including, without limitation, any capital improvements
which may be
required; provided, however, that such Property may be altered or
renovated in the
ordinary course of Borrower's or its Subsidiaries' business and
abandon or otherwise
dispose of such Property in the event the same is no longer useful
in the operation
of the business of the Borrower and its Subsidiaries.
ARTICLE VIII
NEGATIVE COVENANTS
Borrower covenants and agrees that it shall comply with
the following
covenants until payment in full of all of the Obligations (other
than indemnities
not
yet due), unless the Lender shall otherwise give prior written
consent:
8.01. Indebtedness. The Borrower shall not and shall
not permit any of
its Subsidiaries to directly or indirectly create, incur, assume
or otherwise become
or remain directly or indirectly liable with respect to any
Indebtedness, except:
(a) the Obligations and Other Bridge Financing;
(b) Permitted Existing Indebtedness and any extensions,
renewals,
refundings or replacements thereof, provided that any such
extension,
renewal, refunding or replacement is in an aggregate principal
amount not
greater than the principal amount of, and is on terms no less
favorable to
the Borrower or its Subsidiary than the terms of, the Permitted
Existing
Indebtedness so extended, renewed, refunded or replaced;
(c) in an aggregate amount not to exceed $100,000 at
any time,
Capital Leases and purchase money Indebtedness incurred to finance
the
acquisition of fixed assets, and Indebtedness incurred to
refinance such
Capital Leases and purchase money Indebtedness;
(d) Indebtedness in respect of taxes, assessments,
governmental
charges and Claims for labor, materials or supplies, to the extent
that
payment thereof is not required pursuant to Section 7.04;
(e) Indebtedness constituting Accommodation Obligations
other than:
(i) recourse obligations resulting from endorsement of
negotiable
instruments for collection in the ordinary course of its business;
and
(ii) Permitted Existing Accommodation Obligations and
any extensions,
renewals or replacements thereof, provided that the aggregate
Indebtedness
under any such extension, renewal or replacement is not greater
than the
Indebtedness under, and shall be on terms no less favorable to the
Borrower
or such Subsidiary than the terms of, the Permitted Existing
Accommodation
Obligation so extended, renewed or replaced;
(f) Indebtedness arising from intercompany loans,
evidenced by
Contractual Obligations satisfactory to the Lender, from the
Borrower to
any of its Subsidiaries or from any such Subsidiary to the
Borrower or any
other such Subsidiary, provided that such Contractual Obligations
are in
form and substance satisfactory to the Lender;
(g) Indebtedness under appeal bonds in connection with
judgments
which do not result in an Event of Default or a Potential Event of
Default
or any other breach hereunder, provided that the aggregate amount
of all
such Indebtedness does not exceed $100,000;
(h) Indebtedness in an aggregate amount not to exceed
$1,000,000 at any
time outstanding, arising with respect to line deposits, letters
of credit and
other similar arrangements incurred by the Borrower after the
Closing Date in
connection with carrier agreements entered into in the ordinary
course of its
business; and
(i) in addition to the Indebtedness permitted by
clauses (a) through
(h) above, other unsecured Indebtedness in an aggregate amount not
to
exceed $2,000,000 at any time outstanding incurred on terms
acceptable to
the Lender.
8.02. Sales of Assets. The Borrower shall not and
shall not permit any
of
its Subsidiaries to sell, assign, transfer, lease, convey or
otherwise dispose of
any
Property, whether now owned or hereafter acquired, or any income
or profits there-
from, or enter into any agreement to do so, except:
(a) the transfer of Property from a Subsidiary of the
Borrower to the
Borrower;
(b) the sale of Inventory in the ordinary course of
Borrower's and
its Subsidiaries respective businesses;
(c) the disposition of Equipment if such Equipment is
obsolete or no
longer useful in the ordinary course of the Borrower's or such
Subsidiary's
business;
(d) the licensing of General Intangibles to the extent
not prohibited
by the Loan Documents;
(e) the sale of Investments in Cash Equivalents
permitted pursuant to
Section 8.04(a); and
(f) the sale or other disposition of Property of the
Borrower and its
Subsidiaries the net proceeds of which do not exceed $100,000 in
the aggregate.
8.03. Liens. The Borrower shall not and shall not
permit any of its
Subsidiaries to directly or indirectly create, incur, assume or
permit to exist any
Lien on or with respect to any of their respective Property or
assets except:
(a) Liens created pursuant to the Loan Documents;
(b) Permitted Existing Liens;
(c) Customary Permitted Liens and Liens securing
Indebtedness
permitted under Section 8.01(c) or Section 8.01(h);
(d) provided that written notice is given to the Lender
promptly upon the
grant of such Liens, consensual Liens against (i) Inventory which
are granted,
consistent with past practices, with respect to Inventory which is
the subject
of carrier contracts and (ii) Receivables and proceeds thereof,
which are
granted, consistent with past practices, to cellular carriers to
secure
Borrower's obligations for cellular services sold to Borrower by
such carriers;
and
(e) extensions, renewals, refundings and replacements
of Liens
referred to in clauses (a) and (b) of this Section 8.03; provided
that any
such extension, renewal, refunding or replacement of a Lien
referred to in
clause (b) shall be limited to the Property covered by the Lien
extended,
renewed, refunded or replaced and that the obligations secured by
any such
extension, renewal, refunding or replacement Lien shall be in an
amount not
greater than the amount of the obligations then secured by the
Lien
extended, renewed, refunded or replaced.
8.04. Investments. The Borrower shall not and shall
not permit any of
its
Subsidiaries to directly or indirectly make or own any Investment
except:
(a) Investments in Cash Equivalents;
(b) Permitted Existing Investments; and
(c) Investments received in connection with the
bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent
obligations of, and other disputes with, customers and suppliers
arising in
the ordinary course of business.
8.05. Restricted Junior Payments. The Borrower shall
not and shall not
permit any of its Subsidiaries to declare or make any Restricted
Junior Payment,
except:
(a) dividends or distributions to (i) the Borrower on
the Capital
Stock of any of its Subsidiaries and (ii) any of the Borrower's
Subsid-
iaries from any other Subsidiary of the Borrower;
(b) scheduled principal and interest payments in
respect of Permitted
Existing Indebtedness in accordance with the terms thereof as of
the
Closing Date; and
(c) scheduled principal and interest payments in
respect of the Other
Bridge Financing in accordance with the terms thereof as of the
Closing Date and
prepayments of principal thereof; provided that, in the case of
prepayments, a
prepayment of the Loan is made concurrently therewith in the same
amount of the
prepayment to any lender under the Other Bridge Financing.
8.06. Conduct of Business. The Borrower shall not and
shall not permit
any of its Subsidiaries to engage in any business other than (a)
the businesses
engaged in by the Borrower and its Subsidiaries on the date hereof
and (b) any
business or activities which are substantially similar, related or
incidental
thereto.
8.07. Transactions with Shareholders and Affiliates.
The Borrower shall
not and shall not permit any of its Subsidiaries to directly or
indirectly enter
into
or permit to exist any transaction (including, without limitation,
the purchase,
sale, lease or exchange of any property or the rendering of any
service) with any
holder or holders of more than five percent (5%) of any class of
equity Securities
of
the Borrower, or with any other Affiliate of the Borrower which is
not its
Subsidiary, on terms that are less favorable to the Borrower or
such Subsidiary of
the Borrower, as applicable, than those that might be obtained in
an arm's length
transaction at the time from Persons who are not such a holder or
Affiliate.
Nothing
contained in this Section 8.07 shall prohibit (a) any transaction
expressly
permitted
by Section 8.05; (b) increases in compensation and benefits for
officers and
employees of the Borrower or any of its Subsidiaries which are
customary in the
industry or consistent with the past business practice of the
Borrower or such
Subsidiary, provided that no Event of Default or Potential Event
of Default has
occurred and is continuing; or (c) payment of customary directors'
fees and indemni-
ties.
8.08. Restriction on Fundamental Changes. The Borrower
shall not and
shall not permit any of its Subsidiaries other than STC Europe
Ltd. to enter into
any
merger or consolidation, or liquidate, wind-up or dissolve (or
suffer any
liquidation
or dissolution), or convey, lease, sell, transfer or otherwise
dispose of, in one
transaction or series of transactions, all or substantially all of
such Person's
business or Property, whether now or hereafter acquired, unless
the Obligations are
paid in full concurrent with the consummation of any of the
foregoing.
8.09. Sales and Leasebacks. The Borrower shall not or
permit any of its
Subsidiaries to become liable, directly, by assumption or by
Accommodation
Obligation, with respect to any lease, whether an Operating Lease
or a Capital
Lease,
of any Property (whether real or personal or mixed) which it or
one of its
Subsidiaries (a) sold or transferred or is to sell or transfer to
any other Person,
or (b) intends to use for substantially the same purposes as any
other Property
which
has been or is to be sold or transferred by it or one of its
Subsidiaries to any
other Person, in either instance, in connection with such lease.
8.10. Margin Regulations; Securities Laws. The
Borrower shall not or
permit any of its Subsidiaries to use all or any portion of the
proceeds of any
credit extended under this Agreement to purchase or carry Margin
Stock.
8.11. Issuance of Equity Securities. The Borrower
shall not and shall
not
permit any of its Subsidiaries to issue any equity Securities,
other than equity
Securities of the Borrower pursuant to Permitted Equity Securities
Options and
equity
Securities issued as a result of conversion of Indebtedness
permitted under Section
8.01(i), unless all of the net cash proceeds thereof are used to
repay the
Obligations as provided in Section 2.03(d)(5).
8.12. Organizational Documents; Documents Pertaining to
Other
Indebtedness
for Borrowed Money. The Borrower shall not and shall not permit
any of its
Subsidiaries to amend, modify or otherwise change any of the terms
or provisions in
any of (a) their respective Organizational Documents as in effect
on the Closing
Date, except routine amendments thereof not affecting the ability
of the Borrower to
perform its obligations under the Loan Documents or to conduct its
business on a
basis consistent with past practices and amendments to effect a
change of name of
the
Borrower or a Subsidiary of the Borrower, written notice of which
change of name the
Borrower shall have provided the Lender within thirty (30) days
prior to the
effective date of any such name change or (b) the Contractual
Obligations with
respect to the Other Bridge Financing or with respect to other
Indebtedness for
borrowed money as in effect on the Closing Date, if the effect
thereof is to make
such Contractual Obligations more favorable to the obligees with
respect to such
Indebtedness.
ARTICLE IX
FINANCIAL COVENANTS
The Borrower covenants and agrees that until payment in
full of all of the
Obligations (other than indemnities not yet due):
9.01. Net Worth. The Borrower shall, at all times
during the term of
this
Agreement, maintain a net worth of the Borrower and its
Subsidiaries (determined in
accordance with GAAP as of the last day of each calendar quarter)
of no less than
(a)
$100,000 commencing on June 30, 1998 and (b) $200,000 from and
after June 30, 1999.
9.02. Interest Coverage Ratio. The Borrower shall
maintain an Interest
Coverage Ratio at all times during the term of this Agreement, as
determined as of
the last day of each calendar quarter of at least 2.5 to 1.0.
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.01. Events of Default. Each of the following
occurrences shall
constitute an Event of Default under this Agreement:
(a) Failure to Make Payments When Due. The Borrower
shall fail to pay
when due any principal amount of the Obligations or to pay within
three (3) Business
Days after the due date therefor any interest payable with respect
to the
Obligations.
(b) Breach of Certain Covenants. The Borrower shall
fail duly and
punctually to perform or observe any agreement, covenant or
obligation binding on
such Person under Sections 7.01, 7.02, 7.03, 7.04, 7.05, and 7.06,
Article VIII or
Article IX.
(c) Breach of Representation or Warranty. Any
representation or warranty
made or deemed made by the Borrower to the Lender herein or by the
Borrower or any
of
its Subsidiaries in any of the other Loan Documents or in any
statement or
certificate at any time given by any such Person pursuant to any
of the Loan
Documents shall be false or misleading in any material respect on
the date as of
which made (or deemed made).
(d) Other Defaults. The Borrower shall default in the
performance of or
compliance with any term contained in this Agreement (other than
as identified in
clauses (a), (b) or (c) of this Section 10.01) or any default or
event of default
shall occur under any of the other Loan Documents, and such
default or event of
default shall continue for thirty (30) days after the occurrence
thereof.
(e) Default as to Other Indebtedness. The Borrower or
any of its
Subsidiaries shall fail to make any payment when due (whether by
scheduled maturity,
required prepayment, acceleration, demand or otherwise) with
respect to any
Indebtedness (other than an Obligation) of the Borrower and its
Subsidiaries
aggregating $250,000 or more or with respect to any Indebtedness
arising under the
Other Bridge Financing; or any breach, default or event of default
shall occur, or
any other condition shall exist under any instrument, agreement or
indenture per-
taining to any such Indebtedness, if the effect thereof is to
cause an acceleration,
mandatory redemption or other required repurchase of such
Indebtedness, or permit
the
holder(s) of such Indebtedness to accelerate the maturity of any
such Indebtedness
or
require a redemption or other repurchase of such Indebtedness; or
any such
Indebtedness shall be otherwise declared to be due and payable (by
acceleration or
otherwise) or required to be prepaid, redeemed or otherwise
repurchased by the
Borrower or any of its Subsidiaries (other than by a regularly
scheduled required
prepayment) prior to the stated maturity thereof.
(f) Involuntary Bankruptcy; Appointment of Receiver,
Etc. (i) An
involuntary case shall be commenced against the Borrower or any of
its Subsidiaries
and the petition shall not be dismissed, stayed, bonded or
discharged within thirty
(30) days after commencement of the case; or a court having
jurisdiction in the
premises shall enter a decree or order for relief in respect of
the Borrower or any
of its Subsidiaries in an involuntary case, under any applicable
bankruptcy,
insolvency or other similar law now or hereinafter in effect; or
any other similar
relief shall be granted under any applicable federal, state, local
or foreign law.
(ii) A decree or order of a court having jurisdiction
in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other
officer having similar powers over the Borrower or any of its
Subsidiaries or over
all or a substantial part of the Property of the Borrower or any
of its Subsidiaries
shall be entered; or an interim receiver, trustee or other
custodian of the Borrower
or any of its Subsidiaries or of all or a substantial part of the
Property of the
Borrower or any of its Subsidiaries shall be appointed or a
warrant of attachment,
execution or similar process against any substantial part of the
Property of the
Bor-
rower or any of its Subsidiaries shall be issued and any such
event shall not be
stayed, dismissed, bonded or discharged within thirty (30) days
after entry,
appointment or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc.
The Borrower or
any of its Subsidiaries shall commence a voluntary case under any
applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall
consent to the entry of an order for relief in an involuntary
case, or to the
conversion of an involuntary case to a voluntary case, under any
such law, or shall
consent to the appointment of or taking possession by a receiver,
trustee or other
custodian for all or a substantial part of its Property; or the
Borrower or any of
its Subsidiaries shall make any assignment for the benefit of
creditors or shall be
unable or fail, or admit in writing its inability, to pay its
debts as such debts
become due; or the board of directors (or equivalent) of the
Borrower or any of its
Subsidiaries (or any committee thereof) adopts any resolution or
otherwise
authorizes
any action to approve any of the foregoing.
(h) Dissolution. Any order, judgment or decree shall
be entered against
the Borrower or any of its Subsidiaries decreeing its involuntary
dissolution or
split up and such order shall remain undischarged and unstayed for
a period in
excess
of thirty (30) days; or the Borrower or any of its Subsidiaries
shall otherwise
dissolve, be dissolved, or cease to exist except as specifically
permitted by this
Agreement.
(i) Loan Documents; Failure of Security. At any time,
for any reason,
(i)
any Loan Document ceases to be in full force and effect or the
Borrower or any of
its
Subsidiaries party thereto seeks to repudiate its obligations
thereunder and the
Liens intended to be created thereby are, or the Borrower or any
such Subsidiary
seeks to render such Liens, invalid or unperfected, or (ii) Liens
in favor of the
Lender contemplated by the Loan Documents shall, at any time, for
any reason, be
invalidated or otherwise cease to be in full force and effect, or
such Liens shall
be
subordinated or shall not have the priority contemplated by this
Agreement or the
Loan Documents.
(j) Judgments and Attachments. (i) Any money judgment
(other than a
money
judgment covered by insurance as to which the insurer has
acknowledged coverage),
writ or warrant of attachment, or similar process against the
Borrower or any of its
Subsidiaries or any of their respective assets involving in any
case an amount in
excess of $100,000 is entered and shall remain undischarged,
unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event later
than five (5) days
prior to the date of any proposed sale thereunder; provided,
however, if any such
judgment, writ or warrant of attachment or similar process is in
excess of $250,000,
the entry thereof shall immediately constitute an Event of Default
hereunder.
(ii) A federal tax Lien is filed against the Borrower
or any of its
Property which is not discharged of record, bonded over or
otherwise secured to the
satisfaction of the Lender within forty-five (45) days after the
filing thereof or
the date upon which the Lender receives actual knowledge of the
filing thereof for
an
amount which, either separately or when aggregated with the amount
of any judgments
described in clause (i) above and/or the amount of any
Environmental Lien Claims
described in clause (iii) below, equals or exceeds $250,000.
(iii) An Environmental Lien is filed against any
Property of the Borrower
or its Subsidiaries with respect to Claims in an amount which,
when aggregated with
the amount of judgments set forth in clause (i) above and/or the
federal tax Lien
Claims described in clause (ii) above, equals or exceeds $250,000.
(k) Waiver Application. The plan administrator of any
Benefit Plan
applies under Section 412(d) of the Code for a waiver of the
minimum funding
standards of Section 412(a) of the Internal Revenue Code and the
Lender believes
that
the substantial business hardship upon which the application for
the waiver is based
could subject either the Borrower or any ERISA Affiliate to an
obligation to pay a
material amount of money.
(l) Change in Control. A Change of Control shall
occur.
(m) Material Adverse Effect. An event shall occur
which results in a
Material Adverse Effect.
(n) Other Contractual Obligations. Any breach, default
or event of
default shall occur, or any other condition shall exist under, a
Contractual
Obligation between the Borrower or a Subsidiary of the Borrower
and any other Person
which Contractual Obligation is material to the core business of
the Borrower and
its
Subsidiaries
An Event of Default shall be deemed "continuing" until
cured or waived in
writing in accordance with Section 12.06.
10.02. Rights and Remedies.
(a) Acceleration and Termination. Upon the occurrence
of any Event of
Default described in Sections 10.01(f) or 10.01(g), the unpaid
principal amount of,
and any and all accrued interest on, the Obligations and all
accrued fees shall
automatically become immediately due and payable, without
presentment, demand, or
protest or other requirements of any kind (including, without
limitation, valuation
and appraisement, diligence, presentment, notice of intent to
demand or accelerate
and of acceleration), all of which are hereby expressly waived by
the Borrower; and
upon the occurrence and during the continuance of any other Event
of Default, the
Lender may, by written notice to the Borrower, declare the unpaid
principal amount
of
and any and all accrued and unpaid interest on the Obligations to
be, and the same
shall thereupon be, immediately due and payable, without
presentment, demand, or
protest or other requirements of any kind (including, without
limitation, valuation
and appraisement, diligence, presentment, notice of intent to
demand or accelerate
and of acceleration), all of which are hereby expressly waived by
the Borrower.
(b) Rescission. If at any time after acceleration of
the maturity of the
Loan, the Borrower shall pay all arrears of interest and all
payments on account of
the principal of the Obligations which shall have become due
otherwise than by
acceleration (with interest on principal and, to the extent
permitted by law, on
overdue interest, at the rates specified in this Agreement) and
all Events of
Default
and Potential Events of Default (other than nonpayment of
principal of and accrued
interest on the Loan due and payable solely by virtue of
acceleration) shall be
remedied or waived pursuant to Section 12.06, then upon written
notice to the
Borrower, the aforesaid acceleration and its consequences may be
rescinded and
annulled; but such action shall not affect any subsequent Event of
Default or
Potential Event of Default or impair any right or remedy
consequent thereon.
(c) Enforcement. The Borrower acknowledges that in the
event the
Borrower
or any of its Subsidiaries fails to perform, observe or discharge
any of their
respective obligations or liabilities under this Agreement or any
other Loan
Document, any remedy of law may prove to be inadequate relief to
the Lender;
therefore, the Borrower agrees that the Lender shall be entitled
to temporary and
permanent injunctive relief in any such case without the necessity
of proving actual
damages.
ARTICLE XI
YIELD PROTECTION
11.01. Taxes. (a) Payment of Taxes. Any and all
payments by the
Borrower hereunder or under any other document evidencing any
Obligations shall be
made, in accordance with Section 3.02, free and clear of and
without reduction for
any and all present or future taxes, levies, imposts, deductions,
charges, withhold-
ings, and all stamp or documentary taxes, excise taxes, ad valorem
taxes and other
taxes imposed on the value of the Property, charges or levies
which arise from the
execution, delivery or registration, or from payment or
performance under, or other-
wise with respect to, any of the Loan Documents or the Loan and
all other
liabilities
with respect thereto excluding taxes imposed on or measured by net
income or overall
gross receipts and capital and franchise taxes imposed on it by
(i) the United
States, (ii) the Governmental Authority of the jurisdiction in
which the Lender's
lending office is located or any political subdivision thereof or
(iii) the
Governmental Authority in which such Person is organized, managed
and controlled or
any political subdivision thereof (all such non-excluded taxes,
levies, imposts,
deductions, charges and withholdings being hereinafter referred to
as "Taxes"). If
the Borrower shall be required by law to withhold or deduct any
Taxes from or in
respect of any sum payable hereunder or under any such document to
the Lender, (x)
the sum payable to the Lender shall be increased as may be
necessary so that after
making all required withholding or deductions (including
withholding or deductions
applicable to additional sums payable under this Section 11.01)
the Lender receives
an amount equal to the sum it would have received had no such
withholding or
deductions been made, (y) the Borrower shall make such withholding
or deductions,
and
(z) the Borrower shall pay the full amount withheld or deducted to
the relevant
taxation authority or other authority in accordance with
applicable law.
(b) Indemnification. The Borrower will indemnify the
Lender against, and
reimburse each on demand for, the full amount of all Taxes
(including, without
limitation, any Taxes imposed by any Governmental Authority on
amounts payable under
this Section 11.01 and any additional income or franchise taxes
resulting therefrom)
incurred or paid by the Lender or any of its Affiliates and any
liability (including
penalties, interest, and out-of-pocket expenses paid to third
parties) arising
there-
from or with respect thereto, whether or not such Taxes were
lawfully payable. A
certificate as to any additional amount payable to any Person
under this Section
11.01 submitted by it to the Borrower shall, absent manifest
error, be final,
conclusive and binding upon all parties hereto. The Lender
agrees, within a reason-
able time after receiving a written request from the Borrower, to
provide the
Borrower with such certificates as are reasonably required, and
take such other
actions as are reasonably necessary to claim such exemptions as
the Lender may be
entitled to claim in respect of all or a portion of any Taxes
which are otherwise
required to be paid or deducted or withheld pursuant to this
Section 11.01 in
respect
of any payments under this Agreement.
(c) Receipts. Within thirty (30) days after the date
of any payment of
Taxes by the Borrower, it will furnish to the Lender, at its
address referred to in
Section 12.08, the original or a certified copy of a receipt
evidencing payment
thereof.
11.02. Changes; Legal Restrictions. If after the date
hereof the Lender
determines that the adoption or implementation of or any change in
or in the
interpretation or administration of any law or regulation or any
guideline or
request
from any central bank or other Governmental Authority or quasi-
governmental
authority
exercising jurisdiction, power or control over the Lender or
financial institutions
generally (whether or not having the force of law), compliance
with which:
(a) does or will change the basis of taxation of
payments to the
Lender of principal, fees, interest, or any other amount payable
hereunder
with respect to the Loan made hereunder; or
(b) does or will impose, modify, or hold applicable, in
the
determination of the Lender, any reserve, special deposit,
compulsory loan,
FDIC insurance or similar requirement against assets held by, or
deposits
or other liabilities in or for the account of, advances or loans
by,
commitments made, or other credit extended by, or any other
acquisition of
funds by, the Lender;
and the result of any of the foregoing is to increase the cost to
the Lender of
making, renewing or maintaining the Loan or to reduce any amount
receivable with
respect thereto; then, in any such case, upon written demand by
the Lender, the
Borrower shall immediately pay to the Lender, from time to time as
specified by the
Lender, such amount or amounts as may be necessary to compensate
the Lender for any
such additional cost incurred or reduced amount received. Such
demand shall be
accompanied by a statement as to the amount of such compensation
and include a brief
summary of the basis for such demand. Such statement shall be
conclusive and
binding
for all purposes, absent manifest error.
11.03. Illegality. (i) If at any time the Lender
determines (which
determination shall, absent manifest error, be final and
conclusive and binding upon
all parties) that the making or continuation of the Loan has
become unlawful or
impermissible by compliance by the Lender with any law,
governmental rule,
regulation
or order of any Governmental Authority (whether or not having the
force of law and
whether or not failure to comply therewith would be unlawful or
would result in
costs
or penalties), then, and in any such event, the Lender may give
notice of that
determination, in writing, to the Borrower.
(ii) When notice is given by the Lender under Section
11.03(i), the
Borrower shall immediately, repay the outstanding balance of the
Loan.
11.04. Limitation on Additional Amounts Payable by the
Borrower.
Notwithstanding the provisions of Section 11.01(a), the Borrower
shall not be
required to pay any additional amounts hereunder to the Lender if
(a) the obligation
to pay such additional amounts would not have arisen but for a
failure by the Lender
to comply with the requirements described in Section 11.01 or (b)
the Lender shall
not have furnished the Borrower with such forms or shall not have
taken such other
action as reasonably may be available to it under applicable tax
laws and any
applicable tax treaty to obtain an exemption from, or reduction
(to the lowest
applicable rate) of withholding of such United States federal
income tax; provided,
however, the Borrower's obligation to pay such additional amounts
shall be
reinstated
upon receipt of such forms or evidence that action with respect to
obtaining such
exemption or reduction has been taken.
ARTICLE XII
MISCELLANEOUS
12.01. Assignments and Participations. The Lender may
make assignments
of
or sell participations in the Lender's rights and obligations
under this Agreement
from time to time without the prior written consent of the
Borrower. The Lender may,
in connection with any assignment or participation or proposed
assignment or
participation pursuant to this Section 12.01, disclose to the
assignee or
participant
or proposed assignee or participant, any information relating to
the Borrower or its
Subsidiaries furnished to the Lender by or on behalf of the
Borrower; provided that,
prior to any such disclosure, such assignee or participant, or
proposed assignee or
participant, shall agree to preserve in accordance with Section
12.19 the
confidentiality of any confidential information described therein.
12.02. Expenses.
(a) Generally. The Borrower agrees upon demand to pay,
or reimburse the
Lender for, all of the Lender's reasonable internal (subject to
the limitation set
forth in Section 7.06) and external audit, legal, appraisal,
valuation, filing,
document duplication and reproduction and investigation expenses
and for all other
out-of-pocket costs and expenses of every type and nature
(including, without
limitation, the reasonable fees, expenses and disbursements of
Sidley & Austin,
local
legal counsel, auditors, accountants, appraisers, printers,
insurance and environ-
mental advisers, and other consultants and agents) incurred by the
Lender in
connection with (i) the Lender's review and investigation of the
Borrower and its
Affiliates and the Collateral in connection with the preparation,
negotiation, and
execution of the Loan Documents and the Lender's periodic reviews
and audits of the
Borrower; (ii) the preparation, negotiation, execution and
interpretation of this
Agreement (including, without limitation, the satisfaction or
attempted satisfaction
of any of the conditions set forth in Article IV) and the other
Loan Documents and
the making of the Loan hereunder; (iii) the creation, perfection
or protection of
the
Liens under the Loan Documents (including, without limitation, any
reasonable fees
and expenses for local counsel in various jurisdictions); (iv) the
ongoing
administration of this Agreement, the other Loan Documents and the
Loan, including
consultation with attorneys in connection therewith and with
respect to the Lender's
rights and responsibilities under this Agreement and the other
Loan Documents; (v)
the protection, collection or enforcement of any of the
Obligations or the
enforcement of any of the Loan Documents; (vi) the commencement,
defense or
intervention in any court proceeding relating in any way to the
Obligations, the
Property, the Borrower, any of its Subsidiaries, this Agreement or
any of the other
Loan Documents; (vii) the response to, and preparation for, any
subpoena or request
for document production with which the Lender is served or
deposition or other
proceeding in which the Lender is called to testify, in each case,
relating in any
way to the Obligations, the Property, the Borrower, any of its
Subsidiaries, this
Agreement or any of the other Loan Documents; and (viii) any
amendments, consents,
waivers, assignments, restatements, or supplements to any of the
Loan Documents and
the preparation, negotiation, and execution of the same.
(b) After Default. The Borrower further agrees to pay
or reimburse the
Lender upon demand for all out-of-pocket costs and expenses,
including, without
limitation, reasonable attorneys' fees (including allocated costs
of internal
counsel
and costs of settlement) incurred by the Lender after the
occurrence of an Event of
Default (i) in enforcing any Loan Document or Obligation or any
security therefor or
exercising or enforcing any other right or remedy available by
reason of such Event
of Default; (ii) in connection with any refinancing or
restructuring of the credit
arrangements provided under this Agreement in the nature of a
"work-out" or in any
insolvency or bankruptcy proceeding; (iii) in commencing,
defending or intervening
in
any litigation or in filing a petition, complaint, answer, motion
or other pleadings
in any legal proceeding relating to the Obligations, the Property,
the Borrower or
any of its Subsidiaries and related to or arising out of the
transactions
contemplated hereby or by any of the other Loan Documents; and
(iv) in taking any
other action in or with respect to any suit or proceeding
(bankruptcy or otherwise)
described in clauses (i) through (iii) above.
12.03. Indemnity. The Borrower further agrees (a) to
defend, protect,
indemnify, and hold harmless the Lender and each of its officers,
directors,
employees, attorneys and agents (including, without limitation,
those retained in
connection with the satisfaction or attempted satisfaction of any
of the conditions
set forth in Article IV) (collectively, the "Indemnitees") from
and against any and
all liabilities, obligations, losses (other than loss of profits),
damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of
any kind or nature whatsoever (excluding any taxes and including,
without
limitation,
the fees and disbursements of counsel for such Indemnitees in
connection with any
investigative, administrative or judicial proceeding, whether or
not such
Indemnitees
shall be designated a party thereto), imposed on, incurred by, or
asserted against
such Indemnitees in any manner relating to or arising out of (i)
this Agreement or
the other Loan Documents, or any act, event or transaction related
or attendant
thereto, the making of the Loan hereunder, the management of such
Loan, the use or
intended use of the proceeds of the Loan, or any of the other
transactions
contemplated by any of the Loan Documents, or (ii) any Liabilities
and Costs
relating
to any violation by the Borrower, its Subsidiaries or their
respective predecessors-
in-interest of any Environmental, Health or Safety Requirements of
Law, the past,
present or future operations of the Borrower, its Subsidiaries, or
any of their
respective predecessors in interest, or, the past, present or
future environmental,
health or safety condition of any respective past, present or
future Property of the
Borrower, any of its Subsidiaries, the presence of asbestos-
containing materials at
any respective past, present or future Property of the Borrower,
any of its
Subsidiaries, or the Release or threatened Release of any
Contaminant into the
environment by the Borrower, its Subsidiaries, or their respective
predecessors-in-
interest, or the Release or threatened Release of any Contaminant
into the
environment from or at any facility to which the Borrower, any of
its Subsidiaries,
or their respective predecessors-in-interest sent or directly
arranged the transport
of any Contaminant (collectively, the "Indemnified Matters");
provided, however, the
Borrower shall have no obligation to an Indemnitee hereunder with
respect to
Indemnified Matters caused by or resulting from the willful
misconduct or gross
negligence of such Indemnitee, as determined by a court of
competent jurisdiction
and
(b) not to assert any claim against any of the Indemnified Parties
on any theory of
liability for special, indirect, consequential or punitive damages
arising out of,
or
in any way in connection with, the Obligations or any other
matters governed by this
Agreement and/or the other Loan Documents. To the extent that the
undertaking to
indemnify, pay and hold harmless set forth in the preceding
sentence may be
unenforceable because it is violative of any law or public policy,
the Borrower
shall
contribute the maximum portion which it is permitted to pay and
satisfy under
applicable law, to the payment and satisfaction of all Indemnified
Matters incurred
by the Indemnitees.
12.04. Change in Accounting Principles. If any change
in the accounting
principles used in the preparation of the most recent Financial
Statements referred
to in Section 6.01 are hereafter required or permitted by the
rules, regulations,
pronouncements and opinions of the Financial Accounting Standards
Board or the
American Institute of Certified Public Accountants (or successors
thereto or
agencies
with similar functions) and are adopted by the Borrower with the
agreement of its
independent certified public accountants and such changes result
in a change in the
method of calculation of any of the covenants, standards or terms
found in Article
VII, Article VIII, and Article IX, the parties hereto agree to
enter into
negotiations in order to amend such provisions so as to equitably
reflect such
changes with the desired result that the criteria for evaluating
compliance with
such
covenants, standards and terms by the Borrower shall be the same
after such changes
as if such changes had not been made; provided, however, no change
in GAAP that
would
affect the method of calculation of any of the covenants,
standards or terms shall
be
given effect in such calculations until such provisions are
amended, in a manner
satisfactory to the Lender and the Borrower, to so reflect such
change in accounting
principles.
12.05. Setoff; Protective Advances. (a) Setoff. In
addition to any
Liens granted under the Loan Documents and any rights now or
hereafter granted under
applicable law, upon the occurrence and during the continuance of
any Event of
Default, each Lender and any Affiliate of the Lender is hereby
authorized by the
Borrower at any time or from time to time, without notice to any
Person (any such
notice being hereby expressly waived) to set off and to
appropriate and to apply any
and all deposits (general or special, including, but not limited
to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured
(but not
including
trust accounts)) and any other Indebtedness at any time held or
owing by the Lender
or any of its Affiliates to or for the credit or the account of
the Borrower against
and on account of the Obligations of the Borrower to the Lender or
any of its
Affiliates, including, but not limited to, the Loan and all claims
of any nature or
description arising out of or in connection with this Agreement,
irrespective of
whether or not (i) the Lender shall have made any demand hereunder
or (ii) the
Lender
shall have declared the principal of and interest on the Loan and
other amounts due
hereunder to be due and payable as permitted by Article X and even
though such
Obligations may be contingent or unmatured.
(b) Protective Advances. The Lender may from time to
time, before or
after the occurrence of an Event of Default, make such
disbursements and advances
pursuant to the Loan Documents which the Lender, in its sole
discretion, deems
necessary or desirable to preserve or protect the Collateral or
any portion thereof
or to enhance the likelihood or maximize the amount of repayment
of the Loan and
other Obligations ("Protective Advances"). The Lender shall
notify the Borrower in
writing of each such Protective Advance, which notice shall
include a description of
the purpose of such Protective Advance. The Borrower agrees to
pay the Lender, upon
demand, the principal amount of all outstanding Protective
Advances, together with
interest thereon at the rate applicable from time to time to the
Loan from the date
of such Protective Advance until the outstanding principal balance
thereof is paid
in
full. All outstanding principal of, and interest on, Protective
Advances shall
constitute Obligations secured by the Collateral until paid in
full by the Borrower.
12.06. Amendments and Waivers. Unless otherwise
provided for or required
in this Agreement, no amendment or modification of any provision
of this Agreement
or
any of the other Loan Documents shall be effective without the
written agreement of
the Lender (which the Lender shall have the right to grant or
withhold in its sole
discretion) and the Borrower. No termination or waiver of any
provision of this
Agreement or any of the other Loan Documents, or consent to any
departure by the
Borrower therefrom, shall be effective without the written
concurrence of the
Lender,
which the Lender shall have the right to grant or withhold in its
sole discretion.
Any waiver or consent shall be effective only in the specific
instance and for the
specific purpose for which it was given. No notice to or demand on
the Borrower in
any case shall entitle the Borrower to any other or further notice
or demand in
similar or other circumstances.
12.07. Notices. Unless otherwise specifically provided
herein, any
notice
or other communication herein required or permitted to be given
shall be in writing
and may be personally served, sent facsimile transmission or
courier service or
United States certified mail and shall be deemed to have been
given when delivered
in
person or by courier service, upon receipt of a facsimile
transmission, or four (4)
Business Days after deposit in the United States mail with postage
prepaid and
properly addressed. For the purposes hereof, the addresses of the
parties hereto
(until notice of a change thereof is delivered as provided in this
Section 12.07)
shall be as set forth below each party's name on the signature
pages hereof or, as
to
each party, at such other address as may be designated by such
party in a written
notice to all of the other parties to this Agreement.
12.08. Survival of Warranties and Agreements. All
representations and
warranties made herein and all obligations of the Borrower in
respect of taxes,
indemnification and expense reimbursement shall survive the
execution and delivery
of
this Agreement and the other Loan Documents, the making and
repayment of the Loan
and
the termination of this Agreement and shall not be limited in any
way by the passage
of time or occurrence of any event and shall expressly cover time
periods when the
Lender may have come into possession or control of any of the
Borrower's or its
Subsidiaries' Property.
12.09. Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure
or delay on the part of the Lender in the exercise of any power,
right or privilege
under any of the Loan Documents shall impair such power, right or
privilege or be
construed to be a waiver of any default or acquiescence therein,
nor shall any
single
or partial exercise of any such power, right or privilege preclude
other or further
exercise thereof or of any other right, power or privilege. All
rights and remedies
existing under the Loan Documents are cumulative to and not
exclusive of any rights
or remedies otherwise available.
12.10. Marshalling; Payments Set Aside. The Lender
shall not be under
any
obligation to marshall any assets in favor of the Borrower or any
other Person or
against or in payment of any or all of the Obligations. To the
extent that the
Borrower makes a payment or payments to the Lender or the Lender
receives payment
from the proceeds of the Collateral or exercises its rights of
setoff, and such
payment or payments or the proceeds of such enforcement or setoff
or any part
thereof
are subsequently invalidated, declared to be fraudulent or
preferential, set aside
or
required to be repaid to a trustee, receiver or any other party,
then to the extent
of such recovery, the obligation or part thereof originally
intended to be
satisfied,
and all Liens, right and remedies therefor, shall be revived and
continued in full
force and effect as if such payment had not been made or such
enforcement or setoff
had not occurred.
12.11. Severability. In case any provision in or
obligation under this
Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in
any jurisdiction, the validity, legality and enforceability of the
remaining
provisions or obligations, or of such provision or obligation in
any other
jurisdiction, shall not in any way be affected or impaired
thereby.
12.12. Headings. Section headings in this Agreement
are included herein
for convenience of reference only and shall not constitute a part
of this Agreement
or be given any substantive effect.
12.13. Governing Law. THIS AGREEMENT SHALL BE
INTERPRETED, AND THE
RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE
WITH THE LAWS OF THE
STATE OF NEW YORK.
12.14. Limitation of Liability. No claim may be made
by the Borrower
against the Lender or its Affiliates, directors, officers,
employees, attorneys or
agents for any special, consequential or punitive damages in
respect of any claim
for
breach of contract or any other theory of liability arising out of
or related to the
transactions contemplated by this Agreement, or any act, omission
or event occurring
in connection therewith; and the Borrower hereby waives, releases
and agrees not to
sue upon any such claim for any such damages, whether or not
accrued and whether or
not known or suspected to exist in its favor.
12.15. Successors and Assigns. This Agreement and the
other Loan
Documents shall be binding upon the parties hereto and their
respective successors
and assigns and shall inure to the benefit of the parties hereto
and the successors
and permitted assigns of the Lender. The rights hereunder of the
Borrower, or any
interest therein, may not be assigned without the written consent
of the Lender.
12.16. Certain Consents and Waivers of the Borrower.
(a) Personal Jurisdiction. (i) EACH OF THE LENDER AND
THE BORROWER
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL
COURT SITTING IN
NEW
YORK, NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF
MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED
WITH, RELATED TO
OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, WHETHER ARISING IN CONTRACT,
TORT, EQUITY OR
OTHERWISE, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND
EACH OF THE
PARTIES
HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE
COURT OR, TO THE
EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE LENDER AND THE
BORROWER EACH
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE
AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER
MANNER
PROVIDED BY LAW. THE BORROWER WAIVES IN ALL DISPUTES ANY
OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(ii) THE BORROWER AGREES THAT THE LENDER SHALL HAVE THE
RIGHT TO PROCEED
AGAINST THE BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE LENDER
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO
ENFORCE
A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE LENDER.
THE BORROWER AGREES
THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY
PROCEEDING BROUGHT BY
THE
LENDER TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE LENDER.
THE BORROWER WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN
WHICH THE LENDER MAY
COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.
(b) Service of Process. THE BORROWER IRREVOCABLY
CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO
THE PROCESS AGENT OR THE BORROWER'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO
BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE BORROWER
IRREVOCABLY WAIVES
ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE
LAYING OF VENUE
OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR
HEREAFTER HAVE TO
THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY
OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING
HEREIN SHALL
AFFECT
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE
RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN
THE COURTS OF ANY
OTHER JURISDICTION.
(c) Waiver of Jury Trial. EACH OF THE LENDER AND THE
BORROWER
IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT. EITHER THE BORROWER OR THE LENDER MAY
FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
12.17. Counterparts; Effectiveness; Inconsistencies.
This Agreement and
any amendments, waivers, consents, or supplements hereto may be
executed in
counterparts, each of which when so executed and delivered shall
be deemed an
original, but all such counterparts together shall constitute but
one and the same
instrument. This Agreement shall become effective against the
Borrower and the
Lender on the Closing Date. This Agreement and each of the other
Loan Documents
shall be construed to the extent reasonable to be consistent one
with the other, but
to the extent that the terms and conditions of this Agreement are
actually
inconsistent with the terms and conditions of any other Loan
Document, this
Agreement
shall govern.
12.18. Limitation on Agreements. All agreements
between the Borrower and
the Lender in the Loan Documents are hereby expressly limited so
that in no event
shall the Loan or other amounts payable by the Borrower under any
of the Loan
Documents be directly or indirectly secured (within the meaning of
Regulation U) by
Margin Stock.
12.19. Confidentiality. The Lender shall hold all
nonpublic information
obtained pursuant to the requirements of this Agreement in
accordance with the
Lender's customary procedures for handling confidential
information of this nature
and in accordance with safe and sound lending practices and in any
event may make
disclosure reasonably required by a bona fide offeree, transferee
or participant in
connection with the contemplated transfer or participation or as
required or
requested by any Governmental Authority or representative thereof
or pursuant to
legal process and shall require any such offeree, transferee or
participant to agree
(and require any of its offerees, transferees or participants to
agree) to comply
with this Section 12.19. In no event shall the Lender be
obligated or required to
return any materials furnished by the Borrower; provided, however,
each offeree
shall
be required to agree that if it does not become a transferee or
participant it shall
return all materials furnished to it by the Borrower in connection
with this
Agreement. Any and all confidentiality agreements entered into
between the Lender
and the Borrower shall survive the execution of this Agreement.
12.20. Entire Agreement. This Agreement, taken
together with all of the
other Loan Documents, embodies the entire agreement and
understanding among the
parties hereto and supersedes all prior agreements and
understandings, written and
oral, relating to the subject matter hereof.
12.21. Advice of Counsel. The Borrower understands
that the Lender's
counsel represents only the Lender's and its Affiliates' interests
and that the
Borrower is advised to obtain its own counsel. The Borrower
represents and warrants
to the Lender and the other Holders that it has discussed this
Agreement with its
counsel.
IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date
first above written.
BORROWER: SHARED TECHNOLOGIES CELLULAR, INC.
By_____________________________
Name:
Title:
Notice Address:
100 Great Meadow Road
Wethersfield, Connecticut 06109
Attn: Vincent DiVincenzo
Telecopier No. (860) 258-2455
with a copy to:
Shipman & Goodwin LLP
One American Row
Hartford, Connecticut 06103-2819
Attn: Deborah Frisone
Telecopier No. (860) 251-5899
LENDER: SALOMON BROTHERS HOLDING COMPANY INC
By_____________________________
Name:
Title:
Notice Address:
Salomon Brothers Holding Company Inc
Seven World Trade Center
New York, New York 10048
Attn: Townsend U. Weekes, Jr.
Telecopier No. (212) 783-2823
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attn: DeVerille A. Huston
Telecopier No. (312) 853-7036
EXHIBITS
Exhibit A -- Projections
Exhibit B -- List of Closing Documents
Exhibit C -- Form of Officer's Certificate to Accompany Reports
SCHEDULES
Schedule 1.01.1 -- Permitted Equity Securities Options
Schedule 1.01.2 -- Permitted Existing Accommodation
Obligations
Schedule 1.01.3 -- Permitted Existing Indebtedness
Schedule 1.01.4 -- Permitted Existing Investments
Schedule 1.01.5 -- Permitted Existing Liens
Schedule 5.01-A -- Organizational Documents
Schedule 5.01-C -- Organizational Structure
Schedule 5.01-E -- Governmental Consents
Schedule 5.01-K -- Pending Actions
Schedule 5.01-L -- Compensation Matters
Schedule 5.01-S -- Environmental Matters
Schedule 5.01-T -- ERISA Matters
Schedule 5.01-X -- Patent, Trademark & Permit Claims Pending
Schedule 5.01-Z -- Insurance Policies
::ODMA\PCDOCS\CHICAGO4\621760\1 May 15, 1998 ( 2:53PM)
EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of April 15, 1998,
among SHARED TECHNOLOGIES CELLULAR, INC., a Delaware
corporation ("Grantor"), ANTHONY D. AUTORINO, and SALOMON
BROTHERS HOLDING COMPANY INC ("SBHC"), as Lenders (the
"Lenders") and SBHC as Collateral Agent ("the Collateral
Agent").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement
dated as of the date hereof by and between Grantor and
Anthony D. Autorino (including all annexes, exhibits and
schedules thereto, as from time to time amended, restated,
supplemented or otherwise modified, the "Autorino Credit
Agreement"), Anthony D. Autorino has agreed to extend credit
to Grantor;
WHEREAS, pursuant to that certain Credit Agreement
dated as of the date hereof by and between Grantor and SBHC
(including all annexes, exhibits and schedules thereto, as
from time to time amended, restated, supplemented or
otherwise modified, the "SBHC Credit Agreement" and together
with the Autorino Credit Agreement, the "Credit
Agreements"), SBHC has agreed to extend credit to Grantor;
WHEREAS, in order to induce the Lenders to enter
into the Credit Agreements and the other instruments,
agreements and documents executed or delivered in connection
therewith (collectively, the "Transaction Documents") and to
make the loans as provided for in the Credit Agreements,
Grantor has agreed to grant a continuing lien on the
Collateral to the Collateral Agent for its benefit and the
benefit of the Lenders (as hereinafter defined) to secure
the obligations under the Credit Agreements (the
"Obligations");
WHEREAS, the Lenders desire to set forth their
rights and remedies with respect to each other, their
relationship to the Grantor, the Credit Agreements, their
security interests and rights in the Collateral and various
related matters;
NOW, THEREFORE, in consideration of the premises
and mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as
follows:
I. DEFINED TERMS. All undefined terms
contained in this Security Agreement, unless the context
indicates otherwise, shall have the meanings provided for by
Article 9 of the Uniform Commercial Code as enacted in the
State of New York, as it may be amended from time to time,
to the extent the same are used or defined therein.
I. GRANT OF LIEN.
A. To secure the prompt and complete
payment, performance and observance of all of the
Obligations, Grantor hereby grants to the Collateral Agent,
for its benefit and the benefit of the Lenders, a lien upon
all of its right, title and interest in, to and under the
following property, whether now owned by or owing to, or
hereafter acquired by or arising in favor of Grantor
(including under any trade names, styles or derivations
thereof), and whether owned or consigned by or to, or leased
from or to, Grantor, and regardless of where located (all of
which being hereinafter collectively referred to as the
"Collateral"):
1. all Accounts;
1. all Inventory;
1. all Investment Property;
1. all Proceeds of the foregoing.
A. In addition, to secure the prompt and
complete payment, performance and observance of the
Obligations and in order to induce the Lenders as aforesaid,
Grantor hereby grants to the Collateral Agent, for its
benefit and the benefit of the Lenders a right of set-off
against the property of Grantor held by the Collateral Agent
or any Lender, consisting of property described above in
Section 2(a) now or hereafter in the possession or custody
of or in transit to the Collateral Agent or any Lender, for
any purpose, including safekeeping, collection or pledge,
for the account of Grantor, or as to which Grantor may have
any right or power.
I. COLLATERAL AGENT'S AND LENDERS' RIGHTS;
LIMITATIONS ON COLLATERAL AGENT'S LENDERS' OBLIGATIONS.
A. It is expressly agreed by Grantor that,
anything herein to the contrary notwithstanding, Grantor
shall remain liable under each of its contracts and
agreements included in the Collateral to the extent set
forth therein to observe and perform all the conditions and
obligations to be observed and performed by it thereunder.
Neither the Collateral Agent nor any Lender shall have any
obligation or liability under any contracts and agreements
included in the Collateral by reason of or arising out of
this Security Agreement or the granting herein of a lien
thereon or the receipt by the Collateral Agent or any Lender
of any payment relating to any contracts and agreements
included in the Collateral pursuant hereto. Neither the
Collateral Agent nor any Lender shall be required or
obligated in any manner to perform or fulfill any of the
obligations of Grantor under or pursuant to any contracts
and agreements included in the Collateral, or to make any
payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency
of any performance by any party under any contracts and
agreements included in the Collateral, or to present or file
any claims, or to take any action to collect or enforce any
performance or the payment of any amounts which may have
been assigned to it or to which it may be entitled at any
time or times. Notwithstanding any of the foregoing, after
an Event of Default shall have occurred and be continuing
under a Credit Agreement, if Grantor fails to perform any
agreement contained herein, the Collateral Agent may itself
perform, or cause performance of, such agreement, and the
expenses of the Collateral Agent incurred in connection
therewith shall be payable by Grantor to the Collateral
Agent upon demand by the Collateral Agent.
A. At any time after an "Event of Default"
under a Credit Agreement (as defined in the Credit
Agreements, "Event of Default") shall have occurred and be
continuing, upon one (1) day prior notice to Grantor the
Collateral Agent may in its sole discretion, notify Account
Debtors that the Accounts have been assigned to the
Collateral Agent and that payments shall be made directly to
the Collateral Agent and, upon such notification and at the
expense of Grantor, enforce collection of any such Accounts
and adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as
Grantor might have done. Upon the request of the Collateral
Agent, Grantor shall so notify the Account Debtors. After
receipt by Grantor of notice from the Collateral Agent that
it has exercised its rights under this Section 3(b), all
amounts and proceeds (including instruments) received by
Grantor in respect to the Accounts shall be received in
trust for the benefit of the Collateral Agent hereunder,
shall be segregated from other funds of Grantor and shall be
forthwith paid over to the Collateral Agent in the same form
as so received (with any necessary indorsement) to be held
as collateral and shall be applied as provided in Section
2(b) above.
A. If an Event of Default shall have
occurred and be continuing under a Credit Agreement, the
Collateral Agent may at any time in the Collateral Agent's
own name or in the name of Grantor communicate with Account
Debtors to verify with such persons, to the Collateral
Agent's satisfaction, the existence, amount and terms of any
such Accounts. If an Event of Default under a Credit
Agreement shall have occurred and be continuing, Grantor, at
its own expense, shall cause the independent certified
public accountants then engaged by Grantor to prepare and
deliver to the Collateral Agent at any time and from time to
time promptly upon the Collateral Agent's request, the
following reports with respect to Grantor: (i) a
reconciliation of all Accounts; (ii) an aging of all
Accounts; (iii) trial balances; and (iv) a test verification
of such Accounts, in each case, as the Collateral Agent may
request. Grantor, at its own expense, shall deliver to
Collateral Agent the results of each physical verification,
if any, which Grantor may in its discretion have made, or
caused any other person to have made on its behalf, of all
or any portion of its Inventory.
I. REPRESENTATIONS AND WARRANTIES. Grantor
represents and warrants that:
A. Grantor is the sole owner of each item
of the Collateral upon which it purports to grant a lien
hereunder, and has good and marketable title thereto.
A. No effective security agreement,
financing statement, equivalent security or lien instrument
or continuation statement covering all or any part of the
Collateral is on file or of record in any public office in
the states of Connecticut or Missouri, except to the extent
disclosed on Schedule I and such as may have been filed by
Grantor in favor of Collateral Agent pursuant to this
Security Agreement.
A. This Security Agreement is effective to
create a valid and continuing lien on and, upon the filing
of the appropriate financing statements listed on Schedule
II hereto, a perfected lien in the states of Connecticut and
Missouri in favor of Collateral Agent on the Collateral with
respect to which a lien may be perfected by filing pursuant
to the Uniform Commercial Code in such jurisdictions. Such
lien in the states of Connecticut and Missouri is prior to
all other liens except the liens set forth on Schedule I and
is enforceable as such as against any and all creditors of
and purchasers from Grantor (other than purchasers of
Inventory in the ordinary course of business). All action
by Grantor necessary or desirable to protect and perfect
such lien on each item of the Collateral in such
jurisdictions has been duly taken.
A. The correct name of Grantor on the date
hereof is SHARED TECHNOLOGIES CELLULAR, INC. and, except as
disclosed to the Collateral Agent in writing, Grantor has no
other corporate or fictitious name and has not, during the
five (5) years immediately preceding the date of this
Security Agreement, (i) been known by or used any other
corporate or fictitious name in the ordinary course of its
business; (ii) merged or consolidated with any other person
which is or was known by or uses or used any other
corporate, partnership or fictitious name in the ordinary
course of its business; or (iii) acquired assets from any
other person or operating division of any other person which
is or was known by or uses or used any other corporate,
partnership or fictitious name to the extent that the
transfer of such assets by such person or operating division
is outside of the ordinary course of such person or
operating division's business. Grantor will not change its
name, identity or corporate structure in any manner unless
Grantor shall give the Collateral Agent written notice of
such change within thirty (30) days prior to the effective
date of any such change and certify to the Collateral Agent
that all filings reflecting such new name, identity or
corporate structure have been made which are necessary or
appropriate to preserve the perfection of the security
interests described herein.
A. Grantor's chief executive office,
principal place of business, corporate offices, all
warehouses and premises where Collateral is stored or
located, and the locations of all of its books and records
concerning the Collateral are set forth on Schedule III
hereto.
A. With respect to the Accounts, (i) they
represent bona fide sales of Inventory or rendering of
services to Account Debtors in the ordinary course of
Grantor's business and are not evidenced by a judgment,
instrument or chattel paper; (ii) there are no setoffs,
claims or disputes existing or asserted with respect thereto
and Grantor has not made any agreement with any Account
Debtor other than in the ordinary course of business
consistent with past practices for any extension of time for
the payment thereof, any compromise or settlement for less
than the full amount thereof, any release of any Account
Debtor from liability therefor, or any deduction therefrom
except a discount or allowance allowed by Grantor in the
ordinary course of its business for prompt payment and
disclosed to the Collateral Agent; (iii) to Grantor's
knowledge, there are no facts, events or occurrences which
in any way impair the validity or enforceability thereof or
could reasonably be expected to reduce the amount payable
thereunder as shown on Grantor's books and records and any
invoices and statements with respect thereto; (iv) Grantor
has not received any notice of proceedings or actions which
are threatened or pending against any Account Debtor which
might result in any adverse change in such Account Debtor's
financial condition; and (v) Grantor has no knowledge that
any Account Debtor is unable generally to pay its debts as
they become due. Further with respect to the Accounts; (x)
no payments have been or shall be made thereon except
payments immediately delivered to Grantor or deposit
accounts of Grantor; and (y) to Grantor's knowledge, all
Account Debtors have the capacity to contract.
A. With respect to any Inventory, (i)
Grantor has good, indefeasible and merchantable title to
such Inventory, (ii) such Inventory is of good and
merchantable quality, free from any defects to the best of
Grantor's knowledge, (iii) such Inventory is not subject to
any licensing, patent, royalty, trademark, trade name or
copyright agreements with any third parties which would
require any consent of any third party upon sale or
disposition of that Inventory or the payment of any monies
to any third party as a precondition of such sale or other
disposition, and (iv) the completion of manufacture, sale or
other disposition of such Inventory by the Collateral Agent
following an Event of Default under a Credit Agreement shall
not require the consent of any person and shall not
constitute a breach or default under any contract or
agreement to which Grantor is a party or to which such
property is subject.
(h) No consent of any other person and no
authorization, approval or other action by, and no notice to
or filing with, any Governmental Authority is required (i)
for the grant by Grantor of the security interest granted
hereby or for the execution, delivery or performance of this
Security Agreement by Grantor, (ii) for the perfection or,
except for the filing of the appropriate continuation
statements with respect to the financing statements listed
on Schedule II, maintenance of the security interest created
hereby in the states of Connecticut and Missouri (including
the maintenance of the first priority nature of such
security interest in the states of Connecticut and Missouri)
or (iii) for the exercise by the Collateral Agent of its
rights and remedies hereunder.
I. COVENANTS. Grantor covenants and agrees
with the Collateral Agent that from and after the date of
this Security Agreement and until the indefeasible payment
in full in cash of the Obligations and the termination of
each of the Credit Agreements:
A. Further Assurances; Pledge of
Instruments. At any time and from time to time, upon the
written request of the Collateral Agent and at the sole
expense of Grantor, Grantor shall promptly and duly execute
and deliver any and all such further instruments and
documents and take such further actions as the Collateral
Agent may reasonably deem desirable to obtain the full
benefits of this Security Agreement and of the rights and
powers herein granted, including (i) using its best efforts
to secure all consents and approvals necessary or
appropriate for the assignment to or for the benefit of the
Collateral Agent of any license, agreement or contract held
by Grantor or in which Grantor has any rights not heretofore
assigned, (ii) filing any financing or continuation
statements in Connecticut and Missouri under the Uniform
Commercial Code with respect to the liens granted hereunder
or under any other Loan Document, (iii) transferring
Collateral to the Collateral Agent's possession if a lien on
such Collateral can be perfected only by possession, or if
requested by the Collateral Agent, and (iv) obtaining, or
using its best efforts to obtain, waivers of liens, if any
exist, from landlords and mortgagees in accordance with the
Credit Agreements. Grantor also hereby authorizes the
Collateral Agent to file any such financing or continuation
statements without the signature of Grantor to the extent
permitted by applicable law. If any amount payable under or
in connection with any of the Collateral is or shall become
evidenced by any instrument, such instrument, other than
checks and notes received in the ordinary course of
business, shall be duly endorsed in a manner satisfactory to
the Collateral Agent immediately upon Grantor's receipt
thereof.
A. Maintenance of Records. Grantor shall
keep and maintain, at its own cost and expense, satisfactory
and complete records of the Collateral, including a record
of any and all payments received and any and all credits
granted with respect to the Collateral and all other
dealings with the Collateral. Grantor shall mark its books
and records pertaining to the Collateral to evidence this
Security Agreement and the liens granted hereby. Grantor
shall permit representatives of the Collateral Agent at any
reasonable time, and upon reasonable notice, to inspect,
copy and make abstracts of such records.
(c) Indemnification. In any suit, proceeding or
action brought by the Collateral Agent relating to any
Account for any sum owing thereunder or to enforce any
provision of any Account, Grantor will save, indemnify and
keep the Collateral Agent harmless from and against all
expense (including reasonable attorneys' fees and expenses),
loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder, arising out of a
breach by Grantor of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any
time owing to, or in favor of, such obligor or its
successors from Grantor, except in the case of the
Collateral Agent, to the extent such expense, loss, or
damage is attributable solely to the gross negligence or
willful misconduct of the Collateral Agent as finally
determined by a court of competent jurisdiction. All such
obligations of Grantor shall be and remain enforceable
against and only against Grantor and shall not be
enforceable against the Collateral Agent.
(d) Compliance with Terms of Accounts, etc. In
all material respects, Grantor will perform and comply with
all obligations in respect of its Accounts, contracts, and
all other agreements to which it is a party or by which it
is bound relating to the Collateral. Grantor hereby agrees
that, upon the occurrence and during the continuation of an
Event of Default under a Credit Agreement, Grantor will not,
without the consent of the Collateral Agent, (i) grant any
extension of the time of payment of any of the Collateral or
compromise, compound or settle the same for less than the
full amount thereof; (ii) release, wholly or partly, any
person liable for the payment thereof; or (iii) allow any
credit or discount whatsoever thereon other than trade
discounts granted in the ordinary course of business.
(e) Limitation on Liens on Collateral. Grantor
will not create, permit or suffer to exist, and will defend
the Collateral against, and take such other action as is
necessary to remove, any lien on the Collateral except
Permitted Encumbrances, and will defend the right, title and
interest of the Collateral Agent and the Lenders in and to
any of Grantor's rights under the Collateral against the
claims and demands of all persons whomsoever.
(f) Limitations on Disposition. Grantor will not
sell, lease, transfer or otherwise dispose of any of the
Collateral, or attempt or contract to do so, except as
permitted by the Credit Agreements.
(g) Further Identification of Collateral.
Grantor will, if so requested by the Collateral Agent,
furnish to the Collateral Agent, as often as the Collateral
Agent requests, statements and schedules further identifying
and describing the Collateral and such other reports in
connection with the Collateral as the Collateral Agent may
reasonably request, all in such detail as the Collateral
Agent may specify.
(h) Notices. Grantor will advise the Collateral
Agent promptly, in reasonable detail, (i) of any lien or
claim made or asserted against any of the Collateral and
(ii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the
Collateral or on the liens created hereunder or under any
other Loan Document.
(i) Covenants Regarding Inventory. If any
Inventory is in the possession or control of any third party
or any of Grantor's agents, Grantor shall, upon the
Collateral Agents' request therefor, notify such third party
or agent of the Collateral Agent's security interest in such
Inventory and, upon the Collateral Agent's request following
the occurrence and during the continuation of an Event of
Default under a Credit Agreement, direct such third party or
agent to hold all such Inventory for the Collateral Agent's
account and subject to the Collateral Agent's instructions.
I. COLLATERAL AGENT'S APPOINTMENT AS
ATTORNEY-IN-FACT.
On the Closing Date, Grantor shall execute and
deliver to the Collateral Agent a power of attorney (the
"Power of Attorney") substantially in the form attached
hereto as Exhibit A. The power of attorney granted pursuant
to the Power of Attorney is a power coupled with an interest
and shall be irrevocable until the indefeasible payment in
full in cash of the Obligations and the termination of each
of the Credit Agreements. The powers conferred on the
Collateral Agent under the Power of Attorney are solely to
protect the Collateral Agent's and the Lenders' interests in
the Collateral and shall not impose any duty upon the
Collateral Agent to exercise any such powers. The
Collateral Agent agrees that (a) it shall not exercise any
power or authority granted under the Power of Attorney
unless an Event of Default under a Credit Agreement has
occurred and is continuing, and (b) the Collateral Agent
shall account for any moneys received by the Collateral
Agent in respect of any foreclosure on or disposition of the
Collateral pursuant to the Power of Attorney provided that
the Collateral Agent shall be accountable only for amounts
that it actually receives as a result of the exercise of
such powers. NONE OF THE COLLATERAL AGENT OR ITS
AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR OR ANY
LENDER FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF
ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES
ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR
CONSEQUENTIAL DAMAGES.
I. REMEDIES; RIGHTS UPON DEFAULT.
A. In addition to all other rights and
remedies granted to it under this Security Agreement and
under any other instrument or agreement securing, evidencing
or relating to any of the Obligations, if any Event of
Default under a Credit Agreement shall have occurred and be
continuing, the Collateral Agent may exercise all rights and
remedies of a secured party under the Uniform Commercial
Code. Without limiting the generality of the foregoing,
Grantor expressly agrees that in any such event the
Collateral Agent, without demand of performance or other
demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or
private sale) to or upon Grantor, any Lender, or any other
person (all and each of which demands, advertisements and
notices are hereby expressly waived to the maximum extent
permitted by the Uniform Commercial Code and other
applicable law), may forthwith enter upon the premises of
Grantor where any Collateral is located through self-help,
without judicial process, without first obtaining a final
judgment or giving Grantor, the Lenders, or any other person
notice and opportunity for a hearing on the Collateral
Agent's claim or action, and may collect, receive, assemble,
process, appropriate and realize upon the Collateral, or any
part thereof, and may forthwith sell, lease, assign, give an
option or options to purchase, or sell or otherwise dispose
of and deliver said Collateral (or contract to do so), or
any part thereof, in one or more parcels at a public or
private sale or sales, at any exchange at such prices as may
be commercially reasonable for cash or on credit or for
future delivery without assumption of any credit risk. The
Collateral Agent shall have the right upon any such public
sale or sales and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any
part of said Collateral so sold, free of any right or equity
of redemption, which equity of redemption Grantor hereby
releases. Such sales may be adjourned and continued from
time to time with or without notice. The Collateral Agent
shall have the right to conduct such sales on Grantor's
premises or elsewhere and shall have the right to use
Grantor's premises without charge for such time or times as
the Collateral Agent deems necessary or advisable.
Grantor further agrees, at the Collateral Agent's
request, to assemble the Collateral and make it available to
the at places which the Collateral Agent shall select,
whether at Grantor's premises or elsewhere. Until the
Collateral Agent is able to effect a sale, lease, or other
disposition of Collateral, the Collateral Agent shall have
the right to hold or use Collateral, or any part thereof, to
the extent that it deems appropriate, in its sole
discretion, for the purpose of preserving Collateral or its
value or for any other purpose deemed appropriate, in its
sole discretion, by the Collateral Agent. The Collateral
Agent shall have no obligation to Grantor or the Lenders to
maintain or preserve the rights of Grantor as against third
parties with respect to Collateral while Collateral is in
the possession of the Collateral Agent. The Collateral
Agent may, if it so elects, seek the appointment of a
receiver or keeper to take possession of Collateral and to
enforce any of the Collateral Agent's remedies with respect
to such appointment without prior notice to Grantor or any
Lender, or hearing, as to such appointment. Subject to the
provisions of Section 10 below, the Collateral Agent shall
apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale to the
Obligations as provided in the Credit Agreements, and only
after so paying over such net proceeds, and after the
payment by the Collateral Agent of any other amount required
by any provision of law, need the Collateral Agent account
for the surplus, if any, to Grantor. To the maximum extent
permitted by applicable law, Grantor and each Lender waives
all claims, damages, and demands against the Collateral
Agent arising out of the repossession, retention or sale of
the Collateral except such as arise solely out of the gross
negligence or willful misconduct of the Collateral Agent as
finally determined by a court of competent jurisdiction.
Grantor and each Lender agrees that ten (10) days prior
notice by the Collateral Agent of the time and place of any
public sale or of the time after which a private sale may
take place is reasonable notification of such matters.
Grantor shall remain liable for any deficiency if the
proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations, including any
reasonable attorneys' fees and other expenses incurred by
the Collateral Agent or any Lender to collect such
deficiency.
A. Except as otherwise specifically
provided herein, Grantor hereby waives presentment, demand,
protest or any notice (to the maximum extent permitted by
applicable law) of any kind in connection with this Security
Agreement or any Collateral.
II. GRANT OF LICENSE TO USE INTELLECTUAL
PROPERTY. For the purpose of enabling the Collateral Agent
to exercise rights and remedies under Section 7 hereof
(including, without limiting the terms of Section 7 hereof,
in order to take possession of, hold, preserve, process,
assemble, prepare for sale, market for sale, sell or
otherwise dispose of Collateral) at such time as the
Collateral Agent shall be lawfully entitled to exercise such
rights and remedies, Grantor hereby grants to the Collateral
Agent, for its benefit and the benefit of the Lenders, an
irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to Grantor) to use,
license or sublicense any trademarks, registered trademarks,
trademark applications, service marks, registered service
marks, service mark applications, patents, patent
applications, trade names, rights of use of any name,
labels, fictitious names, inventions, designs, trade
secrets, computer programs, software, printouts and other
computer materials, goodwill, registrations, copyrights,
copyright applications, permits, licenses, franchises,
customer lists, credit files, correspondence, and
advertising materials, and any property of a similar nature,
as it pertains to the Collateral, or any rights to any of
the foregoing, now owned or hereafter acquired by Grantor,
and wherever the same may be located, and including in such
license access to all media in which any of the licensed
items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof.
I. LIMITATION ON COLLATERAL AGENT'S AND
LENDERS' DUTY IN RESPECT OF COLLATERAL. The Collateral
Agent and each Lender shall use reasonable care with respect
to the Collateral in its possession or under its control.
Neither the Collateral Agent nor any Lender shall have any
other duty as to any Collateral in its possession or control
or in the possession or control of any agent or nominee of
the Collateral Agent or such Lender, or any income thereon
or as to the preservation of rights against prior parties or
any other rights pertaining thereto.
10. PARI PASSU INTERESTS; ENFORCEMENT OF SECURITY
INTEREST.
(a) Each Lender agrees that its interests in the
Collateral shall be pari passu and equal in priority and
rights with the interests in the Collateral of the other
Lenders. Each Lender agrees to the appointment of the
Collateral Agent as its agent with respect to the security
interest in the Collateral. Each Lender hereby delegates to
the Collateral Agent all right and authority to exercise and
enforce such Lender's rights against and with respect to the
Collateral as the Collateral Agent may determine, in its
sole discretion. The Collateral Agent shall not be required
to exercise or enforce any rights against, or with respect
to, the Collateral for the benefit of any given Lender
unless it is enforcing such rights for the benefit of SBHC,
as a Lender.
(b) In the event that the Collateral Agent
enforces the security interest in all or part of the
Collateral as set forth herein, the proceeds of any sale,
foreclosure or enforcement action on or against any of the
Collateral, after deducting expenses of such sale,
foreclosure or enforcement action (the "Net Proceeds") shall
be distributed and shared by the Lenders pro rata in
proportion to their respective claims against the Grantor
calculated as of the date of distribution. Each Lender's
share ("Share") shall be equal to the product of (i) a
fraction, the numerator of which shall be equal to the then
unpaid Obligations owing to such Lender by Grantor under the
applicable Credit Agreement and the denominator of which
shall be equal to the sum of all then unpaid Obligations
owing to the Lenders; times (ii) the Net Proceeds.
Notwithstanding any of the foregoing, if the claim of any
Lender for payment of Obligations owing to it under its
applicable Credit Agreement or claim with respect to the
security interest granted hereunder is impaired for any
reason, such that such Lender would be unable to enforce its
rights under such Credit Agreement or the security interest
granted hereunder for the benefit of such Lender is voided
or voidable, then such Lender shall not share pro rata in
the Net Proceeds collected by the Collateral Agent and the
Share of the other Lenders in the Net Proceeds shall be
calculated without regard to the Obligations owning or
claimed to be owing to such Lender.
(c) The Lenders shall share on a pro rata basis
all costs and expenses at any time or times paid by the
Collateral Agent in connection with (i) the collection or
enforcement of the Obligations under the Credit Agreements;
(ii) the preservation of the Collateral; or (iii) the sale,
disposition or other enforcement of, or realization upon,
the Collateral or other collateral securing such
indebtedness, in proportion to their respective Shares,
computed as of the date such expenses are paid or invoiced,
whichever occurs earlier.
(d) Each of the Lenders agrees that it shall not,
without the prior written consent of the Collateral Agent:
(i) release any Collateral which is held by it for the
benefit of the Collateral Agent and the other Lenders; (ii)
enforce any rights or remedies against Grantor, the
Collateral or any other collateral or under such Lender's
Credit Agreement or any other agreements, documents or
instruments; (iii) increase the outstanding indebtedness
owed by Grantor to such Lender; or (iv) institute or cause
to be instituted against the Grantor any proceeding under
any bankruptcy or insolvency laws.
(e) The provisions of this Section 10 are solely
for the benefit of the Collateral Agent and the Lenders, and
Grantor shall not have any right to rely on or enforce any
of the provisions hereof.
11. REINSTATEMENT. This Security Agreement shall
remain in full force and effect and continue to be effective
should any petition be filed by or against Grantor for
liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of any
creditor or creditors or should a receiver or trustee be
appointed for all or any significant part of Grantor's
assets, and shall continue to be effective or be reinstated,
as the case may be, if at any time payment and performance
of the Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference", "fraudulent
conveyance", or otherwise, all as though such payment or
performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced,
restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned. No impairment of
any claim or right of any Lender for payment of Obligations
owing to it under its applicable Credit Agreement or with
respect to the security interest granted hereunder shall
adversely affect or impair the claims or rights of the
Collateral Agent or the other Lenders hereunder.
12. NOTICES. Unless otherwise specifically pro-
vided herein, any notice or other communication herein
required or permitted to be given shall be in writing and
may be personally served, sent facsimile transmission or
courier service or United States certified mail and shall be
deemed to have been given when delivered in person or by
courier service, upon receipt of a facsimile transmission,
or four (4) Business Days after deposit in the United States
mail with postage prepaid and properly addressed. For the
purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this
Section 12) shall be as set forth below:
Shared Technologies Cellular, Inc.
100 Great Meadow Road
Wethersfield, Connecticut 06109
Attn: Vincent DiVincenzo
Facsimile No. (860) 258-2455
with a copy to:
Shipman & Goodwin LLP
One American Row
Hartford, Connecticut 06103-2819
Attn: Deborah Frisone
Facsimile No. (860) 251-5899
Salomon Brothers Holding Company Inc
Seven World Trade Center
New York, New York 10048
Attn: Townsend U. Weekes
Facsimile No. (212) 783-2823
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attn: DeVerille A. Huston
Facsimile No. (312) 853-7036
Anthony D. Autorino
100 Great Meadow Road
Wethersfield, Connecticut 06109
Facsimile No. (860) 258-2455
13. SEVERABILITY. Whenever possible, each
provision of this Security Agreement shall be interpreted in
a manner as to be effective and valid under applicable law,
but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder
of such provision or the remaining provisions of this
Security Agreement. This Security Agreement is to be read,
construed and applied together with the Credit Agreements
and the other Transaction Documents which, taken together,
set forth the complete understanding and agreement of the
Collateral Agent, the Lenders and Grantor with respect to
the matters referred to herein and therein.
14. NO WAIVER; CUMULATIVE REMEDIES; AMENDMENTS.
Neither the Collateral Agent nor any Lender, except to the
extent specifically provided herein, shall by any act,
delay, omission or otherwise be deemed to have waived any of
its rights or remedies hereunder, and no waiver shall be
valid unless in writing, signed by the Collateral Agent and
then only to the extent therein set forth. A waiver by the
Collateral Agent of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or
remedy which the Collateral Agent would otherwise have had
on any future occasion. No failure to exercise nor any
delay in exercising on the part of the Collateral Agent or
any Lender, any right, power or privilege hereunder, shall
operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude
any other or future exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights
and remedies provided by law. None of the terms or
provisions of this Security Agreement may be waived,
altered, modified or amended except by an instrument in
writing, duly executed by the Collateral Agent, on behalf of
itself and each Lender, and Grantor.
15. LIMITATION BY LAW. All rights, remedies and
powers provided in this Security Agreement may be exercised
only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the
provisions of this Security Agreement are intended to be
subject to all applicable mandatory provisions of law that
may be controlling and to be limited to the extent necessary
so that they shall not render this Security Agreement
invalid, unenforceable, in whole or in part, or not entitled
to be recorded, registered or filed under the provisions of
any applicable law.
16. TERMINATION. Upon the indefeasible payment
in full in cash of the Obligations and the termination of
each of the Credit Agreements, the security interest granted
hereby shall terminate and all rights to the Collateral
shall revert to Grantor.
17. CONTINUING SECURITY INTEREST; SUCCESSORS AND
ASSIGNS. This Security Agreement shall create a continuing
security interest in the Collateral and shall (i) remain in
full force and effect until indefeasible payment in full in
cash of the Obligations and termination of each of the
Credit Agreements, (ii) be binding upon Grantor, the
Collateral Agent, and the Lenders, and their respective
successors and assigns, and (iii) inure to the benefit of,
and be enforceable by, Grantor, the Collateral Agent and the
Lenders and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing
clause (iii), each Lender may assign or otherwise transfer
all or any portion of its rights and obligations under the
applicable Credit Agreement in accordance with the terms
thereof (including, without limitation, all or any portion
of any loans owing to it) to any other person, and such
other person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or
otherwise.
18. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Grantor covenants, warrants, and represents to the
Collateral Agent and each Lender that all representations
and warranties of Grantor contained in this Security
Agreement are true at the time of Grantor's execution of
this Security Agreement, shall survive the execution,
delivery and acceptance hereof by the parties hereto and the
closing of the transactions described in the Credit
Agreements and the other Transaction Documents and shall
continue in effect until all of the Obligations shall have
been paid in full in cash and each of the Credit Agreements
has been terminated.
19. COUNTERPARTS. This Security Agreement may be
executed in any number of separate counterparts, each of
which shall collectively and separately constitute one and
the same agreement. Delivery of an executed counterpart of
this Security Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart
hereof.
20. GOVERNING LAW; PERSONAL JURISDICTION; SERVICE
OF PROCESS.
(a) THIS SECURITY AGREEMENT SHALL BE INTERPRETED,
AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(b) EACH OF THE COLLATERAL AGENT, EACH LENDER AND
GRANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY
NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF
MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR PROCEEDING
ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE
EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE
COLLATERAL AGENT, THE LENDERS AND GRANTOR EACH AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
GRANTOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(ii) GRANTOR AGREES THAT THE COLLATERAL AGENT
SHALL HAVE THE RIGHT TO PROCEED AGAINST GRANTOR OR ITS
PROPERTY IN A COURT IN NEW YORK, CONNECTICUT OR MISSOURI TO
ENABLE THE COLLATERAL AGENT TO REALIZE ON THE COLLATERAL OR
ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE
COLLATERAL AGENT. GRANTOR AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY
THE COLLATERAL AGENT TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF THE COLLATERAL AGENT.
GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY
COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.
(c) GRANTOR IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO GRANTOR'S
NOTICE ADDRESS SPECIFIED BELOW, SUCH SERVICE TO BECOME
EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. GRANTOR
IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR
PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY
OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF COLLATERAL TO BRING PROCEEDINGS AGAINST GRANTOR IN THE
COURTS OF ANY OTHER JURISDICTION.
21. WAIVER OF JURY TRIAL. EACH OF THE COLLATERAL
AGENT, EACH LENDER AND GRANTOR IRREVOCABLY WAIVES TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS
SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT. GRANTOR OR
THE COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECURITY AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
22. SECTION TITLES. The Section titles contained
in this Security Agreement are and shall be without
substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.
23. NO STRICT CONSTRUCTION. The parties hereto
have participated jointly in the negotiation and drafting of
this Security Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the
parties hereto and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Security Agreement.
24. ADVICE OF COUNSEL. Each of the parties
represents to each other party hereto that it has discussed
this Security Agreement and, specifically, the provisions of
Section 20 and Section 21, with its counsel.
25. MARSHALLING; RECOURSE TO SECURITY. The
Collateral Agent shall not be under any obligation to
marshall any assets in favor of Grantor or any other party
or against or in payment of any or all of the Obligations.
Recourse to security shall not be required at any time.
26. INCONSISTENCIES; ENTIRE AGREEMENT. Except as
otherwise explicitly provided in this Security Agreement, to
the extent a conflict or inconsistency exists between the
terms and provisions of this Security Agreement and the
terms and provisions of the Credit Agreements, the terms and
provisions of the Credit Agreements shall govern. Except as
provided above, this Security Agreement represents the final
agreement of Grantor, the Collateral Agent and the Lenders
with respect to the matters contained herein and may not be
contradicted by evidence of prior or contemporaneous
agreements, or subsequent oral agreements, among Grantor,
the Collateral Agent and the Lenders.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Security Agreement to be executed and delivered
by its duly authorized officer as of the date first set
forth above.
SHARED TECHNOLOGIES CELLULAR,
INC.,
as Grantor
By:
Name:
Title:
SALOMON BROTHERS HOLDING
COMPANY INC,
as Collateral Agent and as a
Lender
By:
Name:
Title:
ANTHONY D. AUTORINO, as a
Lender
By:
Name:
Title:
SCHEDULE I
to
SECURITY AGREEMENT
PRIOR LIENS
None, except:
SCHEDULE II
to
SECURITY AGREEMENT
FILING JURISDICTIONS
1. Secretary of State of Connecticut
2. Secretary of State of Missouri
3. St. Louis County, Missouri
SCHEDULE III
to
SECURITY AGREEMENT
SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL
AND RECORDS CONCERNING COLLATERAL
I. Chief Executive Office and principal place of business
of Grantor:
II. Corporate Offices of Grantor:
III. Warehouses:
IV. Other Premises at which Collateral is Stored or
Located:
V. Locations of Records Concerning Collateral:
[to be completed by Grantor]
EXHIBIT A
to
SECURITY AGREEMENT
POWER OF ATTORNEY
This Power of Attorney is executed and delivered
by SHARED TECHNOLOGIES CELLULAR, INC., a Delaware
corporation ("Grantor") to SALOMON BROTHERS HOLDING COMPANY
INC, a Delaware corporation (hereinafter referred to as
"Attorney"), as Collateral Agent, under a Security
Agreement, dated as of April 15, 1998 among Grantor,
Attorney, and the "Lenders" parties thereto (as the same may
be amended, restated, supplemented or otherwise modified
from time to time, the "Security Agreement"; unless
otherwise defined herein, capitalized terms are used herein
as therein defined). No person to whom this Power of
Attorney is presented, as authority for Attorney to take any
action or actions contemplated hereby, shall be required to
inquire into or seek confirmation from Grantor as to the
authority of Attorney to take any action described below, or
as to the existence of or fulfillment of any condition to
this Power of Attorney, which is intended to grant to
Attorney unconditionally the authority to take and perform
the actions contemplated herein, and Grantor irrevocably
waives any right to commence any suit or action, in law or
equity, against any person or entity which acts in reliance
upon or acknowledges the authority granted under this Power
of Attorney. The power of attorney granted hereby is
coupled with an interest, and may not be revoked or canceled
by Grantor without Attorney's written consent.
Grantor hereby irrevocably constitutes and
appoints Attorney (and all officers, employees or agents
designated by Attorney), with full power of substitution, as
Grantor's true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of
Grantor and in the name of Grantor or in its own name, from
time to time in Attorney's discretion, to take any and all
appropriate action and to execute and deliver any and all
documents and instruments which may be necessary or
desirable to accomplish the purposes of the Security
Agreement, the Credit Agreements and the other Transaction
Documents and, without limiting the generality of the
foregoing, Grantor hereby grants to Attorney the power and
right, on behalf of Grantor, without notice to or assent by
Grantor, and at any time, to do the following: (a) change
the mailing address of Grantor, open a post office box on
behalf of Grantor, open mail for Grantor, and ask, demand,
collect, give acquittances and receipts for, take possession
of, endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, and notices in
connection with any property of Grantor; (b) effect any
repairs to any asset of Grantor, or continue or obtain any
insurance and pay all or any part of the premiums therefor
and costs thereof, and make, settle and adjust all claims
under such policies of insurance, and make all
determinations and decisions with respect to such policies;
(c) pay or discharge any taxes, liens, security interests,
or other encumbrances levied or placed on or threatened
against Grantor or its property; (d) defend any suit, action
or proceeding brought against Grantor if Grantor does not
defend such suit, action or proceeding or if Attorney
believes that Grantor is not pursuing such defense in a
manner that will maximize the recovery to Attorney, and
settle, compromise or adjust any suit, action, or proceeding
described above and, in connection therewith, give such
discharges or releases as Attorney may deem appropriate; (e)
file or prosecute any claim, litigation, suit or proceeding
in any court of competent jurisdiction or before any
arbitrator, or take any other action otherwise deemed
appropriate by Attorney for the purpose of collecting any
and all such moneys due to Grantor whenever payable and to
enforce any other right in respect of Grantor's property;
(f) cause the certified public accountants then engaged by
Grantor to prepare and deliver to Attorney at any time and
from time to time, promptly upon Attorney's request, the
following reports: (1) a reconciliation of all accounts,
(2) an aging of all accounts, (3) trial balances, (4) test
verifications of such accounts as Attorney may request, and
(5) the results of each physical verification of inventory;
(g) communicate in its own name with any party to any
contract with regard to the assignment of the right, title
and interest of such Grantor in and under the contracts and
other matters relating thereto; and (h) execute, in
connection with any sale provided for in any Transaction
Document, any endorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral and
to otherwise direct such sale or resale, all as though
Attorney were the absolute owner of the property of Grantor
for all purposes, and to do, at Attorney's option and
Grantor's expense, at any time or from time to time, all
acts and other things that Attorney reasonably deems
necessary to perfect, preserve, or realize upon Grantor's
property or assets and Attorney's liens thereon, all as
fully and effectively as Grantor might do. Grantor hereby
ratifies, to the extent permitted by law, all that said
Attorney shall lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, this Power of Attorney is
executed by Grantor, and Grantor has caused its seal to be
affixed pursuant to the authority of its board of directors
this 15th day of April, 1998.
SHARED TECHNOLOGIES CELLULAR,
INC.,
as Grantor
By:
Name:
Title:
ATTEST:
By: ________________________________(SEAL)
Title: _____________________________
EXECUTION COPY
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Pledge Agreement"), dated
as of April 15, 1998, is executed by and between SHARED
TECHNOLOGIES CELLULAR, INC., a Delaware corporation (the
"Pledgor"), ANTHONY D. AUTORINO, and SALOMON BROTHERS HOLDING
COMPANY INC ("SBHC"), as Lenders (the "Lenders") and SBHC as
Collateral Agent (the "Collateral Agent").
WITNESSETH:
WHEREAS, pursuant to that certain Credit Agreement
dated as of the date hereof by and between Pledgor and Anthony
D. Autorino (including all annexes, exhibits and schedules
thereto, as from time to time amended, restated, supplemented
or otherwise modified, the "Autorino Credit Agreement"),
Anthony D. Autorino has agreed to extend credit to Pledgor;
WHEREAS, pursuant to that certain Credit Agreement
dated as of the date hereof by and between Pledgor and SBHC
(including all annexes, exhibits and schedules thereto, as from
time to time amended, restated, supplemented or otherwise
modified, the "SBHC Credit Agreement" and together with the
Autorino Credit Agreement, the "Credit Agreements"), SBHC has
agreed to extend credit to Pledgor;
WHEREAS, the Pledgor owns all of the issued and
outstanding capital stock of The Cellular Hotline, Inc., a
Missouri corporation (the "Corporation");
WHEREAS, the Lenders desire to set forth their rights
and remedies with respect to each other, their relationship to
the Pledgor, the Credit Agreements, their security interests
and rights in the Pledged Collateral and various related
matters; and
WHEREAS, the Lenders have required, as a condition to
its entering into the Credit Agreements, that the Pledgor
execute and deliver this Pledge Agreement;
NOW, THEREFORE, for and in consideration of the
foregoing and of any financial accommodations or extensions of
credit (including, without limitation, any loan or advance by
renewal, refinancing or extension of the agreements described
hereinabove or otherwise) heretofore, now or hereafter made to
or for the benefit of the Pledgor pursuant to the Credit
Agreements or any other agreement, instrument or document
executed pursuant to or in connection therewith, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Pledgor, the Lenders and the
Collateral Agent hereby agree as follows:
1. Pledge. The Pledgor hereby pledges to the
Collateral Agent, for its benefit and for the benefit of the
Lenders, and grants to the Collateral Agent, for its benefit
and for the benefit of the Lenders a security interest in, the
following (collectively, the "Pledged Collateral"):
(a) The shares of the capital stock of the
Corporation, now or at any time or times hereafter owned
by the Pledgor, and the certificates representing the
shares of such capital stock (such now-owned shares being
identified on Exhibit A attached hereto and made a part
hereof), all options and warrants for the purchase of
shares of the stock of the Corporation now or hereafter
held in the name of the Pledgor (all of said capital
stock, options and warrants and all capital stock held in
the name of the Pledgor as a result of the exercise of
such options or warrants being hereinafter collectively
referred to as the "Pledged Stock"), herewith delivered to
the Collateral Agent accompanied by stock powers in the
form of Exhibit B attached hereto and made a part hereof
(the "Powers") duly executed in blank, and all dividends,
cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect
of, or in exchange for, any or all of the Pledged Stock;
(b) All additional shares of stock of the
Corporation from time to time acquired by the Pledgor in
any manner, and the certificates representing such
additional shares (any such additional shares shall
constitute part of the Pledged Stock and the Collateral
Agent is irrevocably authorized to amend Exhibit A from
time to time to reflect such additional shares), and all
options, warrants, dividends, cash, instruments and other
rights and options from time to time received, receivable
or otherwise distributed in respect of or in exchange for
any or all of such shares;
(c) The property and interests in property described
in Section 3 below; and
(d) All proceeds of the foregoing.
2. Security for Obligations. The Pledged Collateral
secures the prompt payment, performance and observance of the
Pledgor's obligations under the Credit Agreements (the
"Obligations").
3. Pledged Collateral Adjustments. If, during the
term of this Pledge Agreement:
(a) Any stock dividend, reclassification,
readjustment or other change is declared or made in the
capital structure of the Corporation, or any option
included within the Pledged Collateral is exercised, or
both, or
(b) Any subscription warrants or any other rights or
options shall be issued in connection with the Pledged
Collateral,
then all new, substituted and additional shares, warrants,
rights, options or other securities, issued by reason of any of
the foregoing, shall be immediately delivered to and held by
the Collateral Agent under the terms of this Pledge Agreement
and shall constitute Pledged Collateral hereunder; provided,
however, that nothing contained in this Section 3 shall be
deemed to permit any stock dividend, issuance of additional
stock, warrants, rights or options, reclassification,
readjustment or other change in the capital structure of the
Corporation which is prohibited under the terms of in the
Credit Agreements.
4. Subsequent Changes Affecting Pledged Collateral.
The Pledgor represents and warrants that it has made its own
arrangements for keeping itself informed of changes or
potential changes affecting the Pledged Collateral (including,
but not limited to, rights to convert, rights to subscribe,
payment of dividends, reorganization or other exchanges, tender
offers and voting rights), and the Pledgor and each Lender
agrees that the Collateral Agent shall have no obligation to
inform the Pledgor or any Lender of any such changes or
potential changes or to take any action or omit to take any
action with respect thereto. The Collateral Agent may, after
the occurrence of an "Event of Default" under a Credit
Agreement (as defined in the Credit Agreements, "Event of
Default"), without notice and at its option, transfer or
register the Pledged Collateral or any part thereof into its or
its nominee's name with or without any indication that such
Pledged Collateral is subject to the security interest
hereunder. In addition, after the occurrence of an Event of
Default under a Credit Agreement the Collateral Agent may at
any time exchange certificates or instruments representing or
evidencing Pledged Shares for certificates or instruments of
smaller or larger denominations.
5. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledgor is the sole legal and beneficial
owner of 100% of the issued and outstanding common
stock of the Corporation, free and clear of any lien
except for the security interest created by this
Pledge Agreement;
(b) The Pledgor has full corporate power and
authority to enter into this Pledge Agreement;
(c) There are no restrictions upon the voting rights
associated with, or upon the transfer of, any of the
Pledged Collateral;
(d) The Pledgor has the right to vote, pledge and
grant a security interest in or otherwise transfer
such Pledged Collateral free of any liens;
(e) No authorization, approval, or other action by,
and no notice to or filing with, any governmental
authority or regulatory body is required either (i)
for the pledge of the Pledged Collateral pursuant to
this Pledge Agreement or for the execution, delivery
or performance of this Pledge Agreement by the
Pledgor or (ii) for the exercise by the Collateral
Agent of the voting or other rights provided for in
this Pledge Agreement or the remedies in respect of
the Pledged Collateral pursuant to this Pledge
Agreement (except as may be required in connection
with such disposition by laws affecting the offering
and sale of securities generally);
(f) The pledge of the Pledged Collateral pursuant to
this Pledge Agreement creates a valid and perfected
first priority security interest in the Pledged
Collateral, in favor of the Collateral Agent, for its
benefit and for the benefit of the Lenders, securing
the payment and performance of the Obligations; and
(g) The Powers are duly executed and give the
Collateral Agent the authority they purport to
confer.
6. Voting Rights. During the term of this Pledge
Agreement, and except as provided in this Section 6 below, the
Pledgor shall have the right to vote the Pledged Stock on all
corporate questions in a manner not inconsistent with the terms
of this Pledge Agreement, the Credit Agreements and any other
agreement, instrument or document executed pursuant thereto or
in connection therewith. If an Event of Default shall have
occurred and be continuing under a Credit Agreement, the
Collateral Agent or the Collateral Agent's nominee may, at the
Collateral Agent's or such nominee's option and following
written notice from the Collateral Agent to the Pledgor,
exercise all voting powers pertaining to the Pledged
Collateral, including the right to take action by shareholder
consent. Such authorization shall constitute an irrevocable
voting proxy from the Pledgor to the Collateral Agent or, at
the Collateral Agent's option, to the Collateral Agent's
nominee.
7. Dividends and Other Distributions. (a) So long
as no Event of Default under a Credit Agreement shall have
occurred and be continuing:
(i) The Pledgor shall be entitled to receive and
retain any and all dividends and interest paid in respect
of the Pledged Collateral, provided, however, that any and
all
(A) dividends and interest paid or payable
other than in cash with respect to, and instruments
and other property received, receivable or otherwise
distributed with respect to, or in exchange for, any
of the Pledged Collateral;
(B) dividends and other distributions paid or
payable in cash with respect to any of the Pledged
Collateral on account of a partial or total
liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in
surplus; and
(C) cash paid, payable or otherwise distributed
with respect to principal of, or in redemption of, or
in exchange for, any of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith
delivered to the Collateral Agent to hold as Pledged
Collateral and shall, if received by the Pledgor, be
received in trust for the Collateral Agent, be segregated
from the other property or funds of the Pledgor, and be
delivered immediately to the Collateral Agent as Pledged
Collateral in the same form as so received (with any
necessary endorsement); and
(ii) The Collateral Agent shall execute and deliver
(or cause to be executed and delivered) to the Pledgor all
such proxies and other instruments as the Pledgor may
reasonably request for the purpose of enabling the Pledgor
to receive the dividends or interest payments which it is
authorized to receive and retain pursuant to clause (i)
above.
(b) After the occurrence and during the continuance of an
Event of Default under a Credit Agreement:
(i) All rights of the Pledgor to receive the
dividends and interest payments which it would otherwise
be authorized to receive and retain pursuant to Section
7(a)(i) hereof shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which
shall thereupon have the sole right to receive and hold as
Pledged Collateral such dividends and interest payments;
(ii) All dividends and interest payments which are
received by the Pledgor contrary to the provisions of
clause (i) of this Section 7(b) shall be received in trust
for the Collateral Agent, shall be segregated from other
funds of the Pledgor and shall be paid over immediately to
the Collateral Agent as Pledged Collateral in the same
form as so received (with any necessary endorsements);
8. Transfers and Other Liens. The Pledgor agrees
that it will not (i) sell or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral without
the prior written consent of the Collateral Agent, or (ii)
create or permit to exist any lien upon or with respect to any
of the Pledged Collateral, except for the security interest
under this Pledge Agreement.
9. Remedies. (a) The Collateral Agent shall have,
in addition to any other rights given under this Pledge
Agreement or by law, all of the rights and remedies with
respect to the Pledged Collateral of a secured party under the
Uniform Commercial Code as in effect in the State of New York.
After the occurrence of an Event of Default under a Credit
Agreement and following written notice to the Pledgor, the
Collateral Agent (personally or through an agent) is hereby
authorized and empowered to transfer and register in its name
or in the name of its nominee the whole or any part of the
Pledged Collateral, to exercise all voting rights with respect
thereto, to collect and receive all cash dividends and other
distributions made thereon, and to otherwise act with respect
to the Pledged Collateral as though the Collateral Agent were
the outright owner thereof, the Pledgor hereby irrevocably
constituting and appointing the Collateral Agent as the proxy
and attorney-in-fact of the Pledgor, with full power of
substitution to do so, such proxy becoming effective upon the
occurrence of an Event of Default under a Credit Agreement and
following written notice thereof; provided, however, that the
Collateral Agent shall have no duty to exercise any such right
or to preserve the same and shall not be liable for any failure
to do so or for any delay in doing so. In addition, after the
occurrence of an Event of Default under a Credit Agreement, the
Collateral Agent shall have such powers of sale and other
powers as may be conferred by applicable law. With respect to
the Pledged Collateral or any part thereof which shall then be
in or shall thereafter come into the possession or custody of
the Collateral Agent or which the Collateral Agent shall
otherwise have the ability to transfer under applicable law,
the Collateral Agent may, in its sole discretion, without
notice except as specified below, after the occurrence of an
Event of Default under a Credit Agreement, sell or cause the
same to be sold at any exchange, broker's board or at public or
private sale, in one or more sales or lots, at such price as
the Collateral Agent may deem best and commercially reasonable,
for cash or on credit or for future delivery, without
assumption of any credit risk, and the purchaser of any or all
of the Pledged Collateral so sold shall thereafter own the
same, absolutely free from any claim, encumbrance or right of
any kind whatsoever. The Collateral Agent may, in its own
name, or in the name of a designee or nominee, buy the Pledged
Collateral at any public sale and, if permitted by applicable
law, buy the Pledged Collateral at any private sale. The
Pledgor will pay to the Collateral Agent all reasonable
expenses (including, without limitation, court costs and
reasonable attorneys' and paralegals' fees and expenses) of, or
incidental to, the enforcement of any of the provisions hereof.
The Collateral Agent agrees to distribute any proceeds of the
sale of the Pledged Collateral in accordance with the Credit
Agreements and the Pledgor shall remain liable for any
deficiency following the sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens
to decline speedily in value or is or becomes of a type sold on
a recognized market, the Collateral Agent will give the Pledgor
reasonable notice of the time and place of any public sale
thereof, or of the time after which any private sale or other
intended disposition is to be made. Any sale of the Pledged
Collateral conducted in conformity with reasonable commercial
practices of banks, commercial finance companies, insurance
companies or other financial institutions disposing of property
similar to the Pledged Collateral shall be deemed to be
commercially reasonable. Notwithstanding any provision to the
contrary contained herein, the Pledgor agrees that any
requirements of reasonable notice shall be met if such notice
is received by the Pledgor as provided in Section 19 below at
least five (5) business days before the time of the sale or
disposition; provided, however, that Collateral Agent may give
any shorter notice that is commercially reasonable under the
circumstances. Any other requirement of notice, demand or
advertisement for sale is waived, to the extent permitted by
law.
(c) In view of the fact that federal and state
securities laws may impose certain restrictions on the method
by which a sale of the Pledged Collateral may be effected after
an Event of Default under a Credit Agreement, the Pledgor
agrees that after the occurrence of an Event of Default under a
Credit Agreement, the Collateral Agent may, from time to time,
attempt to sell all or any part of the Pledged Collateral by
means of a private placement restricting the bidders and
prospective purchasers to those who are qualified and will
represent and agree that they are purchasing for investment
only and not for distribution. In so doing, the Collateral
Agent may solicit offers to buy the Pledged Collateral, or any
part of it, from a limited number of investors deemed by the
Collateral Agent, in its reasonable judgment, to be financially
responsible parties who might be interested in purchasing the
Pledged Collateral. If the Collateral Agent solicits such
offers from not less than four (4) such investors, then the
acceptance by the Collateral Agent of the highest offer
obtained therefrom shall be deemed to be a commercially
reasonable method of disposing of such Pledged Collateral;
provided, however, that this Section does not impose a
requirement that the Collateral Agent solicit offers from four
or more investors in order for the sale to be commercially
reasonable.
10. Pari Passu Interests; Enforcement of Pledge and
Security Interest.
(a) Each Lender agrees that its interests in the
Pledged Collateral shall be pari passu and equal in priority
and rights with the interests in the Pledged Collateral of the
other Lenders. Each Lender agrees to the appointment of the
Collateral Agent as its agent with respect to the pledge of and
security interest in the Pledged Collateral. Each Lender
hereby delegates to the Collateral Agent all right and
authority to exercise and enforce such Lender's rights against
and with respect to the Pledged Collateral as the Collateral
Agent may determine, in its sole discretion. The Collateral
Agent shall not be required to exercise or enforce any rights
against, or with respect to, the Pledged Collateral for the
benefit of any given Lender unless it is enforcing such rights
for the benefit of SBHC, as a Lender.
(b) In the event that the Collateral Agent enforces
the pledge of or security interest in all or part of the
Pledged Collateral as set forth herein, the proceeds of any
sale, transfer or enforcement action on or against any of the
Pledged Collateral, after deducting expenses of such sale,
transfer or enforcement action (the "Net Proceeds") shall be
distributed and shared by the Lenders pro rata in proportion to
their respective claims against the Pledgor calculated as of
the date of distribution. Each Lender's share ("Share") shall
be equal to the product of (i) a fraction, the numerator of
which shall be equal to the then unpaid Obligations owing to
such Lender by Pledgor under the applicable Credit Agreement
and the denominator of which shall be equal to the sum of all
then unpaid Obligations owing to the Lenders; times (ii) the
Net Proceeds. Notwithstanding any of the foregoing, if the
claim of any Lender for payment of Obligations owing to it
under its applicable Credit Agreement or claim with respect to
the pledge and security interest granted hereunder is impaired
for any reason, such that such Lender would be unable to
enforce its rights under such Credit Agreement or the pledge or
security interest granted hereunder for the benefit of such
Lender is voided or voidable, then such Lender shall not share
pro rata in the Net Proceeds collected by the Collateral Agent
and the Share of the other Lenders in the Net Proceeds shall be
calculated without regard to the Obligations owning or claimed
to be owing to such Lender.
(c) The Lenders shall share on a pro rata basis all
costs and expenses at any time or times paid by the Collateral
Agent in connection with (i) the collection or enforcement of
the Obligations under the Credit Agreements; (ii) the
preservation of the Pledged Collateral; or (iii) the sale,
transfer, disposition or other enforcement of, or realization
upon, the Pledged Collateral or other collateral securing such
indebtedness, in proportion to their respective Shares,
computed as of the date such expenses are paid or invoiced,
whichever occurs earlier.
(d) Each of the Lenders agrees that it shall not,
without the prior written consent of the Collateral Agent: (i)
release any Pledged Collateral which is held by it for the
benefit of the Collateral Agent and the other Lenders; (ii)
enforce any rights or remedies against Pledgor, the Pledged
Collateral or any other collateral or under such Lender's
Credit Agreement or any other agreements, documents or
instruments; (iii) increase the outstanding indebtedness owed
by Pledgor to such Lender; or (iv) institute or cause to be
instituted against the Pledgor any proceeding under any
bankruptcy or insolvency laws.
(e) The provisions of this Section 10 are solely for
the benefit of the Collateral Agent and the Lenders, and
Pledgor shall not have any right to rely on or enforce any of
the provisions hereof.
11. Collateral Agent Appointed Attorney-in-Fact.
The Pledgor hereby appoints the Collateral Agent its
attorney-in-fact, with full authority, in the name of the
Pledgor or otherwise, after the occurrence of an Event of
Default under a Credit Agreement, from time to time in the
Collateral Agent's sole discretion, to take any action and to
execute any instrument which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this
Pledge Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to the Pledgor
representing any dividend, interest payment or other
distribution in respect of the Pledged Collateral or any part
thereof and to give full discharge for the same and to arrange
for the transfer of all or any part of the Pledged Collateral
on the books of the Corporation to the name of the Collateral
Agent or the Collateral Agent's nominee.
12. Waivers. The Pledgor waives presentment and
demand for payment of any of the Obligations, protest and
notice of dishonor or Event of Default under a Credit Agreement
with respect to any of the Obligations and all other notices to
which the Pledgor might otherwise be entitled except as
otherwise expressly provided herein or in the Credit
Agreements.
13. Term. This Pledge Agreement shall remain in
full force and effect until the Obligations have been fully and
indefeasibly paid in cash and the Credit Agreements have
terminated pursuant to their terms. Upon the termination of
this Pledge Agreement as provided above (other than as a result
of the sale of the Pledged Collateral), the Collateral Agent
will release the security interest created hereunder and, if it
then has possession of the Pledged Stock, will deliver the
Pledged Stock and the Powers to the Pledgor.
14. Definitions. The singular shall include the
plural and vice versa and any gender shall include any other
gender as the context may require.
15. Successors and Assigns. This Pledge Agreement
shall be binding upon and inure to the benefit of the Pledgor,
the Collateral Agent and the Lenders and their respective
successors and assigns. The Pledgor's successors and assigns
shall include, without limitation, a receiver, trustee or
debtor-in-possession of or for the Pledgor.
16. Governing Law. This Pledge Agreement has been
executed and delivered by the parties hereto in New York, New
York. Any dispute between the Collateral Agent and the Pledgor
arising out of or related to the relationship established
between them in connection with this Pledge Agreement, and
whether arising in contract, tort, equity, or otherwise, shall
be resolved in accordance with the laws of the State of New
York.
17. Severability. Whenever possible, each provision
of this Pledge Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but, if any
provision of this Pledge Agreement shall be held to be
prohibited or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Pledge Agreement.
18. Further Assurances. The Pledgor agrees that it
will cooperate with the Collateral Agent and will execute and
deliver, or cause to be executed and delivered, all such other
stock powers, proxies, instruments and documents, and will take
all such other actions, including, without limitation, the
execution and filing of financing statements, as the Collateral
Agent may reasonably request from time to time in order to
carry out the provisions and purposes of this Pledge Agreement.
19. The Collateral Agent's Duty of Care. The
Collateral Agent shall not be liable for any acts, omissions,
errors of judgment or mistakes of fact or law including,
without limitation, acts, omissions, errors or mistakes with
respect to the Pledged Collateral, except for those arising out
of or in connection with the Collateral Agent's (i) gross
negligence or willful misconduct, or (ii) failure to use
reasonable care with respect to the safe custody of the Pledged
Collateral in the Collateral Agent's possession. Without
limiting the generality of the foregoing, the Collateral Agent
shall be under no obligation to take any steps necessary to
preserve rights in the Pledged Collateral against any other
parties but may do so at its option. All expenses incurred in
connection therewith shall be for the sole account of the
Pledgor, and shall constitute part of the Obligations secured
hereby.
20. Notices. Unless otherwise specifically provided
herein, any notice or other communication herein required or
permitted to be given shall be in writing and may be personally
served, sent facsimile transmission or courier service or
United States certified mail and shall be deemed to have been
given when delivered in person or by courier service, upon
receipt of a facsimile transmission, or four (4) business days
after deposit in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the addresses
of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 12) shall be as set forth
below:
Shared Technologies Cellular, Inc.
100 Great Meadow Road
Wethersfield, Connecticut 06109
Attn: Vincent DiVincenzo
Facsimile No. (860) 258-2455
with a copy to:
Shipman & Goodwin LLP
One American Row
Hartford, Connecticut 06103-2819
Attn: Deborah Frisone
Facsimile No. (860) 251-5899
Salomon Brothers Holding Company Inc
Seven World Trade Center
New York, New York 10048
Attn: Townsend U. Weekes
Facsimile No. (212) 783-2823
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attn: DeVerille A. Huston
Facsimile No. (312) 853-7036
Anthony D. Autorino
100 Great Meadow Road
Wethersfield, Connecticut 06109
Facsimile No. (860) 258-2455
21. Amendments, Waivers and Consents. No amendment
or waiver of any provision of this Pledge Agreement nor consent
to any departure by the Pledgor herefrom, shall in any event be
effective unless the same shall be in writing and signed by the
Lenders and the Collateral Agent, and then such amendment,
waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
22. Section Headings. The section headings herein
are for convenience of reference only, and shall not affect in
any way the interpretation of any of the provisions hereof.
23. Execution in Counterparts. This Pledge
Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which shall together
constitute one and the same agreement.
24. Merger. This Pledge Agreement represents the
final agreement of the Pledgor with respect to the matters
contained herein and may not be contradicted by evidence of
prior or contemporaneous agreements, or subsequent oral
agreements, among the Pledgor, the Lenders and the Collateral
Agent.
IN WITNESS WHEREOF, the Pledgor, the Collateral Agent
and the Lenders have executed this Pledge Agreement as of the
date set forth above.
SHARED TECHNOLOGIES
CELLULAR, INC., as Grantor
By:
Name:
Title:
SALOMON BROTHERS HOLDING
COMPANY INC,
as Collateral Agent and as a
Lender
By:
Name:
Title:
ANTHONY D. AUTORINO, as a
Lender
By:
Name:
Title:
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a copy
of the foregoing Pledge Agreement, agrees promptly to note on
its books the security interests granted under such Pledge
Agreement, and waives any rights or requirement at any time
hereafter to receive a copy of such Pledge Agreement in
connection with the registration of any Pledged Collateral in
the name of the Collateral Agent or its nominee or the exercise
of voting rights by the Collateral Agent or its nominee.
THE CELLULAR HOTLINE, INC.
By: ______________________
Title:
EXHIBIT A
to
PLEDGE AGREEMENT
dated as of April 15, 1998
Pledged Stock Certificates
Percentage of Shares of Common
Issued and Outstanding Stock owned by
Common Stock owned the Pledgor Subject
Name by the Pledgor to Pledge
The Cellular
Hotline, Inc. 100% 1940
EXHIBIT B
to
PLEDGE AGREEMENT
dated as of April 15, 1998
Form of Stock Power
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell,
assign and transfer to _____________________________ _____
Shares of Common Stock of The Cellular Hotline, Inc., a
Missouri corporation, represented by Certificate No. __ (the
"Stock"), standing in the name of the undersigned on the books
of said corporation and does hereby irrevocably constitute and
appoint ___________________________________ as the
undersigned's true and lawful attorney, for it and in its name
and stead, to sell, assign and transfer all or any of the
Stock, and for that purpose to make and execute all necessary
acts of assignment and transfer thereof; and to substitute one
or more persons with like full power, hereby ratifying and
confirming all that said attorney or substitute or substitutes
shall lawfully do by virtue hereof.
Dated: _______________
SHARED TECHNOLOGIES CELLULAR,
INC.
By: _________________________
Title:
EXECUTION COPY
_________________________________________________________________
REGISTRATION RIGHTS AGREEMENT
dated as of April 15, 1998
between
SHARED TECHNOLOGIES CELLULAR, INC.
and
SALOMON BROTHERS HOLDING COMPANY INC
_________________________________________________________________
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated
as of April 15, 1998 among SHARED TECHNOLOGIES CELLULAR, INC., a
Delaware corporation (the "Company"), and SALOMON BROTHERS
HOLDING COMPANY INC (the "Holder").
RECITALS
WHEREAS, pursuant to that certain Warrant Purchase
Agreement of even date herewith by and between Company and
Salomon Brothers Holding Company Inc ("SBHC"), the Company issued
to SBHC Warrant No. SB-1 initially exercisable by Holder for the
purchase of 100,000 shares of Common Stock of the Company (the
"Original Warrant"); and
WHEREAS, the parties hereto hereby desire to set forth
the Holder's rights and the Company's obligations to cause the
registration pursuant to the Securities Act of shares of Common
Stock issuable upon exercise of the Original Warrant or any
warrant issued upon transfer, division or combination of, or in
substitution for, such Original Warrant (collectively, the
"Warrants");
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Definitions and Usage.
As used in this Agreement:
1.1. Definitions.
Agent. "Agent" means the principal placement
agent on an agented placement of Registrable Securities.
Commission. "Commission" shall mean the
Securities and Exchange Commission.
Common Stock. "Common Stock" shall mean (i) the
common stock, with a par value of $0.01 per share, of the
Company, and (ii) shares of capital stock of the Company issued
by the Company in respect of or in exchange for shares of such
common stock in connection with any stock dividend or
distribution, stock split-up, recapitalization, recombination or
exchange by the Company generally of shares of such common stock.
Company. "Company" shall have the meaning set
forth in the Preamble.
Continuously Effective. "Continuously
Effective", with respect to a specified registration statement,
shall mean that it shall not cease to be effective and available
for Transfers of Registrable Securities thereunder for longer
than either (i) any ten (10) consecutive business days, or (ii)
an aggregate of fifteen (15) business days during the period
specified in the relevant provision of this Agreement.
Demand Registration. "Demand Registration" shall
have the meaning set forth in Section 2.1(i).
Demanding Holders. "Demanding Holders" shall have
the meaning set forth in Section 2.1(i).
Exchange Act. "Exchange Act" shall mean the
Securities Exchange Act of 1934.
Holders. "Holders" shall mean SBHC and
Transferees of SBHC's Registrable Securities with respect to the
rights that such Transferees shall have acquired in accordance
with Section 8, at such times as such Persons shall own
Registrable Securities.
Majority Selling Holders. "Majority Selling
Holders" means those Selling Holders whose Registrable Securities
included in such registration represent a majority of the
Registrable Securities of all Selling Holders included therein.
Person. "Person" shall mean any individual,
corporation, partnership, joint venture, association, joint-stock
company, limited liability company, trust, unincorporated
organization or government or other agency or political
subdivision thereof.
Piggyback Registration. "Piggyback Registration"
shall have the meaning set forth in Section 3.
Register, Registered and Registration.
"Register", "registered", and "registration" shall refer to a
registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities
Act, and the declaration or ordering by the Commission of
effectiveness of such registration statement or document.
Registrable Securities. "Registrable Securities"
shall mean, subject to Section 8 and Section 9.3: (i) any shares
of Common Stock issued or issuable upon exercise of the Warrants
and owned by a Holder on the date of determination, (ii) any
shares of Common Stock or other securities issued as (or issuable
upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution
with respect to, or in exchange by the Company generally for, or
in replacement by the Company generally of, any Registrable
Securities; and (iii) any securities issued in exchange for any
Registrable Securities in any merger or reorganization of the
Company; provided, however, that Registrable Securities shall not
include any Securities which have theretofore been registered and
sold pursuant to the Securities Act or which have been sold to
the public pursuant to Rule 144 or any similar rule promulgated
by the Commission pursuant to the Securities Act, and, provided
further, the Company shall have no obligation under Sections 2
and 3 to register any Registrable Securities of a Holder if the
Company shall deliver to the Holders requesting such registration
an opinion of counsel reasonably satisfactory to such Holders and
its counsel to the effect that the proposed sale or disposition
of all of the Registrable Securities for which registration was
requested does not require registration under the Securities Act
for a sale or disposition in a single public sale, and offers to
remove any and all legends restricting transfer from the
certificates evidencing such Registrable Securities. For
purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Securities whenever such Person has the
then-existing right to acquire such Registrable Securities (by
conversion, purchase or otherwise), whether or not such
acquisition has actually been effected.
Registrable Securities then outstanding.
"Registrable Securities then outstanding" shall mean, with
respect to a specified determination date, the Registrable
Securities owned by all Holders on such date.
Registration Expenses. "Registration Expenses"
shall have the meaning set forth in Section 6.1.
SBHC. "SBHC" shall have the meaning set forth in
the Recitals.
Securities Act. "Securities Act" shall mean the
Securities Act of 1933.
Selling Holders. "Selling Holders" shall mean,
with respect to a specified registration pursuant to this
Agreement, Holders whose Registrable Securities are included in
such registration.
Transfer. "Transfer" shall mean and include the
act of selling, giving, transferring, creating a trust (voting or
otherwise), assigning or otherwise disposing of (other than
pledging, hypothecating or otherwise transferring as security)
(and correlative words shall have correlative meanings); provided
however, that any transfer or other disposition upon foreclosure
or other exercise of remedies of a secured creditor after an
event of default under or with respect to a pledge, hypothecation
or other transfer as security shall constitute a "Transfer".
Underwriters' Representative. "Underwriters'
Representative" shall mean the managing underwriter, or, in the
case of a co-managed underwriting, the managing underwriter
designated as the Underwriters' Representative by the co-
managers.
Violation. "Violation" shall have the meaning set
forth in Section 7.1.
Warrants. "Warrants" shall have the meaning set
forth in the Recitals.
1.2. Usage.
(i) References to a Person are also references
to its assigns and successors in interest (by means of merger,
consolidation or sale of all or substantially all the assets of
such Person or otherwise, as the case may be).
(ii) References to Registrable Securities
"owned" by a Holder shall include Registrable Securities
beneficially owned by such Person but which are held of record in
the name of a nominee, trustee, custodian, or other agent, but
shall exclude shares of Common Stock held by a Holder in a
fiduciary capacity for customers of such Person.
(iii) References to a document are to it as
amended, waived and otherwise modified from time to time and
references to a statute or other governmental rule are to it as
amended and otherwise modified from time to time (and references
to any provision thereof shall include references to any
successor provision).
(iv) References to Sections or to Schedules or
Exhibits are to sections hereof or schedules or exhibits hereto,
unless the context otherwise requires.
(v) The definitions set forth herein are
equally applicable both to the singular and plural forms and the
feminine, masculine and neuter forms of the terms defined.
(vi) The term "including" and correlative terms
shall be deemed to be followed by "without limitation" whether or
not followed by such words or words of like import.
(vii) The term "hereof" and similar terms refer
to this Agreement as a whole.
(viii) The "date of" any notice or request given
pursuant to this Agreement shall be determined in accordance with
Section 12.1.
Section 2. Demand Registration.
2.1.
(i) If one or more Holders that own an
aggregate of 51% or more of the Registrable Securities then
outstanding shall make a written request to the Company at any
time (the "Demanding Holders"), the Company shall cause to be
filed with the Commission a registration statement meeting the
requirements of the Securities Act (a "Demand Registration"), and
each Demanding Holder shall be entitled to have included therein
(subject to Section 2.6) all or such number of such Demanding
Holder's Registered Securities, as the Demanding Holder shall
report in writing; provided, however, that no request may be made
pursuant to this Section 2.1 if within six (6) months prior to
the date of such request a Demand Registration Statement pursuant
to this Section 2.1 shall have been declared effective by the
Commission. Any request made pursuant to this Section 2.1 shall
be addressed to the attention of the Secretary of the Company,
and shall specify the number of Registrable Securities to be
registered, the intended methods of disposition thereof and that
the request is for a Demand Registration pursuant to this Section
2.1(i).
(ii) The Company shall be entitled to postpone
for up to 60 days the filing of any Demand Registration statement
otherwise required to be prepared and filed pursuant to this
Section 2.1, if the Board determines, in its good faith
reasonable judgment (with the concurrence of the managing
underwriter, if any), that such registration and the Transfer of
Registrable Securities contemplated thereby would materially
interfere with, or require premature disclosure of, any
financing, acquisition or reorganization involving the Company or
any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination;
provided, however, that the Company shall not have postponed
pursuant to this Section 2.1(ii) the filing of any other Demand
Registration statement otherwise required to be prepared and
filed pursuant to this Section 2.1 during the 12 month period
ended on the date of the relevant request pursuant to Section
2.1(i).
(iii) Whenever the Company shall have received a
demand pursuant to Section 2.1(i) to effect the registration of
any Registrable Securities, the Company shall promptly give
written notice of such proposed registration to all Holders. Any
such Holder may, within twenty (20) days after receipt of such
notice, request in writing that all of such Holder's Registrable
Securities, or any portion thereof designated by such Holder, be
included in the registration.
2.2. Following receipt of a request for a
Demand Registration, the Company shall:
(i) File the registration statement with the
Commission as promptly as practicable, and shall use the
Company's best efforts to have the registration declared
effective under the Securities Act as soon as reasonably
practicable, in each instance giving due regard to the need to
prepare current financial statements, conduct due diligence and
complete other actions that are reasonably necessary to effect a
registered public offering.
(ii) Use the Company's best efforts to keep the
relevant registration statement Continuously Effective for up to
270 days or until such earlier date as of which all the
Registrable Securities under the Demand Registration statement
shall have been disposed of in the manner described in the
Registration Statement. Notwithstanding the foregoing, if for
any reason the effectiveness of a registration pursuant to this
Section 2 is suspended or, in the case of a Demand Registration,
postponed as permitted by Section 2.1(ii), the foregoing period
shall be extended by the aggregate number of days of such
suspension or postponement.
2.3. The Company shall be obligated to effect
no more than one Demand Registrations. For purposes of the
preceding sentence, registration shall not be deemed to have been
effected (i) unless a registration statement with respect thereto
has become effective, (ii) if after such registration statement
has become effective, such registration or the related offer,
sale or distribution of Registrable Securities thereunder is
interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or
court for any reason not attributable to the Selling Holders and
such interference is not thereafter eliminated, or (iii) if the
conditions to closing specified in the underwriting agreement, if
any, entered into in connection with such registration are not
satisfied or waived, other than by reason of a failure on the
part of the Selling Holders. If the Company shall have complied
with its obligations under this Agreement, a right to demand a
registration pursuant to this Section 2 shall be deemed to have
been satisfied upon the earlier of (x) the date as of which all
of the Registrable Securities included therein shall have been
disposed of pursuant to the Registration Statement, and (y) the
date as of which such Demand Registration shall have been
Continuously Effective for a period of 270 days provided no stop
order or similar order, or proceedings for such an order, is
thereafter entered or initiated.
2.4. A registration pursuant to this Section 2
shall be on such appropriate registration form of the Commission
as shall (i) be selected by the Company and be reasonably
acceptable to the Majority Selling Holders and (ii) permit the
disposition of the Registrable Securities in accordance with the
intended method or methods of disposition specified in the
request pursuant to Section 2.1(i).
2.5. If any registration pursuant to Section 2
involves an underwritten offering (whether on a "firm", "best
efforts" or "all reasonable efforts" basis or otherwise), or an
agented offering, the Majority Selling Holders shall have the
right to select the underwriter or underwriters and manager or
managers to administer such underwritten offering or the
placement agent or agents for such agented offering; provided,
however, that each Person so selected shall be reasonably
acceptable to the Company.
2.6. Whenever the Company shall effect a
registration pursuant to this Section 2 in connection with an
underwritten offering by one or more Selling Holders of
Registrable Securities: (i) if such Selling Holders have
requested the inclusion therein of more than one class of
Registrable Securities, and the Underwriters' Representative or
Agent advises each such Selling Holder in writing that, in its
opinion, the inclusion of more than one class of Registrable
Securities would adversely affect such offering, the Demanding
Holders holding at least a majority of the Registrable Securities
proposed to be sold therein by them, shall decide which class of
Registrable Securities shall be included therein in such offering
and the related registration, and the other class shall be
excluded; and (ii) if the Underwriters' Representative or Agent
advises each such Selling Holder in writing that, in its opinion,
the amount of securities requested to be included in such
offering (whether by Selling Holders or others) exceeds the
amount which can be sold in such offering within a price range
acceptable to the Majority Selling Holders, securities shall be
included in such offering and the related registration, to the
extent of the amount which can be sold within such price range:
First, the Registrable Securities requested by Demanding Holders
pursuant to this Section 2; and Second all other securities
requested to be included in such registration.
Section 3. Piggyback Registration.
3.1. If at any time the Company proposes to
register (including for this purpose a registration effected by
the Company for shareholders of the Company other than the
Holders) securities under the Securities Act in connection with
the public offering solely for cash on Form S-1, S-2 or S-3 (or
any replacement or successor forms), the Company shall promptly
give each Holder of Registrable Securities written notice of such
registration (a "Piggyback Registration"). Upon the written
request of each Holder given within 20 days following the date of
such notice, the Company shall cause to be included in such
registration statement and use its best efforts to be registered
under the Securities Act all the Registrable Securities that each
such Holder shall have requested to be registered. The Company
shall have the absolute right to withdraw or cease to prepare or
file any registration statement for any offering referred to in
this Section 3 without any obligation or liability to any Holder.
3.2. If the Underwriters' Representative or
Agent shall advise the Company in writing (with a copy to each
Selling Holder) that, in its opinion, the amount of Registrable
Securities requested to be included in such registration would
materially adversely affect such offering, or the timing thereof,
then the Company will include in such registration, subject to
any and all rights of third parties pursuant to agreements
existing on the date hereof, to the extent of the amount and
class which the Company is so advised can be sold without such
material adverse effect in such offering: First, all securities
proposed to be sold by the Company for its own account; second,
the Registrable Securities requested to be included in such
registration by Holders pursuant to this Section 3; and third all
other securities being registered pursuant to the exercise of
contractual rights comparable to the rights granted in this
Section 3.
3.3. Each Holder shall be entitled to have its
Registrable Securities included in an unlimited number of
Piggyback Registrations pursuant to this Section 3.
3.4. If the Company has previously filed a
registration statement with respect to Registerable Securities
pursuant to Section 2 or pursuant to this Section 3, and if such
previous registration 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-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 180
days has elapsed from the effective date of such a previous
registration.
Section 4. Registration Procedures. Whenever
required under Section 2 or Section 3 to effect the registration
of any Registrable Securities, the Company shall, as
expeditiously as practicable:
4.1. Prepare and file with the Commission a
registration statement with respect to such Registrable
Securities and use the Company's best efforts to cause such
registration statement to become effective.
4.2. Prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as
may be necessary to comply with the provisions of the Securities
Act and rules thereunder with respect to the disposition of all
securities covered by such registration statement. If the
registration is for an underwritten offering, the Company shall
amend the registration statement or supplement the prospectus
whenever required by the terms of the underwriting agreement
entered into pursuant to Section 5.2. In the event that any
Registrable Securities included in a registration statement
subject to, or required by, this Agreement remain unsold at the
end of the period during which the Company is obligated to use
its best efforts to maintain the effectiveness of such
registration statement, the Company may file a post-effective
amendment to the registration statement for the purpose of
removing such Securities from registered status.
4.3. Furnish to each Selling Holder of
Registrable Securities, without charge, such numbers of copies of
the registration statement, any pre-effective or post-effective
amendment thereto, the prospectus, including each preliminary
prospectus and any amendments or supplements thereto, in each
case in conformity with the requirements of the Securities Act
and the rules thereunder, and such other related documents as any
such Selling Holder may reasonably request in order to facilitate
the disposition of Registrable Securities owned by such Selling
Holder.
4.4. Use the Company's best efforts (i) to
register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such
states or jurisdictions as shall be reasonably requested by the
Underwriters' Representative or Agent (as applicable, or if
inapplicable, the Majority Selling Holders), and (ii) to obtain
the withdrawal of any order suspending the effectiveness of a
registration statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of the offer and
transfer of any of the Registrable Securities in any
jurisdiction, at the earliest possible moment; provided, however,
that the Company shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
4.5. In the event of any underwritten or
agented offering, enter into and perform the Company's
obligations under an underwriting or agency agreement (including
indemnification and contribution obligations of underwriters or
agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The
Company shall also cooperate with the Majority Selling Holders
and the Underwriters' Representative or Agent for such offering
in the marketing of the Registrable Securities, including making
available the Company's officers, accountants, counsel, premises,
books and records for such purpose, but the Company shall not be
required to incur any material out-of-pocket expense pursuant to
this sentence.
4.6. Promptly notify each Selling Holder of any
stop order issued or threatened to be issued by the Commission in
connection therewith (and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
4.7. Make generally available to the Company's
security holders copies of all periodic reports, proxy
statements, and other information referred to in Section 9.1 and
an earnings statement satisfying the provisions of Section 11(a)
of the Securities Act no later than 90 days following the end of
the 12-month period beginning with the first month of the
Company's first fiscal quarter commencing after the effective
date of each registration statement filed pursuant to this
Agreement.
4.8. Make available for inspection at
reasonable times and upon reasonable notice by any Selling
Holder, any underwriter participating in such offering and the
representatives of such Selling Holder and Underwriter (but not
more than one firm of counsel to such Selling Holders), all
financial and other information as shall be reasonably requested
by them, and provide the Selling Holder, any underwriter
participating in such offering and the representatives of such
Selling Holder and Underwriter the opportunity to discuss the
business affairs of the Company with its principal executives and
independent public accountants who have certified the audited
financial statements included in such registration statement, in
each case all as necessary to enable them to exercise their due
diligence responsibility under the Securities Act; provided,
however, that information that the Company determines, in good
faith, to be confidential shall not be disclosed unless such
Person signs a confidentiality agreement reasonably satisfactory
to the Company or the related Selling Holder of Registrable
Securities agrees to be responsible for such Person's breach of
confidentiality on terms reasonably satisfactory to the Company.
4.9. Use the Company's best efforts to obtain a
so-called "comfort letter" from its independent public
accountants, and legal opinions of counsel to the Company
addressed to the Selling Holders, in customary form and covering
such matters of the type customarily covered by such letters, and
in a form that shall be reasonably satisfactory to Majority
Selling Holders. The Company shall furnish to each Selling
Holder a signed counterpart of any such comfort letter or legal
opinion. Delivery of any such opinion or comfort letter shall be
subject to the recipient furnishing such written representations
or acknowledgments as are customarily provided by selling
shareholders who receive such comfort letters or opinions.
4.10. Provide and cause to be maintained a
transfer agent and registrar for all Registrable Securities
covered by such registration statement from and after a date not
later than the effective date of such registration statement
which transfer agent and registrar may be the Company.
4.11. Use all reasonable efforts to cause the
Registrable Securities covered by such registration statement (i)
if the Common Stock is then listed on a securities exchange or
included for quotation in a recognized trading market, to
continue to be so listed or included for a reasonable period of
time after the offering, and (ii) to be registered with or
approved by such other United States or state governmental
agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Selling
Holders of Registrable Securities to consummate the disposition
of such Registrable Securities.
4.12. Use the Company's reasonable efforts to
provide a CUSIP number for the Registrable Securities prior to
the effective date of the first registration statement including
Registrable Securities.
4.13. Take such other actions as are reasonably
required in order to expedite or facilitate the disposition of
Registrable Securities included in each such registration.
Section 5. Holders' Obligations. It shall be a
condition precedent to the obligations of the Company to take any
action pursuant to this Agreement with respect to the Registrable
Securities of any Selling Holder of Registrable Securities that
such Selling Holder shall:
5.1. Furnish to the Company such information
regarding such Selling Holder, the number of the Registrable
Securities owned by it, and the intended method of disposition of
such securities as shall be required to effect the registration
of such Selling Holder's Registrable Securities, and to cooperate
with the Company in preparing such registration;
5.2. Agree to sell their Registrable Securities
to the underwriters at the same price and on substantially the
same terms and conditions as the Company or the other Persons on
whose behalf the registration statement was being filed have
agreed to sell their securities, and to execute the underwriting
agreement agreed to by the Majority Selling Holders (in the case
of a registration under Section 2) or the Company and the
Majority Selling Holders (in the case of a registration under
Section 3).
Section 6. Expenses of Registration. Expenses in
connection with registrations pursuant to this Agreement shall be
allocated and paid as follows:
6.1. With respect to each Demand Registration
the Company shall bear and pay all expenses incurred in
connection with any registration, filing, or qualification of
Registrable Securities with respect to such Demand Registrations
for each Selling Holder (which right may be assigned to any
Person to whom Registrable Securities are Transferred as
permitted by Section 8), including all registration, filing and
National Association of Securities Dealers, Inc. fees, all fees
and expenses of complying with securities or blue sky laws, all
word processing, duplicating and printing expenses, messenger and
delivery expenses, the reasonable fees and disbursements of
counsel for the Company, and of the Company's independent public
accountants, including the expenses of "cold comfort" letters
required by or incident to such performance and compliance, and
the reasonable fees and disbursements of one firm of counsel for
the Selling Holders of Registrable Securities (selected by
Demanding Holders owning a majority of the Registrable Securities
owned by Demanding Holders to be included in a Demand
Registration) (the "Registration Expenses"), but excluding
underwriting discounts and commissions relating to Registrable
Securities (which shall be paid on a pro rata basis by the
Selling Holders) provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding
begun pursuant to Section 2 if the registration is subsequently
withdrawn at the request of the Majority Selling Holders (in
which case all Selling Holders shall bear such expense), unless
Holders whose Registrable Securities constitute a majority of the
Registrable Securities then outstanding agree that such withdrawn
registration shall constitute one of the demand registrations
under Section 2 hereof.
6.2. The Company shall bear and pay all
Registration Expenses incurred in connection with any Piggyback
Registrations pursuant to Section 3 for each Selling Holder
(which right may be Transferred to any Person to whom Registrable
Securities are Transferred as permitted by Section 8), but
excluding underwriting discounts and commissions relating to
Registrable Securities (which shall be paid on a pro rata basis
by the Selling Holders of Registrable Securities).
6.3. Any failure of the Company to pay any
Registration Expenses as required by this Section 6 shall not
relieve the Company of its obligations under this Agreement.
Section 7. Indemnification; Contribution. If any
Registrable Securities are included in a registration statement
under this Agreement:
7.1. To the extent permitted by applicable law,
the Company shall indemnify and hold harmless each Selling
Holder, each Person, if any, who controls such Selling Holder
within the meaning of the Securities Act, and each officer,
director, partner, and employee of such Selling Holder and such
controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including attorneys'
fees and disbursements and expenses of investigation, incurred by
such party pursuant to any actual or threatened action, suit,
proceeding or investigation, or to which any of the foregoing
Persons may become subject under the Securities Act, the Exchange
Act or other federal or state laws, insofar as such losses,
claims, damages, liabilities and expenses arise out of or are
based upon any of the following statements, omissions or
violations (collectively a "Violation"):
(i) Any untrue statement or alleged untrue
statement of a material fact contained in such registration
statement, including any preliminary prospectus or final
prospectus contained therein, or any amendments or supplements
thereto;
(ii) The omission or alleged omission to state
therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; or
(iii) Any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any applicable
state securities law or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any applicable state
securities law;
provided, however, that the indemnification required by this
Section 7.1 shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or expense if such settlement
is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage,
liability or expense to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in
conformity with written information furnished to the Company by
the indemnified party expressly for use in connection with such
registration; provided, further, that the indemnity agreement
contained in this Section 7 shall not apply to any underwriter to
the extent that any such loss is based on or arises out of an
untrue statement or alleged untrue statement of a material fact,
or an omission or alleged omission to state a material fact,
contained in or omitted from any preliminary prospectus if the
final prospectus shall correct such untrue statement or alleged
untrue statement, or such omission or alleged omission, and a
copy of the final prospectus has not been sent or given to such
person at or prior to the confirmation of sale to such person if
such underwriter was under an obligation to deliver such final
prospectus and failed to do so. The Company shall also indemnify
underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the
distribution, their officers, directors, agents and employees and
each person who controls such persons (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange
Act) to the same extent as provided above with respect to the
indemnification of the Selling Holders.
7.2. To the extent permitted by applicable law,
each Selling Holder shall indemnify and hold harmless the
Company, each of its directors, each of its officers who shall
have signed the registration statement, each Person, if any, who
controls the Company within the meaning of the Securities Act,
any other Selling Holder, any controlling Person of any such
other Selling Holder and each officer, director, partner, and
employee of such other Selling Holder and such controlling
Person, against any and all losses, claims, damages, liabilities
and expenses (joint and several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such
party pursuant to any actual or threatened action, suit,
proceeding or investigation, or to which any of the foregoing
Persons may otherwise become subject under the Securities Act,
the Exchange Act or other federal or state laws, insofar as such
losses, claims, damages, liabilities and expenses arise out of or
are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such
Selling Holder expressly for use in connection with such
registration; provided, however, that (x) the indemnification
required by this Section 7.2 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or expense
if settlement is effected without the consent of the relevant
Selling Holder of Registrable Securities, which consent shall not
be unreasonably withheld, and (y) in no event shall the amount of
any indemnity under this Section 7.2 exceed the gross proceeds
from the applicable offering received by such Selling Holder.
7.3. Promptly after receipt by an indemnified
party under this Section 7 of notice of the commencement of any
action, suit, proceeding, investigation or threat thereof made in
writing for which such indemnified party may make a claim under
this Section 7, such indemnified party shall deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the fees and
disbursements and expenses to be paid by the indemnifying party,
if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified
party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time following the
commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 7 but shall
not relieve the indemnifying party of any liability that it may
have to any indemnified party otherwise than pursuant to this
Section 7. Any fees and expenses incurred by the indemnified
party (including any fees and expenses incurred in connection
with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred,
within thirty (30) days of written notice thereof to the
indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to
indemnification hereunder). Any such indemnified party shall
have the right to employ separate counsel in any such action,
claim or proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has
agreed to pay such fees and expenses or (ii) the indemnifying
party shall have failed to promptly assume the defense of such
action, claim or proceeding or (iii) the named parties to any
such action, claim or proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to
it which are different from or in addition to those available to
the indemnifying party and that the assertion of such defenses
would create a conflict of interest such that counsel employed by
the indemnifying party could not faithfully represent the
indemnified party (in which case, if such indemnified party
notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party,
the indemnifying party shall not have the right to assume the
defense of such action, claim or proceeding on behalf of such
indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such
action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified
parties, unless in the reasonable judgment of such indemnified
party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to
such action, claim or proceeding, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such
additional counsel or counsels). No indemnifying party shall be
liable to an indemnified party for any settlement of any action,
proceeding or claim without the written consent of the
indemnifying party, which consent shall not be unreasonably
withheld.
7.4. If the indemnification required by this
Section 7 from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to in this Section 7:
(i) The indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of
such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the
actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to,
among other things, whether any Violation has been committed by,
or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
Violation. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set
forth in Section 7.1 and Section 7.2, any legal or other fees or
expenses reasonably incurred by such party in connection with any
investigation or proceeding.
(ii) The parties hereto agree that it would not
be just and equitable if contribution pursuant to this
Section 7.4 were determined by pro rata allocation or by any
other method of allocation which does not take into account the
equitable considerations referred to in Section 7.4(i). No
Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation.
7.5. If indemnification is available under this
Section 7, the indemnifying parties shall indemnify each
indemnified party to the full extent provided in this Section 7
without regard to the relative fault of such indemnifying party
or indemnified party or any other equitable consideration
referred to in Section 7.4.
7.6. The obligations of the Company and the
Selling Holders of Registrable Securities under this Section 7
shall survive the completion of any offering of Registrable
Securities pursuant to a registration statement under this
Agreement, and otherwise.
Section 8. Transfer of Registration Rights. The
rights of a Holder with respect to Registrable Securities
pursuant to this Agreement may be Transferred by such Holder to
any of its Person in connection with the Transfer of Registrable
Securities to such Person, provided that any such Transferee that
is not a party to this Agreement shall execute and deliver to the
Secretary of the Company a properly completed agreement
substantially in the form of Exhibit A.
Section 9. Covenants of the Company. The Company
hereby agrees and covenants as follows:
9.1. The Company shall file as and when
applicable, on a timely basis, all reports required to be filed
by it under the Exchange Act. If the Company is not required to
file reports pursuant to the Exchange Act, upon the request of
any Holder of Registrable Securities, the Company shall make
publicly available the information specified in subparagraph
(c)(2) of Rule 144 of the Securities Act, and take such further
action as may be reasonably required from time to time and as may
be within the reasonable control of the Company, to enable the
Holders to Transfer Registrable Securities without registration
under the Securities Act within the limitation of the exemptions
provided by Rule 144 under the Securities Act or any similar rule
or regulation hereafter adopted by the Commission.
9.2. (i) The Company shall not, and shall not
permit its majority owned subsidiaries to, effect any public sale
or distribution of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for shares of
Common Stock, during the five business days prior to, and during
the 90-day period beginning on, the commencement of a public
distribution of the Registrable Securities pursuant to any
registration statement prepared pursuant to this Agreement (other
than by the Company pursuant to such registration if the
registration is pursuant to Section 3). The Company shall not
effect any registration of its securities (other than on Form S-
4, Form S-8, or any successor forms to such forms or pursuant to
such other registration rights agreements as may be approved in
writing by the Majority Selling Holders, as the case may be, or
effect any public or private sale or distribution of any of its
securities, including a sale pursuant to Regulation D under the
Securities Act, whether on its own behalf or at the request of
any holder or holders of such securities from the date of a
request for a Demand Registration pursuant to Section 2.1 until
the earlier of (x) 90 days following the date as of which all
securities covered by such Demand Registration statement shall
have been Transferred, and (y) 90 days following the effective
date of such Demand Registration statement, unless the Company
shall have previously notified in writing all Selling Holders of
the Company's desire to do so, and Selling Holders owning a
majority of the Registrable Securities or the Underwriters'
Representative, if any, shall have consented thereto in writing.
(ii) Any agreement entered into after the
date of this Agreement pursuant to which the Company or any of
its majority owned subsidiaries issues or agrees to issue any
privately placed securities similar to any issue of the
Registrable Securities (other than (x) shares of Common Stock
pursuant to a stock incentive, stock option, stock bonus, stock
purchase or other employee benefit plan of the Company approved
by its Board of Directors, and (y) securities issued to Persons
in exchange for ownership interests in any Person in connection
with a business combination in which the Company or any of its
majority owned subsidiaries is a party) shall contain a provision
whereby holders of such securities agree not to effect any public
sale or distribution of any such securities during the periods
described in the first sentence of Section 9.2(i), in each case
including a sale pursuant to Rule 144 under the Securities Act
(unless such Person is prevented by applicable statute or
regulation from entering into such an agreement).
9.3. The Company shall not, directly or
indirectly, (x) enter into any merger, consolidation or
reorganization in which the Company shall not be the surviving
corporation or (y) Transfer or agree to Transfer all or
substantially all the Company's assets, unless prior to such
merger, consolidation, reorganization or asset Transfer, the
surviving corporation or the Transferee, respectively, shall have
agreed in writing to assume the obligations of the Company under
this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the
securities which the Holders of Registrable Securities would be
entitled to receive in exchange for Registrable Securities
pursuant to any such merger, consolidation or reorganization.
Section 10. Amendment, Modification and Waivers;
Further Assurances.
(i) This Agreement may be amended with the
consent of the Company 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 shall have obtained the
written consent of Holders owning Registrable Securities
possessing a majority in number of the Registrable Securities
then outstanding to such amendment, action or omission to act.
(ii) No waiver of any terms or conditions of
this Agreement shall operate as a waiver of any other breach of
such terms and conditions or any other term or condition, nor
shall any failure to enforce any provision hereof operate as a
waiver of such provision or of any other provision hereof. No
written waiver hereunder, unless it by its own terms explicitly
provides to the contrary, shall be construed to effect a
continuing waiver of the provisions being waived and no such
waiver in any instance shall constitute a waiver in any other
instance or for any other purpose or impair the right of the
party against whom such waiver is claimed in all other instances
or for all other purposes to require full compliance with such
provision.
(iii) Each of the parties hereto shall execute
all such further instruments and documents and take all such
further action as any other party hereto may reasonably require
in order to effectuate the terms and purposes of this Agreement.
Section 11. Assignment; Benefit. This Agreement and
all of the provisions hereof shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
heirs, assigns, executors, administrators or successors;
provided, however, that except as specifically provided herein
with respect to certain matters, neither this Agreement nor any
of the rights, interests or obligations hereunder shall be
assigned or delegated by the Company without the prior written
consent of Holders owning Registrable Securities possessing a
majority in number of the Registrable Securities outstanding on
the date as of which such delegation or assignment is to become
effective. A Holder may Transfer its rights hereunder to a
successor in interest to the Registrable Securities owned by such
assignor only as permitted by Section 8.
Section 12. Miscellaneous.
12.1. Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING REGARD TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF.
12.2. Notices. All notices and requests given
pursuant to this Agreement shall be in writing and shall be made
by hand-delivery, first-class mail (registered or certified,
return receipt requested), confirmed facsimile or overnight air
courier guaranteeing next business day delivery to the relevant
address specified on Schedule 1 to this Agreement or in the
relevant agreement in the form of Exhibit A whereby such party
became bound by the provisions of this Agreement. Except as
otherwise provided in this Agreement, the date of each such
notice and request shall be deemed to be, and the date on which
each such notice and request shall be deemed given shall be: at
the time delivered, if personally delivered or mailed; when
receipt is acknowledged, if sent by facsimile; and the next
business day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next business day delivery.
12.3. Entire Agreement; Integration. This
Agreement supersedes all prior agreements between or among any of
the parties hereto with respect to the subject matter contained
herein and therein, and such agreements embody the entire
understanding among the parties relating to such subject matter.
12.4. Injunctive Relief. Each of the parties
hereto acknowledges that in the event of a breach by any of them
of any material provision of this Agreement, the aggrieved party
may be without an adequate remedy at law. Each of the parties
therefore agrees that in the event of such a breach hereof the
aggrieved party may elect to institute and prosecute proceedings
in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach hereof. By
seeking or obtaining any such relief, the aggrieved party shall
not be precluded from seeking or obtaining any other relief to
which it may be entitled.
12.5. Section Headings. Section headings are
for convenience of reference only and shall not affect the
meaning of any provision of this Agreement.
12.6. Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be an
original, and all of which shall together constitute one and the
same instrument. All signatures need not be on the same
counterpart.
12.7. Severability. If any provision of this
Agreement shall be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity and enforceability
of the remaining provisions of this Agreement, unless the result
thereof would be unreasonable, in which case the parties hereto
shall negotiate in good faith as to appropriate amendments
hereto.
12.8. Filing. A copy of this Agreement and of
all amendments thereto shall be filed at the principal executive
office of the Company with the corporate recorder of the Company.
12.9. Termination. This Agreement may be
terminated at any time by a written instrument signed by the
parties hereto. Unless sooner terminated in accordance with the
preceding sentence, this Agreement (other than Section 7 hereof)
shall terminate in its entirety on such date as there shall be no
Registrable Securities outstanding, provided that any shares of
Common Stock previously subject to this Agreement shall not be
Registrable Securities following the sale of any such shares in
an offering registered pursuant to this Agreement.
12.10. Attorneys' Fees. In any action or
proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the
successful party shall be entitled to recover reasonable
attorneys' fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available
remedy.
12.11. No Third Party Beneficiaries. Nothing
herein expressed or implied is intended to confer upon any
person, other than the parties hereto or their respective
permitted assigns, successors, heirs and legal representatives,
any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly
executed by the parties hereto as of the date first written
above.
SHARED TECHNOLOGIES CELLULAR, INC.
By: ____________________________
Name:
Title:
SALOMON BROTHERS HOLDING COMPANY
INC
By: _____________________________
Name:
Title:
EXHIBIT A
to Registration
Rights Agreement
AGREEMENT TO BE BOUND
BY THE REGISTRATION RIGHTS AGREEMENT
The undersigned, being the transferee of ______ shares
of the Common Stock, with a par value of $0.01 per share [or
describe other capital stock received in exchange for such common
stock] (the "Registrable Securities"), of SHARED TECHNOLOGIES
CELLULAR, INC., a Delaware corporation (the "Company"), as a
condition to the receipt of such Registrable Securities,
acknowledges that matters pertaining to the registration of such
Registrable Securities is governed by the Registration Rights
Agreement dated as of April 15, 1998 initially among the Company
and Salomon Brothers Holding Company Inc referred to therein (the
"Agreement"), and the undersigned hereby (1) acknowledges receipt
of a copy of the Agreement, and (2) agrees to be bound as a
Holder by the terms of the Agreement, as the same has been or may
be amended from time to time.
Agreed to this __ day of ______________, ____________.
_________________________________
_________________________________*
_________________________________*
*Include address for notices.
EXECUTION COPY
WARRANT PURCHASE AGREEMENT
dated as of
April 15, 1998
between
SHARED TECHNOLOGIES CELLULAR, INC.
and
SALOMON BROTHERS HOLDING COMPANY INC
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement")
dated as of April 15, 1998, by and between SHARED TECHNOLOGIES
CELLULAR, INC., a Delaware corporation (the "Company"), and
SALOMON BROTHERS HOLDING COMPANY INC, a Delaware corporation (the
"Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement of
even date herewith among the Company and the Purchaser, as
Lender, (the "Credit Agreement"), the Purchaser is extending
certain credit facilities to the Company;
WHEREAS, in order to induce the Purchaser to enter into
the Credit Agreement, the Company has agreed to issue and sell to
the Purchaser a Warrant initially exercisable for 200,000 shares
of the Common Stock of the Company;
NOW, THEREFORE, in consideration of the mutual
promises, representations, warranties, covenants and conditions
set forth in this Agreement, and for other good and valuable
consideration the receipt and adequacy of which is hereby
acknowledged, the parties mutually agree as follows:
SECTION 1. DEFINITIONS.
The terms hereinafter set forth when used herein shall
have the following meanings, and any terms not otherwise defined
herein that are defined in the Credit Agreement shall have the
respective meanings specified in the Credit Agreement:
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Common Stock" shall mean the common stock, with a par
value of $0.01 per share, of the Company.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the
Securities Act.
"Contractual Obligation" shall mean, with respect to
any person, any provision of any mortgage or security issued by
such person or of any lease, franchise, agreement, guaranty,
instrument or undertaking to which such person is a party or by
which it or any of its properties is bound.
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof, and
any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Requirement of Law" shall mean any applicable law,
statute, treaty, rule, regulation, arbitration award, judgment,
decree, order or other determination of any Governmental
Authority.
"Securities Act" shall mean the Securities Act of 1933,
as amended, or any similar Federal statute, and the rules and
regulations of the Commission promulgated thereunder, all as the
same shall be in effect at the time.
"Warrant" shall have the meaning assigned in
Section 2.01 hereof.
SECTION 2. ISSUE AND SALE OF WARRANT.
2.01. Sale of Warrant. Concurrently with the
execution and delivery hereof, the Company is issuing and selling
to the Purchaser, and the Purchaser is purchasing from the
Company, Warrant No. SB-1 initially exercisable for the purchase
of 200,000 shares of Common Stock (the "Warrant"), for the
purchase price of $1.00.
2.02. Allocated Purchase Price. The Company and the
Purchaser hereby acknowledge that for the purposes of Section
1273(c)(2) of the Code, the Warrant is a part of an investment
unit with the loans being made by the Purchaser to the Company
under the Credit Agreement, and that the allocated purchase price
of the Warrant for such purposes is $1.00. The Company and the
Purchaser agree to use the foregoing allocated purchase price as
the purchase price of the Warrant for all income tax purposes.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby respectively represents and
warrants to the Company as follows:
3.01. Authority. The Purchaser has full legal right,
power and authority to enter into and perform this Agreement, and
the execution and delivery of this Agreement by it and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action. This Agree-
ment constitutes the legal, valid and binding obligation of the
Purchaser, enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorgani-
zation or similar laws affecting creditors' rights generally and
subject to general principles of equity.
3.02. Brokers and Finders. No brokerage or finder's
commissions or fees are payable in connection with the trans-
actions contemplated by this Agreement on account of any action
taken by the Purchaser or its representatives, and the Purchaser
will indemnify the Company against and hold the Company harmless
from any liability, loss or expense (including, without
limitation, reasonable attorneys' fees) arising in connection
with any claim for any such commissions or fees.
3.03 Investor Representation. Purchaser is acquiring
the Warrant for the Common Stock for its own account and not with
a view to reselling or distributing such securities in any
transaction which would constitute a "distribution" within the
meaning of the Securities Act. Purchaser has such knowledge and
experience in financial and business matters that it is capable
of evaluating the merits and risks of the investment in the
Warrant and the Common Stock. Purchaser understands that neither
the Warrant nor the Common Stock has been registered under the
Securities Act or any applicable state securities laws
(collectively, the "Acts") and that the Company is relying upon
exemptions from registration under the Acts based in part on its
representations under this Agreement, and that the Warrant and
the Common Stock may not be resold without registration under the
Acts or an exemption therefrom. Purchaser is not an entity
formed solely to make this investment. Purchaser is an
"accredited investor" as defined in Rule 501 promulgated under
the Securities Act.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the
Purchaser as follows:
4.01. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware, with all requisite power to own its
properties and assets and to conduct its business as now
conducted, and is duly qualified as a foreign corporation and is
in good standing under the laws of each jurisdiction in which a
failure to be so qualified and in good standing will have or is
reasonably likely to have a material adverse effect on the
business, operations, property, prospects or condition (financial
or otherwise) of the Company or would have an adverse effect on
the enforceability against the Company of this Agreement or the
Warrant or the ability of the Company to perform its obligations
hereunder or thereunder
4.02. Capitalization. (a) The Company's authorized
capital stock consists of: (i) 20,000,000 shares of Common Stock,
of which (A) 7,138,601 shares are issued and outstanding; (B)
200,000 shares are reserved for issuance upon exercise of the
Warrant to be issued to the Purchaser hereunder; (C) 100,000
shares are reserved for issuance upon exercise of the warrants
issued to Anthony D. Autorino; and (D) 4,283,831 shares are
reserved for conversion or issuance, as applicable, as set forth
on Schedule B hereto, and (ii) 5,000,000 shares of $0.01 par
value Preferred Stock, of which zero shares are issued and
outstanding. All of the outstanding shares of capital stock of
the Company have been duly authorized and validly issued, are
fully paid and nonassessable, free of preemptive rights and have
been offered and issued without violation of the Securities Act
or any applicable state securities or blue sky law or any
preemptive rights of any person. Schedule A hereto accurately
sets forth, as of the date hereof, the number of issued and
outstanding shares of Common Stock held by each person known by
the Company to own beneficially or of record more than 5% of any
class of the Company's outstanding capital stock.
(b) Except as disclosed on Schedule B hereto:
(i) there are no issued or outstanding securities that are
convertible into or exchangeable for shares of the Company's
capital stock ("Convertible Securities"); (ii) there are no
issued or outstanding subscriptions, options, warrants or other
rights to purchase or acquire any shares of the capital stock of
the Company or any Convertible Securities ("Option Rights") other
than the Warrant; (iii) the Company is not a party to any
agreement or understanding pursuant to which it is obligated to
purchase or redeem any shares of its capital stock or any
Convertible Securities or Option Rights and is not otherwise
under any obligation to repurchase, redeem or otherwise acquire
any shares of its capital stock or any Convertible Securities or
Option Rights; (iv) the Company is not a party to any agreement
or understanding pursuant to which it is obligated to register
any shares of its capital stock or other securities under the
Securities Act or any state securities laws; (v) to the best
knowledge of the Company, no securities holder of the Company is
a party to any voting agreement, voting trust, irrevocable proxy
or other agreement affecting the voting rights of any shares of
the Company's capital stock or any agreement providing for any
call or put option, right of first refusal or offer or other
right to acquire or dispose of any shares of the Company's
capital stock or any Convertible Securities or Option Rights and
(vi) there are no outstanding debt securities of the Company that
provide the holders thereof with voting rights. Except as set
forth on Schedule B and except for the shares of Common Stock
reserved for issuance upon exercise of the Warrant, no shares of
Common Stock are issuable upon the exercise of any outstanding
Convertible Securities or Option Rights of the Company and no
additional shares of Common Stock will become issuable upon
exercise of such Convertible Securities or Option Rights on
account of the issuance of the Warrant.
4.03. Valid Issuance of Warrant. (a) The Warrant has
been duly executed and delivered by the Company, has been duly
authorized and validly issued free and clear of all liens,
encumbrances, equities and claims, are fully paid and non-assess-
able, and constitutes the legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally and subject to
general principles of equity.
(b) The shares of Common Stock issuable upon exercise
of the Warrant have been duly authorized and reserved for
issuance and, when issued in accordance with the terms of the
Warrant, will be validly issued, fully paid and non-assessable,
free and clear of all liens, encumbrances, equities and claims
and without violation of any preemptive rights.
4.04. Authority. The Company has full legal right,
power and authority (i) to enter into and perform this Agreement
and (ii) to issue the Warrant and to perform all its obligations
relating thereto. The execution and delivery of this Agreement,
the issuance of the Warrant by the Company and the consummation
of the transactions contemplated hereby and thereby have all been
duly authorized by the Board of Directors of the Company and,
where required, the shareholders of the Company. No consent,
waiver or authorization of, or filing with any other Person
(including without limitation, any Governmental Authority) is
required in connection with any of the foregoing or with the
validity or enforceability against the Company of this Agreement
or the Warrant. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with
its terms, except as may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally and subject to general principles of equity.
4.05. No Conflict. The execution, delivery and
performance of this Agreement and the Warrant and the
consummation of the transactions contemplated hereby and thereby
do not and will not, with or without the passage of time or the
giving of notice or both, (i) conflict with or violate any
provision of the Company's Certificate of Incorporation or By-
laws, (ii) to the best of the Company's knowledge, conflict with
or violate any Requirement of Law or Contractual Obligation
applicable to the Company, (iii) result in, or require, the
creation or imposition of any Lien on any of its properties or
revenues pursuant to any Requirement of Law or Contractual
Obligation or (iv) require any action by or in respect of, or
filing with, any governmental body, agency or official.
4.06. Litigation. No action, suit, claim, litigation,
investigation or proceeding (formal or informal) of or before any
arbitrator or Governmental Authority is pending or (to the best
of the Company's knowledge) threatened by or against the Company
or against any of its properties or revenues with respect to this
Agreement or the Warrant or any of the transactions contemplated
hereby or thereby.
4.07. Compliance With Laws. To the best of the
Company's knowledge, the Company is in compliance, in all
material respects, with all laws, ordinances, governmental rules
and regulations to which it is subject, where the failure to so
comply would have a material adverse effect on the
enforceability against the Company of this Agreement or the
Warrant or the ability of the Company to perform its obligations
hereunder and thereunder.
4.08. Brokers and Finders. Except as disclosed in the
Credit Agreement and the schedules thereto, no brokerage or
finder's commissions or fees are payable in connection with the
transactions contemplated by this Agreement on account of any
action taken by the Company, its affiliates or their represen-
tatives, and the Company will indemnify the Purchaser against and
hold the Purchaser harmless from any liability, loss or expense
(including, without limitation, reasonable attorneys' fees)
arising in connection with any claim for any such commissions or
fees.
4.09. Securities Law Compliance. The offer and sale
of the Warrant hereunder is exempt from the registration and
prospectus delivery requirements of the Securities Act, and the
rules and regulations thereunder, and the securities laws of the
state of New York. The Company has not offered the Warrant to
anyone other than the Purchaser, and no securities of the same
class as the Warrant have been offered and sold by the Company
within the six-month period immediately prior to the date hereof.
4.10. Transfer Taxes. Except as have been paid by the
Company prior to the date hereof, no fees, taxes, charges or
other amounts imposed by any federal, state or local taxing or
other Governmental Authority are or will become payable by the
Company or the Purchaser as a consequence of the consummation of
any of the transactions contemplated hereby (including, without
limitation, transfer taxes and filing fees).
4.11. Full Disclosure. This Agreement, together with
the Credit Agreement and the exhibits, schedules, attachments,
documents, certificates and other written items and materials
prepared and supplied to the Purchaser by or on behalf of the
Company with respect to the transactions contemplated hereby and
thereby, taken as a whole, do not and will not, as the case may
be, contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements
contained therein not misleading in the context made. There is
no fact known to the Company which the Company has not disclosed
to the Purchaser in writing and which is reasonably likely to
have a material adverse effect on the business, operations,
property, prospects or condition (financial or otherwise) of the
Company or would have an adverse effect on the enforceability
against the Company of this Agreement or the Warrant or the
ability of the Company to perform its obligations hereunder or
thereunder.
SECTION 5. MISCELLANEOUS.
5.01. Expenses. The Company agrees to pay, and save
the Purchaser harmless against liability for the payment of, all
reasonable out-of-pocket expenses arising in connection with the
transactions contemplated by this Agreement or by the Warrant,
including, without limitation, any stamp or similar taxes
(including interest and penalties, if any) which may be
determined to be payable in respect of the execution, delivery,
issue and sale of the Warrant, the reasonable fees and expenses
of counsel to the Purchaser in connection with the preparation of
this Agreement and the issuance of the Warrant, including any
modifications, amendments or consents to such agreements, the
expense of preparing and issuing the Warrant, the cost of
delivering the Warrant to such place as the Purchaser shall
determine, insured to their satisfaction, and the costs and
expenses incurred in the preparation of all certificates and
letters on behalf of the Company and of the performance by the
Company of and compliance with all agreements and conditions
contained herein to be performed or complied with.
5.02. Notices.
(a) All communications under this Agreement shall be
in writing and shall be mailed by first class mail, postage
prepaid,
(1) if to the Purchaser, to:
Salomon Brothers Holding Company Inc
Seven Work Trade Center
New York, New York 10048
Attention: Townsend U. Weekes, Jr.
Telecopier No. (212) 783-2823
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: DeVerille Huston
Telecopier No. (312) 853-7036
or at such other address as such Purchaser may have furnished the
Company in writing, or
(2) if to the Company, to:
Shared Technologies Cellular, Inc.
100 Great Meadow Road
Wethersfield, Connecticut 06109
Attention: Vincent DiVincenzo
Telecopier No. (860)258-2455
with a copy to:
Shipman & Goodwin LLP
One American Row
Hartford, Connecticut 06103-2819
Attention: Deborah Frisone
Telecopier No. (860)251-5899
or at such other address as the Company may have furnished to the
Purchaser in writing.
(b) Any notice so addressed and mailed by registered
or certified mail shall be deemed to have been given when mailed.
5.03. Survival. All warranties, representations, and
covenants made herein or in any certificate or other instrument
delivered by the parties hereto or on their behalf under this
Agreement shall be considered to have been relied upon and shall
survive the delivery of the Warrant and payment therefor,
regardless of any investigation made by any such party or on
their behalf for so long as the Warrant is exercisable. All
statements in any such certificate or other instrument shall
constitute warranties and representations by such party
hereunder.
5.04. Amendment. This Agreement may be amended only
by a written instrument signed by the Purchaser and the Company.
5.05. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns. Any transfer of the
Warrant shall be deemed to constitute an automatic assignment of
the rights of the transferor hereunder to the transferee.
5.06. Severability. Should any part of this Agreement
for any reason be declared invalid, such decision shall not
affect the validity of any remaining portion, which remaining
portion shall remain in full force and effect as if this
Agreement had been executed with the invalid portion thereof
eliminated and it is hereby declared the intention of the parties
hereto that they would have executed the remaining portion of
this Agreement without including therein any such part or parts
which may, for any reason, be hereafter declared invalid.
5.07. Captions. The descriptive headings of the
various Sections or parts of this Agreement are for convenience
only and shall not affect the meaning or construction of any of
the provisions hereof.
5.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW RULES THEREOF.
5.09. Waiver of Jury Trial. The Company and the
Purchaser each hereby expressly acknowledges that any dispute
arising out of, connected with, or incidental to the relation-
ships established between them in connection with, this Agree-
ment, will be a highly complex commercial matter inappropriate
for resolution by a jury. The Company and the Purchaser each
hereby waives any right to have a jury participate in resolving
any such dispute, whether sounding in contract, tort or other-
wise. Instead, any disputes resolved in court will be resolved
in a bench trial without a jury.
5.10. Entire Agreement. This Agreement, together with
the Credit Agreement, the Warrant and the Registration Rights
Agreement of even date herewith between the Company and the
Purchaser, is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein and
therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to
herein and therein. This Agreement, together with the Credit
Agreement and the Warrant, supersedes all prior agreements and
understandings between the parties with respect to such subject
matter.
5.11. Attorneys' Fees. In any action or proceeding
brought to enforce any provision of this Agreement or the
Warrant, or where any provision hereof or thereof is validly
asserted as a defense, the successful party shall be entitled to
recover reasonable attorneys' fees in addition to any other
available remedy.
5.12. Counterparts. This Agreement may be executed in
any number of counterparts, each executed counterpart consti-
tuting an original but all together only one agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By: ______________________________
Name:
Title:
SALOMON BROTHERS HOLDING COMPANY INC
By:_______________________________
Name:
Title:
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS. 1
SECTION 2. ISSUE AND SALE OF WARRANT. 2
2.01. Sale of Warrant 2
2.02. Allocated Purchase Price 2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 2
3.01. Authority 2
3.02. Brokers and Finders 2
3.03 Investor Representation 3
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3
4.01. Organization 3
4.02. Capitalization 3
4.03. Valid Issuance of Warrant 4
4.04. Authority 4
4.05. No Conflict 5
4.06. Litigation 5
4.07. Compliance With Laws 5
4.08. Brokers and Finders 5
4.09. Securities Law Compliance 5
4.10. Transfer Taxes 5
4.11. Full Disclosure 6
SECTION 5. MISCELLANEOUS. 6
5.01. Expenses 6
5.02. Notices 6
5.03. Survival 7
5.04. Amendment 8
5.05. Successors and Assigns 8
5.06. Severability 8
5.07. Captions 8
5.08. GOVERNING LAW 8
5.09. Waiver of Jury Trial 8
5.10. Entire Agreement 8
5.11. Attorneys' Fees 8
5.12. Counterparts 9
Schedule A -- Schedule of Capital Stock
Schedule B -- Schedule of Outstanding Convertible
Securities and Option Rights
EXECUTION COPY
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED
UPON ITS EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Warrant No. SB-1
Number of Shares: 200,000
(subject to adjustment)
Date of Issuance: April 15, 1998
SHARED TECHNOLOGIES CELLULAR, INC.
Common Stock Purchase Warrant
SHARED TECHNOLOGIES CELLULAR, INC. (the "Company"), for
value received, hereby certifies that Salomon Brothers
Holding Company Inc, or its registered assigns (the
"Registered Holder"), is entitled, subject to the terms set
forth below, to purchase from the Company, at any time or
from time to time on or after the date hereof, and until
5:00 p.m. Eastern time, April 15, 2003 (the "Exercise
Period"), shares of its common stock, $.01 par value per
share ("Common Stock") (subject to appropriate adjustment in
the event of any stock dividend, stock split, combination or
other similar recapitalization affecting such Common Stock),
at a purchase price per share of $5.00. The number of
shares purchasable upon exercise of this Warrant, and the
purchase price per share, each as adjusted from time to time
pursuant to the provisions of this Warrant, are hereinafter
referred to as the "Warrant Stock" and the "Purchase Price,"
respectively.
1. Exercise.
(a) This Warrant may be exercised by the Registered
Holder, in whole or in part, by surrendering this Warrant,
with the Subscription Form appended hereto as Exhibit I duly
completed and executed by such Registered Holder or by such
Registered Holder's duly authorized attorney, at the
principal office of the Company, or at such other office or
agency as the Company may designate, accompanied by payment
to the Company of an amount equal to the product of the then
applicable Purchase Price multiplied by the number of shares
of Common Stock then being purchased pursuant to one of the
payment methods permitted under Section 1(b) below.
(b) Payment shall be made either (1) by cash, money
order, certified or bank cashier's check, or wire transfer,
(b) by converting the Warrant, or any portion hereof, into
Common Stock pursuant to Section 1(c) below ("Warrant
Conversion"), (c) cancellation of indebtedness outstanding
under that certain Credit Agreement of even date herewith
between the Company and the Registered Holder or (d) any
combination of the foregoing at the option of the Registered
Holder.
(c) The Registered Holder may exercise the purchase
right represented by this Warrant with respect to a
particular number of shares of Common Stock subject to his
Warrant ("Converted Warrant Stock") and elect to pay for the
Converted Warrant Stock through Warrant Conversion as
defined in Section 1.1(b), and by specifying such election
in the Subscription Form. In such event, the Company shall
deliver to the Registered Holder (without payment by the
Registered Holder of any Purchase Price or any cash or other
consideration) that number of shares of Common Stock equal
to the quotient obtained by dividing (x) the value of this
Warrant (or the specified portion hereof) on the date of
exercise (the "Exercise Date"), which value shall be
determined by subtracting (A) the aggregate Purchase Price
of the Converted Warrant Stock immediately prior to the
exercise of this Warrant from (B) the aggregate Fair Market
Value of the Converted Warrant Stock issuable upon exercise
of this Warrant (or the specified portion hereof) on the
Exercise Date, by (y) the Fair Market Value of one share of
Common Stock on the Exercise Date. For purposes of this
Section 1, "Fair Market Value" per share of Common Stock as
of any specified date shall mean the higher of (i) the book
value per share of Common Stock as of such date and (ii) (A)
if the Common Stock is publicly traded on such date, the
current market price per share or (B) if the Common Stock is
not publicly traded on such date, (1) the fair market value
per share of Common Stock as determined in good faith by the
Board of Directors of the Company and set forth in a written
notice to the Registered Holder.
(d) Each exercise of this Warrant shall be deemed to
have been effected immediately prior to the close of
business on the day on which this Warrant shall have been
surrendered to the Company as provided in subsection 1(a)
above. At such time, the person or persons in whose name or
names any certificates for Warrant Stock shall be issuable
upon such exercise as provided in subsection 1(e) below
shall be deemed to have become the holder or holders of
record of the Warrant Stock represented by such
certificates.
(e) As soon as practicable after the exercise of this
Warrant in full or in part, and in any event within 15 days
thereafter, the Company at its expense (including payment of
any applicable transfer taxes) will cause to be issued in
the name of, and delivered to, the Registered Holder, or as
such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number
of full shares of Warrant Stock to which such Registered
Holder shall be entitled upon such exercise, and
(ii) in case such exercise is in part only, a new
warrant or warrants (dated the date hereof) of like tenor,
calling in the aggregate on the face or faces thereof for
the number of shares of Warrant Stock equal (without giving
effect to any adjustment therein) to the number of such
shares called for on the face of this Warrant minus the
number of such shares purchased by the Registered Holder
upon such exercise as provided in subsection 1(a) above.
2. Adjustments.
(a) If outstanding shares of the Company's Common
Stock shall be subdivided into a greater number of shares or
a dividend in Common Stock shall be paid in respect of
Common Stock, the Purchase Price in effect immediately prior
to such subdivision or at the record date of such dividend
shall simultaneously with the effectiveness of such
subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares
of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to
such combination shall, simultaneously with the
effectiveness of such combination, be proportionately
increased.
(b) If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a
change in par value or a subdivision or combination as
provided for in subsection 2(a) above), or any consolidation
or merger of the Company with or into another corporation,
or a transfer of all or substantially all of the assets of
the Company, then, as part of any such reorganization,
reclassification, consolidation, merger or sale, as the case
may be, lawful provision shall be made so that the
Registered Holder of this Warrant shall have the right
thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property
which such Registered Holder would have been entitled to
receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger or sale, as the case
may be, such Registered Holder had held the number of shares
of Common Stock which were then purchasable upon the
exercise of this Warrant.
(c) When any adjustment is required to be made in the
Purchase Price pursuant to this Section 2, the number of
shares of Warrant Stock purchasable upon the exercise of
this Warrant shall be changed to the number determined by
dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior
to such adjustment, multiplied by the Purchase price in
effect immediately prior to such adjustment, by (ii) the
Purchase Price in effect immediately after such adjustment.
3. Fractional Shares. The Company shall not be
required upon the exercise of this Warrant to issue any
fractional shares. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Company
shall pay cash equal to such fraction multiplied by the then
fair market value of the Common Stock.
4. Limitation on Sales, etc. Each holder of this
Warrant acknowledges that this Warrant and the Warrant Stock
have not been registered under the Securities Act of 1933,
as amended (the "Act"), and agrees not to sell, pledge,
distribute, offer for sale, transfer or otherwise dispose of
this Warrant or any Warrant Stock issued upon its exercise
in the absence of (a) an effective registration statement
under the Act as to this Warrant or such Warrant Stock and
registration or qualification of this Warrant or such
Warrant Stock under any applicable Blue Sky or state
securities law then in effect, or (b) an opinion of counsel,
satisfactory to the Company, that such registration and
qualification are not required. Each certificate or other
instrument for Warrant Stock issued upon the exercise of
this Warrant shall bear a legend substantially to the
foregoing effect.
5. Liquidation or Dissolution; Dividends.
(a) In case the Company at any time while this Warrant
shall remain unexpired and unexercised, shall dissolve,
liquidate, or wind up its affairs, other than with respect
to a transaction described in Section 2(b), the Registered
Holder shall have the right to exercise this Warrant for a
period of sixty (60) days after the later of (i) such event
having occurred and (ii) receipt by the Registered Holder of
a notice from the Company indicating the kind and amount of
securities or assets issuable or distributable to holders of
shares of Common Stock with respect to such event, and upon
exercise of this Warrant during such period, the Registered
Holder shall have the right to receive in lieu of each share
of the Warrant Stock, the same kind and amount of any
securities or assets as may be issuable, distributable, or
payable upon any such dissolution, liquidation, or winding
up with respect to each of the shares of the Common Stock.
(b) At any time the Company pays any dividends or
makes any other distributions with respect to the Common
Stock, the Company shall pay at such time to the Registered
Holder of this Warrant the dividends or other distributions
which such Registered Holder would have been entitled to
receive had such Registered Holder exercised all of its
rights to acquire or receive Common Stock under such Warrant
on the date as of which the holders of Common Stock of
record entitled to such dividends or other distributions
were determined.
6. Exchange of Warrants. Upon the surrender by the
Registered Holder of this Warrant, properly endorsed, to the
Company at the principal office of the Company, the Company
will, subject to the provisions of Section 4 hereof, issue
and deliver to or upon the order of the Registered Holder,
at the Company's expense, a new Warrant or Warrants of like
tenor, in the name of such Registered Holder or as such
Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the
aggregate on the face or faces thereof for the number of
shares of Warrant Stock called for on the face or faces of
the Warrant or Warrants so surrendered.
7. Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and (in the case
of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount
reasonably satisfactory to the Company, or (in the case of
mutilation) upon surrender and cancellation of this Warrant,
the Company will issue, in lieu thereof, a new Warrant of
like tenor.
8. Transfers, etc.
(a) The Company will maintain a register (the "Warrant
Register") containing the names and addresses of the
Registered Holders of this Warrant. Any Registered Holder
may change its or his address as shown on the Warrant
Register by written notice to the Company requesting such
change.
(b) Subject to the provisions of Section 4 hereof,
this Warrant and all rights hereunder are transferable, in
whole or in part, upon surrender of this Warrant with a
properly executed assignment (in the form of Exhibit II
hereto) at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the
Warrant Register, the Company may treat the Registered
Holder of this Warrant as the absolute owner hereof for all
purposes; provided, however, that if and when this Warrant
is properly assigned in blank, the Company may (but shall
not be obligated to) treat the bearer hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to
the contrary.
9. Mailing of Notices, etc. All notices and other
communications from the Company to the Registered Holder of
this Warrant shall be mailed by first-class mail, postage
prepaid, to the address furnished to the Company in writing
by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices
and other communications from the Registered Holder of this
Warrant or in connection herewith to the Company shall be
mailed by first-class certified or registered mail, postage
prepaid, to the Company at its principal office set forth
below. If the Company should at any time change the
location of its principal office to a place other than as
set forth below, it shall give prompt written notice to the
Registered Holder of this Warrant and thereafter all
references in this Warrant to the location of its principal
office at the particular time shall be as so specified in
such notice.
10. No Rights as Stockholder. Until the exercise of
this Warrant, the Registered Holder of this Warrant shall
not have or exercise any rights by virtue hereof as a
stockholder of the Company.
11. Change or Waiver. Any term of this Warrant may be
changed or waived only by an instrument in writing signed by
the party against which enforcement of the change or waiver
is sought. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company or
the Holder shall operate as a waiver of such right or
otherwise prejudice the rights, powers or remedies of such
Person.
12. Headings. The headings in this Warrant are for
purposes of reference only and shall not limit or otherwise
affect the meaning of any provision of this Warrant.
13. Governing Law. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE
VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON
EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY
WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE
GOVERNED BY THE LAWS OF DELAWARE.
IN WITNESS WHEREOF, the Company has caused this Warrant
to be duly executed by its officer thereunto duly authorized
and to be issued as of the 15 day of April, 1998.
[Corporate Seal] SHARED TECHNOLOGIES CELLULAR, INC.
By:__________________________
Name: Vincent DiVincenzo
Title: Chief Financial Officer
100 Great Meadow Road, Suite 102
Wethersfield, CT 06109
ATTEST:
________________________
Kenneth M. Dorros
Secretary
EXHIBIT I
SUBSCRIPTION FORM
To: Shared Technologies Cellular, Inc. Dated: _________
100 Great Meadow Road
Wethersfield, CT 06109
Attn: Legal Department
[Choose one or both of the paragraphs, as applicable]
The undersigned, pursuant to the provisions set forth in the
attached Warrant (No. SB-1), hereby irrevocably elects to purchase
__________ shares of the Common Stock covered by such Warrant and
herewith makes payment of $__________, representing the full
purchase price for such shares at the price per share provided for
in such Warrant.
The undersigned, pursuant to the provisions set forth in the
attached Warrant (No. SB-1), hereby irrevocably elects to exercise
the right of conversion represented by the attached Warrant for,
and to convert thereunder, ____ shares of Common Stock, as
provided for therein.
Name: _______________________
Signature
_____________________
Address: _____________________
____________________
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, _______________________ hereby sells,
assigns and transfers all of the rights of the undersigned under
the attached Warrant (No. SB-1) with respect to the number of
shares of Common Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated:________ Name: _______________________
Signature:____________________
_
Address:______________________
_____________________
Witness:______________________
SUBSCRIPTION AGREEMENT
Shared Technologies Cellular, Inc.
100 Great Meadow Road, Suite 102
Wethersfield, CT 06109
Attention: Anthony D. Autorino
Vincent DiVincenzo
William A. DiBella
Ladies and Gentlemen:
1. SUBSCRIPTION
The undersigned hereby subscribes for a convertible
demand note in the principal amount set forth on the attached
signature page (the "Note") being offered by Shared
Technologies Cellular, Inc., a Delaware corporation (the
"Company"), on the conditions stated herein. The undersigned
will advance principal under the Note as set forth herein.
The Note shall be convertible into shares of the Company's
Common Stock, par value $.01 per share (the "Common Stock")
and shall be substantially in the form of the Note set forth
as Exhibit A hereto. The Note and the Common Stock issuable
upon conversion thereof are hereinafter referred to as the
"Securities."
2. REPRESENTATIONS AND WARRANTIES OF THE POTENTIAL INVESTOR
The undersigned hereby acknowledges that the undersigned
has received and read (a) the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, filed with
the Securities and Exchange Commission on March 31, 1998, and
(b) this Subscription Agreement.
The undersigned acknowledges that it has had an
opportunity to ask questions of and request additional
information concerning the Company from representatives of
the Company. The undersigned has not received any written
information concerning this offering and is not relying on
any other information provided to the undersigned or any
representations made to the undersigned by anyone other than
the representatives of the Company referred to above.
The undersigned understands that the Securities have not
been registered under the Securities Act of 1933 as amended
(the "Act") or any applicable state securities laws and that
such Securities will be sold in transactions except from
registration under the Act and such state securities laws.
The undersigned understands that the Company is relying on
Section 4(2) under the Act, which provides an exemption from
registration under the Act and which does not require that
any specific information about the Company be disclosed. The
undersigned understands that the availability of such
exemptions is predicated in part on the Company's reliance on
the undersigned's representations and warranties herein.
The undersigned hereby represents and warrants to you
that: (a) the undersigned is acquiring the Securities for
the undersigned's own account not with a view to the resale
or other distribution thereof, and the undersigned will not
transfer, sell or otherwise dispose of the Securities without
registering them under the applicable federal or state
securities laws or seeking an exemption therefrom; (b) the
undersigned has such knowledge and experience in financial
and business matters and particularly this type of investment
to evaluate the merits and risks of an investment in the
Company; and (c) the undersigned can bear the economic risk
of an investment in the Company, including the risk of a
complete loss of the undersigned's investment.
The undersigned understands that the undersigned must
bear the economic risk of this investment for an indefinite
period of time inasmuch as the Securities have not been and
will not be registered under the Act or any applicable state
securities laws and, therefore, that the Securities cannot be
sold, pledged or transferred unless they are subsequently
registered under the Act and qualified under applicable state
securities laws or an exemption from such registration and
qualification is available. The undersigned understands
that, except as set forth in the Note, the Company has no
obligation and does not presently intend to register or
qualify any of the Securities or to take any action or
provide any information necessary to give effect to the
availability of any such exemption.
The undersigned further understands that these
restrictions on transferability will be noted in the
Company's records as a stop transfer instruction, and that
the Securities will be subject to the other terms and
conditions of this Subscription Agreement, and that the Note
will bear a legend substantially in the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND IT MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS";
and that the Common Stock issuable upon conversion of the
Note in accordance with the terms thereof will bear a legend
substantially in the following form, as well as any legend
required by appropriate Blue Sky officials:
"The shares represented by this certificate have
not been registered under the Securities Act of
1933, as amended, or any state securities laws,
and may not be sold or transferred in the absence
of an effective registration under such Act and
any applicable state securities laws or the
availability of an exemption from registration
under such Act and any applicable state
securities laws."
The undersigned understands that the Company will
require that the undersigned meet certain investor
suitability standards and that the undersigned be an
"accredited investor" as that term is defined in the federal
securities laws.
The information provided to the Company herein is true
and correct in all respects as of the date hereof. The
undersigned agrees to notify the Company in writing
immediately if any of the statements made herein shall become
materially inaccurate.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Certain Defined Terms. As used in this
Section 3, the following terms shall have the following
meanings, applicable both to the singular and the plural forms
of the terms defined:
"Affiliate", as applied to any Person, means any other
Person that directly or indirectly controls, is
controlled by, or is under common control with, that
Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control
with"), as applied to any Person, means the possession,
directly or indirectly, of the power to vote five
percent (5.0%) or more of the Securities having voting
power for the election of directors of such Person or
otherwise to direct or cause the direction of the
management and policies of that Person, whether through
the ownership of voting Securities or by contract or
otherwise.
"Closing Date" means the date the Company accepts this
Subscription Agreement and issues a Note to the
undersigned in accordance with the terms hereof.
"Contractual Obligation", as applied to any Person,
means any provision of any Securities issued by that
Person or any indenture, mortgage, deed of trust,
security agreement, pledge agreement, guaranty,
contract, undertaking, agreement or instrument to which
that Person is a party or by which it or any of its
properties is bound, or to which it or any of its
properties is subject.
"Environmental, Health or Safety Requirements of Law"
means all Requirements of Law derived from or relating
to any federal, state or local law, ordinance, rule,
regulation, permit, license or other binding
determination of any Governmental Authority relating to,
imposing liability or standards concerning, or otherwise
addressing, the environment, health and/or safety and
public health codes, each as from time to time in
effect.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the
American Institute of Certified Public Accountants'
Accounting Principles Board and Financial Accounting
Standards Board or in such other statements by such
other entity as may be in general use by significant
segments of the accounting profession as in effect on
the date hereof (unless otherwise specified herein as in
effect on another date or dates).
"Governmental Authority" means any nation or government,
any federal, state, local or other political subdivision
thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Investment Documents" means this Subscription Agreement
and the Note issued to the undersigned in connection
therewith and all other instruments, agreements and
written Contractual Obligations between the Company and
the undersigned delivered to the undersigned pursuant to
or in connection with the transactions contemplated
hereby.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, conditional sale agreement,
deposit arrangement, security interest, encumbrance,
lien, preference, priority or other security agreement
or preferential arrangement of any kind or nature
whatsoever in respect of any property of a Person,
whether granted voluntarily or imposed by law.
"Material Adverse Effect" means a material adverse
effect upon (i) the financial condition, operations,
assets or prospects of the Company or any of its
Subsidiaries, or (ii) the ability of the Company or any
of its Subsidiaries to perform their respective
obligations under the Investment Documents.
"Organizational Documents" means, with respect to any
corporation, limited liability company, or partnership
(i) the articles/certificate of incorporation (or the
equivalent organizational documents) of such corporation
or limited liability company, (ii) the partnership
agreement executed by the partners in the partnership,
(iii) the by-laws (or the equivalent governing
documents) of the corporation, limited liability company
or partnership, and (iv) any document setting forth the
designation, amount and/or relative rights, limitations
and preferences of any class or series of such
corporation's capital stock or such limited liability
company's or partnership's equity or ownership
interests.
"Permitted Equity Securities Options" means the
subscriptions, options, warrants, rights, convertible
securities and other agreements or commitments relating
to the issuance of equity Securities of the Company or
any Subsidiary of the Company identified as such on
Schedule 3.1.
"Person" means any natural person, corporation, limited
liability company, limited partnership, general
partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or
not a legal entity, and any Governmental Authority.
"Property" means any real property or personal property,
plant, building, facility, structure, underground
storage tank or unit, equipment, inventory, general
intangible, receivable, or other asset owned, leased or
operated by the Company or any Subsidiary of the
Company, as applicable, (including any surface water
thereon, and soil and groundwater thereunder).
"Requirements of Law" means, as to any Person, the
charter and by-laws or other organizational or governing
documents of such Person, and any material law, rule or
regulation, or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or
to which such Person or any of its property is subject
and any certificate of occupancy, zoning ordinance,
building, environmental or land use requirement or
Permit or and Environmental, Health or Safety
Requirement of Law.
"Securities" means any capital stock, shares, investment
property, voting trust certificates, limited partnership
certificates, bonds, debentures, notes or other
evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general
any instruments commonly known as "securities",
including, without limitation, any certificates of
interest, shares, or participations in temporary or
interim certificates for the purchase or acquisition of,
or any right to subscribe to, purchase or acquire any of
the foregoing, but shall not include the Notes or any
other evidence of the obligations to the undersigned in
connection therewith.
"Subsidiary" of a Person means any corporation, limited
liability company, general or limited partnership, or
other entity of which securities or other ownership
interests having ordinary voting power to elect a
majority of the board of directors or other Persons
performing similar functions with respect to such entity
are at the time directly or indirectly owned or
controlled by such Person, one or more of the other
subsidiaries of such Person or any combination thereof.
Section 3.2 Representations and Warranties. In order
to induce the undersigned to subscribe for a Note as herein
set forth, except as set forth on the Schedules attached
hereto, the Company hereby represents and warrants to the
undersigned that the following statements are true, correct
and complete as of the date hereof:
(a) Organization; Corporate Powers.
(i) The Company and each of its Subsidiaries (A) is
a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
organization, (B) is duly qualified to do business as a
foreign corporation and is in good standing under the
laws of each jurisdiction in which failure to be so
qualified and in good standing will have or is
reasonably likely to have a Material Adverse Effect, and
(C) has all requisite corporate power and authority to
own, operate and encumber its Property and to conduct
its business as presently conducted and as proposed to
be conducted.
(ii) True, correct and complete copies of the
Organizational Documents identified on Schedule 3.2-
A(ii) attached hereto have been made available to the
undersigned for inspection upon the undersigned's
written request therefor, each of which is in full force
and effect, has not been modified or amended except to
the extent indicated therein and, to the best of the
Company's knowledge, there are no defaults under such
Organizational Documents and no events which, with the
passage of time or giving of notice or both, would
constitute a default under such Organizational
Documents.
(b) Authority.
(i) The Company has the requisite corporate power
and authority (A) to execute, deliver and perform each
of the Investment Documents which are required to be
executed by it in connection herewith or which have been
executed by it as required by the Investment Documents.
(ii) The execution, delivery and performance of
each of the Investment Documents which are required to
be executed by the Company in connection with this
Subscription Agreement or which have been executed as
required by this Subscription Agreement on or prior to
the Closing Date and to which the Company is party and
the consummation of the transactions contemplated
thereby, have been duly approved by the board of
directors and, if necessary, the shareholders of the
Company and such approvals have not been rescinded. No
other corporate action or proceedings on the part of the
Company are necessary to consummate such transactions.
(iii) Each of the Investment Documents to which
the Company is a party (A) when delivered, will have
been duly executed and delivered by it and (B) will
constitute the Company's legal, valid and binding
obligation, enforceable against it in accordance with
its terms.
(c) Subsidiaries; Ownership of Equity Securities.
Schedule 3.2-C attached hereto (i) describes the corporate
structure of the Company, its Subsidiaries and any other
Person in which the Company or any of its Subsidiaries holds
a direct or indirect partnership, joint venture or other
equity interest and indicates the nature of such interest
with respect to each Person included in such diagram; and
(ii) accurately sets forth (A) the correct legal name of such
Person, the jurisdiction of its incorporation or organization
and the jurisdictions in which the Company and its
Subsidiaries are qualified to transact business as a foreign
corporation or otherwise and (B) the authorized, issued and
outstanding shares or interests of each class of equity
Securities of the Company and each of its Subsidiaries and
the owners of such shares or interests in each of the
Company's Subsidiaries. None of such issued and outstanding
equity Securities is subject to any vesting, redemption, or
repurchase agreement, and there are no warrants or options
(other than Permitted Equity Securities Options) outstanding
with respect to such equity Securities. The outstanding
equity Securities of each Subsidiary of the Company are duly
authorized, validly issued, fully paid and nonassessable.
(d) No Conflict. The execution, delivery and
performance of each of the Investment Documents to which the
Company is a party do not and will not (i) conflict with the
Organizational Documents of the Company, (ii) to the best of
the Company's knowledge, conflict with, result in a breach of
or constitute (with or without notice or lapse of time or
both) a default under any Requirement of Law or Contractual
Obligation of the Company, or require termination of any
Contractual Obligation, the consequences of which violation,
breach, default or termination, singly or in the aggregate,
will, or is reasonably likely to, result in a Material
Adverse Effect or may subject the undersigned to any
liability, (iii) result in or require the creation or
imposition of any Lien whatsoever upon any of the Property or
assets of the Company, or (iv) require any approval of the
Company's shareholders which has not been obtained.
(e) Governmental Consents. Except as set forth on
Schedule 3.2-E attached hereto, the execution, delivery and
performance of each of the Investment Documents to which the
Company is a party do not and will not require any
registration with, consent or approval of, or notice to, or
other action to, with or by any Governmental Authority,
except filings, consents or notices which have been made,
obtained or given.
(f) Financial Position. The financial statements (the
"Financial Statements") included in the Company's Annual
Report on Form 10-K were prepared in all material respects in
conformity with GAAP, except as otherwise noted therein, and
fairly present in all material respects the respective
consolidated financial positions, and the consolidated
results of operations and cash flows for each of the periods
covered thereby of the Company and its Subsidiaries as at the
respective dates thereof. Neither the Company nor any of its
Subsidiaries has any contingent liability or liability for
any taxes, long-term leases or commitments, not disclosed to
the undersigned prior to the date hereof or not reflected in
the Financial Statements, which will have or is reasonably
likely to have a Material Adverse Effect.
(g) Litigation; Adverse Effects. Except as set forth
in Schedule 3.2-G attached hereto, there is no action, suit,
proceeding, claim, investigation or arbitration before or by
any Governmental Authority or private arbitrator pending or,
to the knowledge of the Company, threatened against the
Company or any of the Property (i) challenging the validity
or the enforceability of any of the Investment Documents, or
(ii) which will, or is reasonably likely to, result in any
Material Adverse Effect. There is no material loss
contingency within the meaning of GAAP which has not been
reflected in the consolidated Financial Statements of the
Company. To the best of the Company's knowledge, neither the
Company nor any Subsidiary is (A) in violation of any
applicable Requirements of Law which violation will result,
or is reasonably likely to result, in a Material Adverse
Effect, or (B) subject to or in default with respect to any
final judgment, writ, injunction, restraining order or order
of any nature, decree, rule or regulation of any court or
Governmental Authority which will, or is reasonably likely
to, result in a Material Adverse Effect.
(h) No Material Adverse Effect. Except as disclosed on
Schedule 3.2-H, since December 31, 1997, there has occurred
no event with respect to the Company or any Affiliate of the
Company which has resulted, or is reasonably likely to
result, in a Material Adverse Effect.
(i) Performance. Except as disclosed on Schedule 3.2-
H, neither the Company nor any of its Subsidiaries has
received any notice, citation, or allegation, nor has actual
knowledge, that (i) it is in default in the performance,
observance or fulfillment of any of the obligations,
covenants or conditions contained in any Contractual
Obligation applicable to it which is material to its ability
to maintain or continue the operations of its core business,
(ii) any of its Property is in violation of any Requirement
of Law, or (iii) any condition exists which, with the giving
of notice or the lapse of time or both, would constitute a
default with respect to any such Contractual Obligation, in
each case, except where such default or defaults, if any,
will not, or is not reasonably likely to, result in a
Material Adverse Effect.
(j) Disclosure. The representations and warranties of
the Company contained in the Investment Documents, and all
certificates and other documents delivered to the undersigned
pursuant to the terms thereof, do not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were
made, not misleading. The Company has not intentionally
withheld any fact from the undersigned in regard to any
matter which will, or is reasonably likely to, result in a
Material Adverse Effect.
(k) Requirements of Law. To the best of the Company's
knowledge, the Company and its Subsidiaries are in compliance
with all Requirements of Law applicable to them and their
respective businesses, in each case where the failure to so
comply individually or in the aggregate will, or is
reasonably likely to, result in a Material Adverse Effect.
(l) Environmental Matters. To the best of the
Company's knowledge, except as disclosed on Schedule 3.2-L
attached hereto, the operations of the Company and its
Properties comply in all material respects with all
applicable Environmental, Health or Safety Requirements of
Law and the Company is conducting and will continue to
conduct its business and operations in an environmentally
responsible manner in material compliance with Environmental,
Health or Safety Requirements of Law, and the Company and its
Subsidiaries, taken as a whole, have not been, and have no
reason to believe that they will be, subject to any claims
arising out of or relating to environmental, health or safety
matters that have or will result in material cash
expenditures by the Company and its Subsidiaries.
(m) Labor Matters. Except for individual employee
contracts, neither the Company nor any of its Subsidiaries is
a party to any labor contract. There are no strikes,
lockouts or other grievances relating to any collective
bargaining or similar agreement to which the Company or any
of its Subsidiaries is a party.
(n) Assets and Properties. The Company and each of its
Subsidiaries has good and marketable title to all of the
assets and Property (tangible and intangible) owned by it
(except insofar as marketability may be limited by any laws
or regulations of any Governmental Authority affecting such
assets). Substantially all of the assets and Property owned
by, leased to, or used by the Company or a Subsidiary of the
Company is in adequate operating condition and repair,
ordinary wear and tear excepted, is free and clear of any
known defects except such defects as do not substantially
interfere with the continued use thereof in the conduct of
normal operations, and is able to serve the function for
which they are currently being used, except in each case
where the failure of such asset to meet such requirements
would not, or is not reasonably likely to, result in a
Material Adverse Effect.
4. PROCEDURE
(a) Subscription. A complete subscription must include
(i) two copies of the signature page of the Subscription
Agreement signed by the undersigned, and (ii) a check or wire
transfer of funds in the principal amount of the Note, all of
which must be delivered to the Company.
(b) Acceptance. This Subscription Agreement shall be
deemed to be accepted by the Company only when a copy of this
Subscription Agreement is signed by the Company.
(c) Rejection. The Company may at its option refuse to
accept the undersigned's subscription in its discretion for
any reason. Should this subscription be rejected or should
the offering of the Note not be consummated for any reason,
the Company promptly shall return any amounts forwarded in
connection herewith.
[Intentionally left blank. Next page is signature page.]
SHARED TECHNOLOGIES CELLULAR, INC.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
CONVERTIBLE NOTE in the principal
amount of $____________________
DATE:_____________, 1998 _______________________________
Signature(s)
_______________________________
Print Name(s)
_______________________________
Taxpayer's Identification
Number(s)
Mailing Address
_______________________________
_______________________________
_______________________________
Accepted by Shared Technologies Cellular, Inc.
By:________________________
Its:_______________________
Date:___________________, 1998
43097_1C.DOC
EXHIBIT A
[FINAL FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND IT MAY NOT
BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
CONVERTIBLE NOTE
SHARED TECHNOLOGIES CELLULAR, INC.
$__________________ May __, 1998
FOR VALUE RECEIVED, SHARED TECHNOLOGIES CELLULAR, INC., a
Delaware corporation (the "Company"), hereby promises to pay to
____________________, an individual with a mailing address of
_______________________, (the "Holder"), or registered assigns,
the principal sum of ______________ Dollars ($___________) and
to pay interest on the outstanding principal balance at a rate
equal to five percent (5%) per annum, for the period commencing
on the date hereof and ending on the date this Note shall be
paid in full or converted into common stock of the Company as
hereinafter set forth. Accrued interest under this Note shall
be due and payable quarterly, in arrears, beginning on the first
day of July, 1998 (with respect to interest accrued from the
date of this Note through June 30, 1998) and on the first day of
each October, January, April and July thereafter (with respect
to interest accrued in the immediately preceding quarter) during
the Term (as defined below). Unless sooner paid or converted
into common stock of the Company in accordance with the terms
hereof, the outstanding principal amount of this Note and all
accrued and unpaid interest hereon shall be due and payable on
May 15, 2005 (the "Maturity Date"). The term of this Note (the
"Term") shall be the period beginning on the date hereof and
ending on the earlier of (i) the date on which this Note is
prepaid in full or converted in whole or (ii) the Maturity Date.
This Note is one of a series of promissory notes (the "Notes")
issued by the Company in the aggregate principal amount of
$2,400,000 pursuant to separate subscription agreements (the
"Subscription Agreements") between the Company and the
subscribers party thereto.
Upon conversion of this Note, accrued and unpaid interest
on the outstanding principal balance of this Note shall be
payable in the manner set forth in Section 2. Principal and
interest due hereunder shall be payable in lawful money of the
United States of America, at such place as the legal holder may
designate from time to time in writing to the Company. Interest
hereunder shall be computed on the basis of a three hundred
sixty (360) day year and a thirty (30) day month.
1. PREPAYMENTS AND REPLACEMENT
1.1 Optional Prepayment. The Company may not prepay, in
whole or in part, the outstanding principal balance of this Note
without the prior written consent of the holder hereof. In the
case of any such permitted principal prepayment, the Company
shall simultaneously therewith pay accrued interest on the
principal amount prepaid.
1.2 Payment on Non-Business Days. Whenever any payment to
be made shall be due on a Saturday, Sunday or a date on which
banks in the State of Connecticut are authorized or required to
be closed, such payment may be made on the next succeeding
business day and interest shall be payable at the rate set forth
herein for the period of any such extension.
1.3 Replacement. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of
this Note and, if requested in the case of any such loss, theft
or destruction, upon delivery of an indemnity bond or other
agreement or security reasonably satisfactory to the Company,
or, in the case of any such mutilation, upon surrender and
cancellation of this Note, the Company will issue a new Note, in
the amount of the unpaid principal balance of the lost, stolen,
destroyed or mutilated Note in lieu of such lost, stolen,
destroyed or mutilated Note.
2. CONVERSION
2.1 Holder's Conversion Option. Subject to and in
compliance with the provisions of this Section 2, the entire
outstanding principal amount of this Note may, at the option of
the holder hereof, at any time prior to the giving of notice of
conversion by the Company pursuant to Section 2.2, be converted
into fully-paid and nonassessable shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), at a
conversion price of Five and 00/100 Dollars ($5.00) per share,
subject to adjustment as provided below (the "Conversion
Price").
2.2 Company's Conversion Option. Subject to and in
compliance with the provisions of this Section 2, if a
Conversion Event (as defined below) occurs at any time after the
date which is three years (3) from the date of this Note, then
the Company may require, by written notice to the holder hereof
given within ninety (90) days of such Conversion Event, that the
entire outstanding principal amount of this Note, plus accrued
and unpaid interest, be converted into shares of Common Stock at
the Conversion Price then in effect. In the event that more
than one Conversion Event occurs after such date, the Company
may exercise its rights under this Section 2.2 as to one or more
of such Conversion Events. To exercise its conversion option
pursuant to this Section 2.2, the Company shall give ten (10)
days prior written notice to the holder of this Note indicating
its intention to so exercise its conversion option, and on the
tenth (10th) day following the receipt such notice by the holder
of this Note, the principal amount outstanding hereunder,
together with all accrued but unpaid interest, shall
automatically be converted into fully paid and nonassessable
shares of Common Stock. The number of shares of Common Stock
into which this Note is so convertible shall be the number of
shares of Common Stock that could be purchased by the principal
amount of this Note outstanding, together with all accrued but
unpaid interest on this Note, at the Conversion Price then in
effect. Subject to the proviso to this sentence,
notwithstanding anything to the contrary contained in this
Section 2.2, the Company may only exercise its Conversion Option
if, upon conversion, the securities issuable to the holder of
this Note may be sold by such holder without restriction under
the Securities Act and without limitation as to amount or manner
of sale; provided however, that the preceding terms of this
sentence shall not apply to (x) any affiliate of the Company,
(y) any person who has been an affiliate of the Company within
three months preceding the date of proposed exercise by the
Company of its Conversion Option hereunder, or (z) any person
who has become a holder of this Note within two (2) years of the
Company's exercise of its Conversion Option hereunder.
As used herein, "Conversion Event" shall mean the
occurrence of the following circumstances: the Trading Price (as
defined below) of the Common Stock equals or exceeds Ten and
00/100 Dollars ($10.00) per share for each of five (5)
consecutive trading days.
As used herein, "Trading Price" of Common Stock shall mean,
for each business day, the closing price of the Common Stock on
such business day as reported by Nasdaq, or if the Common Stock
is not at the time listed or admitted for trading on Nasdaq, any
other exchange with which the Common Stock is at such time
listed or admitted for trading; provided, however, that if the
Common Stock is not so listed or admitted for trading for any
period then no Conversion Event shall be deemed to have occurred
during such period. The closing price for each business day
shall be the last reported sales price or, in case no such
reported sales took place on such day, the average of the last
reported bid and asked prices.
2.3 Accrued Interest. In the case of conversion at the
option of the holder under Section 2.1, interest accrued and
unpaid on the principal amount of this Note converted shall, at
the option of the holder of this Note, be paid in cash upon
conversion of such principal amount, or be paid by the issuance
of Common Stock at the Conversion Price. In the case of the
conversion at the option of the Company, interest accrued and
unpaid on the principal amount of this Note converted shall be
paid by the issuance of Common Stock at the Conversion Price as
set forth in Section 2.2.
2.4 Adjustment of the Conversion Price. The Conversion
Price shall be subject to adjustment from time to time as
follows:
(a) If, at any time during the Term of this Note, the
number of shares of Common Stock outstanding is increased
by a stock dividend payable in shares of Common Stock or by
a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of
the holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, the Conversion Price
shall be appropriately decreased so that the number of
shares of Common Stock issuable upon the conversion hereof
shall be increased in proportion to such increase in
outstanding shares.
(b) If, at any time during the Term of this Note, the
number of shares of Common Stock outstanding is decreased
by a combination of the outstanding shares of Common Stock,
then, following the record date for such combination, the
Conversion Price shall appropriately increase so that the
number of shares of Common Stock issuable upon the
conversion hereof shall be decreased in proportion to such
decrease in outstanding shares.
(c) All calculations under this Section 2.4 shall be
made to the nearest cent or to the nearest one-tenth (1/10)
of a share, as the case may be.
(d) Whenever the Conversion Price shall be adjusted
as provided in this Section 2.4, the Company shall prepare
a statement showing the facts requiring such adjustment and
the Conversion Price that shall be in effect after such
adjustment. The Company shall cause a copy of such
statement to be sent by mail, first class postage prepaid,
to each registered holder of the Note at its address
appearing on the Company's records.
(e) Adjustments made pursuant to Subsection (a) or
(b) above shall be made on the date such dividend,
subdivision, split-up or combination, as the case may be,
is made and shall become effective at the opening of
business on the business day next following the record date
for the determination of stockholders entitled to such
dividend, subdivision, split-up or combination.
(f) In any case in which the provisions of this
Section 2.4 shall require that an adjustment shall become
effective immediately after a record date for an event, the
Company may defer until the occurrence of such event
issuing to the registered holder of this Note which is
exercised after such record date and before the occurrence
of such event the additional shares of Common Stock
issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of Common
Stock issuable upon such exercise before giving effect to
such adjustment exercise; provided, however, that the
Company shall deliver to such registered holder a due bill
or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence
of the event requiring such adjustment.
2.5 Exercise of Conversion Option. To exercise its
conversion option under Section 2.1, the holder of this Note
shall surrender the Note to the Company at its principal office,
shall give written notice to the Company at such office that
such holder elects to convert this Note and shall state in such
notice whether the holder elects for accrued interest on the
principal amount of this Note to be paid in cash or in
additional shares of Common Stock. Such notice shall also state
the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock issuable
upon such conversion shall be issued. The Note surrendered for
conversion shall be accompanied by proper assignment thereof to
the Company or in blank. Upon the exercise of the Company's
conversion option under Section 2.2, the holder of this Note
shall promptly surrender the same for conversion, accompanied by
proper assignment thereof to the Company or in blank, and the
right of the holder hereof to receive payments of interest and
principal hereunder shall cease and thereafter this Note shall
represent only the right to receive the shares of Common Stock
issuable in accordance with the terms hereof upon such
conversion. The Company shall issue such certificate or
certificates for shares of Common Stock issuable upon such
conversion in the name of the holder hereof appearing on its
books, and shall deliver such certificate or certificates to the
address of such holder appearing on its books, unless, in either
case, it receives written instructions from the holder hereof to
so issue or deliver such certificates to a different name or
address. The date when written notice of the holder's
conversion election is received by the Company, together with
this Note, shall be referred to herein as the "Conversion Date"
(except that in the case of the Company's conversion election
pursuant to Section 2.2, such conversion shall be deemed to have
been made on the tenth (10th) day after the Company has given
written notice thereof in accordance with such Section 2.2 and
such date shall be deemed to be the "Conversion Date"). As
promptly as practicable, but in any event within thirty (30)
days after the Conversion Date (or, in the case of conversion at
the option of the Company, within thirty (30) days of surrender
of this Note), the Company shall issue and deliver to the holder
of this Note, or on its written order, such certificate or
certificates as it may request for the number of whole shares of
Common Stock issuable upon the conversion of this Note in
accordance with the provisions of this Section 2, and, if such
conversion is at the election of the holder hereof, cash in
payment of any accrued interest required to be paid in cash
pursuant to the election of such holder, and cash, as provided
in Section 2.6, in respect of any fraction of a share of Common
Stock issuable upon such conversion. Any conversion hereunder,
whether at the option of the holder hereof or the Company, shall
be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights
of the holder as holder of this Note as to the principal amount
so converted shall cease.
2.6 Cash in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares
shall be issued upon the conversion of this Note. Instead of
any fractional shares of Common Stock which would otherwise be
issuable upon conversion of this Note, the Company shall pay to
the holder of this Note a cash adjustment in respect of such
fractional shares in an amount equal to the same fraction of the
fair market value per share of the Common Stock at the close of
business on the Conversion Date, as determined by the Company's
Board of Directors.
2.7 Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of
effecting the conversion of this Note, such number of its shares
of Common Stock as shall from time to time be sufficient to
effect the conversion of this Note, and if at any time the
number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of this Note, the
Company shall take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
2.8 Notice of Record Date. In the event of:
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or
to receive any other right;
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock
of the Company, any merger or consolidation of the Company,
or any transfer of all or substantially all of the assets
of the Company to any other corporation, or any other
entity or person; or
(c) any voluntary or involuntary dissolution,
liquidation or winding up of the Company,
then and in each such event the Company shall mail or cause to
be mailed to the holder of this Note a notice specifying (i) the
date on which any such record is to be taken for the purpose of
such dividend, distribution or right, or if a record is not to
be taken, the date as of which the holders of record of Common
Stock to be entitled to such dividend, distribution or right are
to be determined, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is
expected to become effective and (iii) the time, if any, that is
to be fixed, as to when the holders of record of Common Stock
(or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding up. Such notice shall be mailed at least
twenty (20) days prior to the applicable record or effective
date specified in such notice on which such action is to be
taken. Failure to give such notice shall not invalidate any
such action.
2.9 Transfer Restriction Legend. Each certificate for
shares of Common Stock issued upon conversion of this Note shall
bear the following legend (and any additional legend required by
(i) any applicable state securities laws and (ii) any securities
exchange upon which such shares may, at the time of such
exercise, be listed) on the face thereof unless at the time of
exercise such shares shall be registered under the Securities
Act:
The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or any state securities laws, and may not
be sold or transferred in the absence of an
effective registration under such Act and any
applicable state securities laws or the availability
of an exemption from registration under such Act and
any applicable state securities laws.
Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new
certificate issued upon completion of a public distribution
under a registration statement of the securities represented
thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof the securities represented
thereby are not, at such time, required by law to bear such
legend.
3. REGISTRATION RIGHTS
3.1 Certain Definitions. As used in this Section 3, the
following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering
the Securities Act.
"Continuously Effective", with respect to a specified
registration statement, shall mean that it shall not cease to be
effective and available for Transfers of Registrable Securities
thereunder for longer than either (i) any ten (10) consecutive
business days, or (ii) an aggregate of fifteen (15) business
days during the period specified in the relevant provision of
this Note.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Existing Registration Rights Agreements" shall mean (i)
those certain separate Registration Rights Agreement, each dated
as of April 15, 1998, entered into between the Company and
Salomon Brothers Holding Company Inc. and Anthony Autorino,
respectively, and (ii) those certain separate Registration
Rights Agreement, dated as of April 30, 1998 and April 21, 1998,
respectively, entered into between the Company and International
Capital Partners, Inc. and Beatrice Wittouck Lunt, respectively.
"Holders" shall mean the holders of outstanding Registrable
Securities which have not been sold to the public.
"Lock-Out Period" shall mean each period (i) commencing on
the date which is five (5) business days prior to the
commencement of a public distribution of any of the Company's
securities pursuant to any registration statement prepared
pursuant to any one or more of the Existing Registration Rights
Agreements (a "Distribution"), and (ii) ending on the date which
is ninety (90) days following the commencement of such
Distribution.
"Majority Selling Holders" means those Selling Holders
whose Registrable Securities included in such registration
represent a majority of the Registrable Securities of all
Selling Holders included therein.
"Other Shareholders" shall mean holders of securities of
the Company who are entitled by contract with the Company or who
are permitted by the Company to have securities included in a
registration of the Company's securities.
"Registrable Securities" shall mean the Common Stock issued
or issuable upon conversion of this Note and the other Notes
less any such Common Stock theretofore sold to the public or in
a private placement.
The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Section 3 hereof, including,
without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company,
blue sky fees and expenses, the fees and disbursements of no
more than one legal counsel ("Seller's Counsel") representing
the Selling Holders as selected by the Majority Selling Holders,
and the expense of any special audits incident to or required by
any such registration; provided, however, that such expenses
shall not include the compensation of regular employees of the
Company unless such expenses are incurred in connection with a
Demand Registration under Section 3.2 pursuant to which the
Holder or Holders making such request for a Demand Registration
are required to pay the Registration Expenses incurred in
connection therewith, in which case such expenses shall include
the compensation of regular employees of the Company at such
hourly rate as the Company may reasonably establish therefor.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable
Securities, all fees and disbursements of counsel for the Holder
(other than Seller's Counsel)."
"Selling Holders" shall mean, with respect to a specified
registration pursuant to this Note, Holders whose Registrable
Securities are included in such registration
"Transfer" shall mean and include the act of selling,
giving, transferring, creating a trust (voting or otherwise),
assigning or otherwise disposing of (other than pledging,
hypothecating or otherwise transferring as security) (and
correlative words shall have correlative meanings).
3.2 Demand Registration.
(a) If one or more Holders of Registrable Securities
shall make a written request to the Company at any time
(the "Demanding Holders"), the Company shall cause to be
filed with the Commission a registration statement meeting
the requirements of the Securities Act (a "Demand
Registration"), and each Demanding Holder shall be entitled
to have included therein (subject to Section 3.2(g)) all or
such number of such Demanding Holder's Registered
Securities as the Demanding Holder shall request in
writing; provided, however, that (i) no request may be made
pursuant to this Section 3.2 within one hundred and eighty
(180) days after any registration statement covering
securities subject to the terms of any of the Existing
Registration Rights Agreements is declared effective by the
Commission, and (ii) if the Holder or Holders making such
request pursuant this Section 3.2 own an aggregate of less
than 25% of the Registrable Securities then outstanding,
such Holder or Holders shall pay all of the Registration
Expenses incurred in connection therewith and shall make
such arrangement to ensure the payment thereof as the
Company may reasonable request, including, without
limitation, the establishment of an escrow fund in an
amount sufficient to pay in full such anticipated
Registration Expenses. Any request made pursuant to this
Section 3.2 shall be addressed to the attention of the
Secretary of the Company, and shall specify the number of
Registrable Securities to be registered, the intended
methods of disposition thereof and that the request is for
a Demand Registration pursuant to this Section 3.2(a).
(b) The Company shall be entitled to postpone for up
to sixty (60) days the filing of any Demand Registration
statement otherwise required to be prepared and filed
pursuant to this Section 3.2, if the Board of Directors of
the Company determines, in its good faith reasonable
judgment (with the concurrence of the managing underwriter,
if any), that such registration and the Transfer of
Registrable Securities contemplated thereby would
materially interfere with, or require premature disclosure
of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the
Company promptly gives the Demanding Holders notice of such
determination; provided, however, that the Company shall
not have postponed pursuant to this Section 3.2(b) the
filing of any other Demand Registration statement otherwise
required to be prepared and filed pursuant to this Section
3.2 during the twelve (12) month period ended on the date
of the relevant request pursuant to Section 3.2(a).
(c) Whenever the Company shall have received a demand
pursuant to Section 3.2(a) to effect the registration of
any Registrable Securities, the Company shall promptly give
written notice of such proposed registration to all
Holders. Any such Holder may, within twenty (20) days
after receipt of such notice, request in writing that all
of such Holder's Registrable Securities, or any portion
thereof designated by such Holder, be included in the
registration.
(d) Following receipt of a request for a Demand
Registration, the Company shall:
(i) File the registration statement with
the Commission as promptly as practicable, and shall
use its best efforts to have the registration declared
effective under the Securities Act as soon as
reasonably practicable, in each instance giving due
regard to the need to prepare current financial
statements, conduct due diligence and complete other
actions that are reasonably necessary to effect a
registered public offering.
(ii) Use its best efforts to keep the
relevant registration statement Continuously Effective
for up to 270 days or until such earlier date as of
which all the Registrable Securities under the Demand
Registration statement shall have been disposed of in
the manner described in the Registration Statement.
Notwithstanding the foregoing, if for any reason the
effectiveness of a registration pursuant to Section 3.2
or Section 3.3 hereof is suspended or, in the case of a
Demand Registration, postponed as permitted by Section
3.2(b), the foregoing period shall be extended by the
aggregate number of days of such suspension or
postponement.
(e) The Company shall be obligated to effect no more
than one Demand Registration. For purposes of the preceding
sentence, registration shall not be deemed to have been
effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such
registration statement has become effective, such
registration or the related offer, sale or distribution of
Registrable Securities thereunder is interfered with by any
stop order, injunction or other order or requirement of the
Commission or other governmental agency or court for any
reason not attributable to the Selling Holders and such
interference is not thereafter eliminated, or (iii) if the
conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by
reason of a failure on the part of the Selling Holders. If
the Company shall have complied with its obligations under
this Note, a right to demand a registration pursuant to this
Section 3.2 shall be deemed to have been satisfied upon the
earlier of (x) the date as of which all of the Registrable
Securities included therein shall have been disposed of
pursuant to the Registration Statement, and (y) the date as
of which such Demand Registration shall have been
Continuously Effective for a period of 270 days provided no
stop order or similar order, or proceedings for such an
order, is thereafter entered or initiated.
(f) A registration pursuant to this Section 3.2 shall
be on such appropriate registration form of the Commission
as shall (i) be selected by the Company and be reasonably
acceptable to the Majority Selling Holders and (ii) permit
the disposition of the Registrable Securities in accordance
with the intended method or methods of disposition
specified in the request pursuant to Section 3.2(a).
(g) Whenever the Company shall effect a registration
pursuant to this Section 3.2 in connection with an
underwritten offering by one or more Selling Holders of
Registrable Securities: (i) if such Selling Holders have
requested the inclusion therein of more than one class of
Registrable Securities, and the underwriter advises each
such Selling Holder in writing that, in its opinion, the
inclusion of more than one class of Registrable Securities
would adversely affect such offering, the Demanding Holders
holding at least a majority of the Registrable Securities
proposed to be sold therein by them, shall decide which
class of Registrable Securities shall be included therein
in such offering and the related registration, and the
other class shall be excluded; and (ii) if the underwriter
advises each such Selling Holder in writing that, in its
opinion, the amount of securities requested to be included
in such offering (whether by Selling Holders or others)
exceeds the amount which can be sold in such offering
within a price range acceptable to the Majority Selling
Holders, securities shall be included in such offering and
the related registration, to the extent of the amount which
can be sold within such price range: First, the Registrable
Securities requested by Demanding Holders pursuant to this
Section 3.2; and Second, all other securities requested to
be included in such registration.
3.3 Piggyback Registration.
(a) If at any time after June 1, 1998 the Company
proposes to register (including for this purpose a
registration effected by the Company for Other
Shareholders) securities under the Securities Act in
connection with the public offering solely for cash on Form
S-1, S-2 or S-3 (or any replacement or successor forms),
the Company shall promptly give each Holder of Registrable
Securities written notice of such registration (a
"Piggyback Registration"). Upon the written request of
each Holder given within twenty (20) days following the
date of such notice, the Company shall cause to be included
in such registration statement and use reasonable efforts
to be registered under the Securities Act all the
Registrable Securities that each such Holder shall have
requested to be registered. The Company shall have the
absolute right to withdraw or cease to prepare or file any
registration statement for any offering referred to in this
Section 3.3 without any obligation or liability to any
Holder.
(b) If the underwriter shall advise the Company in
writing (with a copy to each Selling Holder) that, in its
opinion, the amount of Registrable Securities requested to
be included in such registration would materially adversely
affect such offering, or the timing thereof, then the
Company will include in such registration, subject to any
and all rights of third parties pursuant to agreements
existing on the date hereof, to the extent of the amount
and class which the Company is so advised can be sold
without such material adverse effect in such offering:
First, all securities proposed to be sold by the Company
for its own account; and Second, the Registrable Securities
requested to be included in such registration by Holders
pursuant to this Section 3.3 and all other securities being
registered pursuant to the exercise of contractual rights
comparable to the rights granted in this Section 3.3, on a
pro rata basis in proportion to the relative number of
securities of the holders participating in such
registration.
(c) Each Holder shall be entitled to have its
Registrable Securities included in an unlimited number of
Piggyback Registrations pursuant to this Section 3.3.
3.4 Expenses of Registration. Except as otherwise
provided in Section 3.2(a) hereof, the Company shall bear all
Registration Expenses incurred in connection with any
registration, qualification and compliance by the Company
pursuant to Section 3.2 or Section 3.3 hereof. All Selling
Expenses shall be borne by the holders of the securities so
registered pro rata on the basis of the number of their shares
so registered.
3.5 Registration Procedures. Whenever required under
Section 3.2 or Section 3.3 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as
practicable:
(a) Prepare and file with the Commission a
registration statement with respect to such Registrable
Securities and use the Company's best efforts to cause such
registration statement to become effective.
(b) Prepare and file with the Commission such
amendments and supplements to such registration statement
and the prospectus used in connection with such
registration statement as may be necessary to comply with
the provisions of the Securities Act and rules thereunder
with respect to the disposition of all securities covered
by such registration statement. If the registration is for
an underwritten offering, the Company shall amend the
registration statement or supplement the prospectus
whenever required by the terms of the underwriting
agreement entered into pursuant to Section 3.6(b). In the
event that any Registrable Securities included in a
registration statement subject to, or required by, this
Note remain unsold at the end of the period during which
the Company is obligated to use its best efforts to
maintain the effectiveness of such registration statement,
the Company may file a post-effective amendment to the
registration statement for the purpose of removing such
Securities from registered status.
(c) Furnish to each Selling Holder of Registrable
Securities, without charge, such numbers of copies of the
registration statement, any pre-effective or post-effective
amendment thereto, the prospectus, including each
preliminary prospectus and any amendments or supplements
thereto, in each case in conformity with the requirements
of the Securities Act and the rules thereunder, and such
other related documents as any such Selling Holder may
reasonably request in order to facilitate the disposition
of Registrable Securities owned by such Selling Holder.
(d) Use the Company's best efforts (i) to register
and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of
such states or jurisdictions as shall be reasonably
requested by the underwriter, and (ii) to obtain the
withdrawal of any order suspending the effectiveness of a
registration statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of the
offer and transfer of any of the Registrable Securities in
any jurisdiction, at the earliest possible moment;
provided, however, that the Company shall not be required
in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten or agented
offering, enter into and perform the Company's obligations
under an underwriting or agency agreement (including
indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with
the managing underwriter or underwriters of or agents for
such offering. The Company shall also cooperate with the
Majority Selling Holders and the underwriter for such
offering in the marketing of the Registrable Securities,
including making available the Company's officers,
accountants, counsel, premises, books and records for such
purpose, but the Company shall not be required to incur any
material out-of-pocket expense pursuant to this sentence.
(f) Promptly notify each Selling Holder of any stop
order issued or threatened to be issued by the Commission
in connection therewith (and take all reasonable actions
required to prevent the entry of such stop order or to
remove it if entered).
(g) Make generally available to the Company's
security holders copies of all periodic reports, proxy
statements, and an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later
than ninety (90) days following the end of the twelve (12)-
month period beginning with the first month of the
Company's first fiscal quarter commencing after the
effective date of each registration statement filed
pursuant to the terms of this Note.
(h) Make available for inspection at reasonable times
and upon reasonable notice by any Selling Holder, any
underwriter participating in such offering and the
representatives of such Selling Holder and the underwriter
(but not more than one firm of counsel to such Selling
Holders), all financial and other information as shall be
reasonably requested by them, and provide the Selling
Holder, any underwriter participating in such offering and
the representatives of such Selling Holder and the
underwriter the opportunity to discuss the business affairs
of the Company with its principal executives and
independent public accountants who have certified the
audited financial statements included in such registration
statement, in each case all as necessary to enable them to
exercise their due diligence responsibility under the
Securities Act; provided, however, that information that
the Company determines, in good faith, to be confidential
shall not be disclosed unless such person signs a
confidentiality agreement reasonably satisfactory to the
Company.
(i) Use all reasonable efforts to cause the
Registrable Securities covered by such registration
statement (i) if the Common Stock is then listed on a
securities exchange or included for quotation in a
recognized trading market, to continue to be so listed or
included for a reasonable period of time after the
offering, and (ii) to be registered with or approved by
such other United States or state governmental agencies or
authorities as may be necessary by virtue of the business
and operations of the Company to enable the Selling Holders
of Registrable Securities to consummate the disposition of
such Registrable Securities.
(j) Take such other actions as are reasonably
required in order to expedite or facilitate the disposition
of Registrable Securities included in each such
registration.
3.6 Holders' Obligations. It shall be a condition
precedent to the obligations of the Company to take any action
pursuant to the term of this Note with respect to the
Registrable Securities of any Selling Holder of Registrable
Securities that such Selling Holder shall:
(a) Furnish to the Company such information regarding
such Selling Holder, the number of the Registrable
Securities owned by it, and the intended method of
disposition of such securities as shall be reasonably
requested by the Company and as reasonably required to
effect the registration, qualification or compliance
referred to in this Section 3, and to cooperate with the
Company in preparing such registration;
(b) Agree to sell their Registrable Securities to the
underwriters at the same price and on substantially the
same terms and conditions as the Company or the other
persons on whose behalf the registration statement was
being filed have agreed to sell their securities, and to
execute an underwriting agreement in customary form with
the underwriter or underwriters selected by the Company.
3.7 Rule 144 Reporting. With a view to making available
the benefits of certain rules and regulations of the Commission
which may permit the sale of the Registrable Securities to the
public without registration, the Company agrees to:
(a) File with the Commission in a timely manner all
reports and other documents required of the Company under
the Securities Act and the Securities Exchange Act at any
time it is subject to such reporting requirements; and
(b) So long as the holder of this Note owns any
Registrable Securities, furnish to such holder promptly
upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, and
of the Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of the Company, and
such other reports and documents so filed as such holder
may reasonably request in availing itself of any rule or
regulation of the Commission allowing such holder to sell
any such securities without registration.
3.8 Lock-Out Period. By its acceptance hereof, the holder
of this Note hereby agrees not to effect any public sale or
distribution (including a sale pursuant to Rule 144 under the
Securities Act) of any Common Stock it may acquire or hold
pursuant to any conversion of the indebtedness evidenced by this
Note into Common Stock of the Company during any Lock-Out
Period. The Company hereby agrees to give the holder of this
Note written notice of each Lock-Out Period, including the dates
thereof.
3.9 Transfer of Registration Rights. The rights to cause
the Company to register securities granted by the Company under
this Section 3 may be assigned by any Holder to a transferee or
assignee of all, or any part, of the Registrable Securities,
provided that the Company is given written notice at the time of
or within a reasonable time after said transfer, stating the
name and address of said transferee or assignee and identifying
the securities with respect to which such registration rights
are being assigned, and provided further that the transferee or
assignee of such rights is not deemed by the Board of Directors
of the Company, in its reasonable judgment, to be a competitor
of the Company; and provided further that the transferee or
assignee of such rights assumes the obligations of the holder of
this Note under this Section 3.
3.10 Indemnification.
(a) The Company, with respect to each registration,
qualification and compliance effected pursuant to this
Section 3, will indemnify and hold harmless each Holder,
each of its officers, directors, partners, and agents, and
each party controlling such Holder, and each underwriter,
if any, and each party who controls any underwriter,
against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering
circular or other document (including any related
registration statement, notification or the like) incident
to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or any
rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in
connection with any such registration, qualification or
compliance, and will reimburse each such Holder, each of
its officers, directors, partners, and agents, and each
party controlling such Holder, each such underwriter and
each party who controls any such underwriter, for any legal
and any other expenses incurred in connection with
investigating or defending any such claim, loss, damage,
liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based upon
written information furnished to the Company by such Holder
or underwriter, as the case may be, and stated to be
specifically for use in any prospectus, offering circular
or other document (including any related registration
statement, notification or the like) incident to any such
registration, qualification or compliance.
(b) Each Holder and Other Shareholder will, if
Registrable Securities held by it, him or her are included
in the securities as to which such registration,
qualification or compliance is being effected, indemnify
and hold harmless the Company, each of its directors and
officers and each underwriter, if any, of the Company's
securities covered by such a registration statement, each
party who controls the Company or such underwriter, each
other such Holder and Other Shareholder and each of their
respective officers, directors, partners, and agents, and
each party controlling such Holder or Other Shareholder,
against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement,
prospectus, offering circular or other document, or any
omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the
Company and such Holders, Other Shareholders, directors,
officers, partners, agents, parties, underwriters or
control persons for any legal or any other expenses
reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document
solely in reliance upon and in conformity with written
information furnished to the Company by such Holder or
Other Shareholder and stated to be specifically for use in
any prospectus, offering circular or other document
(including any related registration statement, notification
or the like) incident to any such registration,
qualification or compliance; provided, however, that the
obligations of such Holders and Other Shareholders
hereunder shall be limited to an amount equal to the
proceeds to each such Holder or Other Shareholder of
securities sold as contemplated herein.
(c) Each party entitled to indemnification under this
Section 3.10 (the "Indemnified Party") shall give notice to
the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be
approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense (unless
the Indemnified Party shall have been advised by counsel
that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the
Indemnified Party, in which case such expense shall be paid
by the Indemnifying Party), and provided further that the
failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its
obligations under this Section 3. No Indemnifying Party,
in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified
Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall provide
such information as may be reasonably requested by an
Indemnifying Party in order to enable such Indemnifying
Party to defend a claim as to which indemnity is sought.
4. SALE OF NEW SECURITIES BY THE COMPANY
4.1 Certain Definitions. As used in this Section 4, the
following terms shall have the following respective meanings:
"Equity Security" shall mean any capital stock of the
Company, whether now authorized or not, and warrants to purchase
capital stock, and securities of any type that are, or may
become, convertible into capital stock; the number of shares of
an Equity Security which is a warrant or convertible security
shall be the number of shares of such Equity Security which
would result upon the immediate exercise of such warrant or
right of conversion of such convertible security, without regard
to when such warrant may in fact be exercised or such
convertible security may in fact be converted.
"New Securities" shall mean any Equity Securities hereafter
issued solely in connection with a private placement of such
Equity Securities for the purpose of raising working capital for
the Company; provided that, in no case shall the term New
Securities include (i) securities purchased or acquired pursuant
to the terms of this Note or the other Notes; (ii) securities
offered to the public pursuant to a registration statement filed
in accordance with the provisions of the Securities Act; (iii)
securities issued in connection with the acquisition of another
corporation by the Company by merger, purchase of substantially
all assets or other reorganization whereby the Company owns,
upon consummation of such acquisition, greater than fifty
percent (50%) of the voting power to elect the directors of such
corporation; (iv) securities issued in any merger or
consolidation of the Company; (v) securities evidencing any
borrowings, direct or indirect, from financial institutions or
other persons by the Company, whether or not presently
authorized, including any type of loan or payment evidenced by
any type of debt instrument, provided such securities do not
have equity features (such as warrants, options or other rights
to purchase capital stock) and are not convertible into capital
stock of the Company; (vi) securities issued pursuant to any
stock option plan, stock purchase or stock bonus arrangement, or
grant, in each case for the benefit of employees, directors,
officers, advisors and consultants of the Company and its
subsidiaries; (viii) securities issued to financial institutions
and leasing companies in connection with borrowing or lease
financing arrangements of the Company, whether or not such
securities have equity features or not; (ix) securities issued
in connection with any joint venture, partnering arrangement,
strategic alliance or any other similar arrangement between the
Company and any other person and (x) securities issued in
connection with the settlement of any claim against, or dispute
involving, the Company.
"Preemptive Share" shall mean, immediately prior to any
issue of New Securities, the percentage which expresses the
ratio between (i) the number of Equity Securities owned at such
time by the Purchaser and (ii) the aggregate number of Equity
Securities outstanding at such time.
"Purchaser" shall mean the initial holder of this Note so
long as (i) such initial holder owns or is contractually
entitled to acquire from the Company not less than the number of
shares such holder owns or is contractually entitled to acquire
from the Company immediately after such holder's purchase of
this Note, and (ii) such initial holder has not previously
declined to participate in any previous issuance of New
Securities such holder was entitled to participate in pursuant
to the terms of this Note.
"Sell", as to any Equity Security shall mean to sell, or in
any other way directly or indirectly transfer, assign,
distribute, encumber or otherwise dispose of such Equity
Security, either voluntarily or involuntarily.
4.2 Sale of New Securities. Except as otherwise expressly
provided herein, the Company hereby agrees that it shall not
Sell any New Securities except in accordance with the following
procedures:
(a) The Company shall first deliver to the Purchaser
a written notice of the Company's intention to sell New
Securities (a "Notice of Intention to Sell"), which shall
be irrevocable for a period of ten (10) days after delivery
thereof, offering to the Purchaser the right to purchase up
to its Preemptive Share of such New Securities at the
purchase price and on the terms specified therein. The
Purchaser shall have the right and option, for a period of
ten (10) days after delivery to such Purchaser of such
Notice of Intention To Sell, to purchase all or any part of
the New Securities so offered at the purchase price and on
the terms stated therein. Such acceptance shall be made by
delivering a written notice of acceptance (a "Notice of
Acceptance") to the Company within the aforesaid ten (10)
day period.
(b) The closing of any sales of New Securities under
the terms of Section 4.2(a) shall be made at the offices of
the Company on a mutually satisfactory business day within
fourteen (14) days after the expiration of the aforesaid
periods. Delivery of certificates or other instruments
evidencing such New Securities duly endorsed for transfer
to the Purchaser shall be made on such date against payment
of the purchase price therefor.
(c) If effective acceptance shall not be received
pursuant to Section 4.2(a) above with respect to all New
Securities offered for sale pursuant to a Notice of
Intention To Sell, then the Company may sell all or any
part of the remaining New Securities so offered for sale at
a price not less than the price, and on terms not
substantially more favorable to the purchaser thereof than
the terms stated in the original Notice of Intention To
Sell, at any time within one hundred eighty (l80) days
after the expiration of the offer required by Section
4.2(a) above. In the event the remaining New Securities
are not sold by the Company during such one hundred eighty
(l80) day period, the right of the Company to sell such
remaining New Securities shall expire and the obligations
of this Section 4 shall be reinstated; provided, however,
that in the event the Company determines, at any time
during such one hundred eighty (l80) day period, that the
sale of all or any part of the remaining New Securities on
the terms set forth in the Notice of Intention To Sell is
impractical, the Company can terminate the offer and
reinstate the procedure provided in this Section 4 without
waiting for the expiration of such one hundred eighty (l80)
day period.
5. EVENTS OF DEFAULT
If any of the following events ("Events of Default") shall
occur and be continuing:
(a) the Company shall default in the payment within
five (5) business days after the due date of any principal
of or interest under this Note or any fee or other amount
payable by the Company under this Note;
(b) there shall be any material breach of the
Company's representations and warranties set forth in the
Note, the Subscription Agreement to which the Holder is a
party or the other documents contemplated thereby and such
breach shall continue for a period of five (5) business
days following written notice thereof by the Holder;
(c) the Company shall default in the performance of
any of its covenants or agreements in the Note, the
Subscription Agreement to which the Holder is a party or
the other documents contemplated thereby and such default
shall continue for a period of thirty (30) days following
written notice thereof by the Holder;
(d) the Company shall admit in writing its inability
to, or be generally unable to, pay its debts as such debts
generally become due;
(e) failure by the Company or any of its subsidiaries
(i) to make payment when due with respect to any other
indebtedness under one or more classes or issues of
indebtedness which one or more classes or issues of
indebtedness are in an aggregate principal amount of
$1,000,000 or more; or (ii) to perform any term, covenant,
condition, or provision of one or more classes or issues of
indebtedness which one or more classes or issues of
indebtedness are in an aggregate principal amount of
$1,000,000 or more, which failure in the case of this
clause (e) results in an acceleration of the maturity
thereof;
(f) one or more orders, decrees or judgments for the
payment of money shall be rendered against the Company, or
any of its subsidiaries, and the Company, or such
subsidiary, shall not discharge the same or provide for its
discharge in accordance with its terms, or procure a stay
of execution thereof within sixty (60) days from the date
of entry thereof and within said period of sixty (60) days,
or such longer period during which execution of such
judgment shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal
and such judgment together with all other such judgments
shall exceed in the aggregate $1,000,000;
(g) [Intentionally Omitted]
(h) the Company shall (i) apply for or consent in
writing to the appointment of, or, to the extent
applicable, the taking of possession by, a receiver,
custodian, trustee or liquidator of it or of all or a
substantial part of its assets, (ii) make an assignment for
the benefit of its creditors, (iii) commence a voluntary
case under the federal Bankruptcy Code (as now or hereafter
in effect), (iv) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment
of debts, (v) fail to controvert, or acquiesce to, any
petition filed against it in an involuntary case under the
federal Bankruptcy Code which is not dismissed, bonded or
discharged within thirty (30) days, or (vi) take any action
for the purpose of effecting any of the foregoing; or
(i) a proceeding or case shall be commenced, without
the application or consent of the Company in any court of
competent jurisdiction, seeking (i) the liquidation,
reorganization, dissolution or winding-up of its assets, or
the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator
or the like of such entity of all or any substantial part
of its assets, or (iii) similar relief in respect of its
creditors, under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall
continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered
and continue unstayed and in effect, for a period of thirty
(30) days; or an order for relief against it or any of its
assets shall be entered in an involuntary case under the
federal Bankruptcy Code.
THEREUPON: (i) in the case of an Event of Default (other
than an Event of Default referred to in clause (h) or (i) above)
the Holder may, by notice to the Company, declare the principal
amount then outstanding of, and the accrued interest on, this
Note and all other amounts payable by the Company under this
Note to be forthwith due and payable, whereupon such amount
shall be immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which
we are hereby expressly waived by the Company; (ii) in the case
of the occurrence of an Event of Default referred to in clause
(h) or (i) above, the principal amount then outstanding of, and
the accrued interest if any, on, this Note shall become
automatically immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which
hereby expressly waived by the Company, and in any case the
Holder may take such action as is permitted to enforce its
rights hereunder, (iii) the Company shall pay all the expenses
of the Holder incurred for the collection of this Note,
including reasonable attorneys' fees and legal expenses and (iv)
the Holder may exercise from time to time any rights and
remedies available to it by law, including those available under
any agreement or other instrument relating to the amounts owned
under this Note.
6. MISCELLANEOUS
6.1 Notices. Any notice or other document required or
permitted to be given or delivered to the holder of this Note
shall be delivered at, or sent by first-class, certified or
registered mail, postage prepaid, or nationally recognized
overnight courier, or sent via facsimile, to such holder at
________________________________, facsimile number:
_____________, or to such other address as shall have been
furnished to the Company in writing by such holder. Any notice
or other document required or permitted to be given or delivered
to the Company shall be delivered at, or sent by first-class,
certified or registered mail, postage prepaid, or nationally
recognized overnight courier, or sent via facsimile, to the
Company at 100 Great Meadow Road, Suite 104, Wethersfield, CT
06109, Attention: Legal Department, facsimile number: (860) 258-
2455, or to such other address as shall have been furnished in
writing to the holder hereof by the Company. Any notice so
addressed and mailed by registered or certified mail shall be
deemed to be given when so mailed and deemed received (i) if
sent by certified or registered mail, three (3) days after being
so mailed, or (ii) if sent by nationally recognized overnight
courier for next day delivery, one (1) day after being so sent.
Any notice so addressed and otherwise delivered shall be deemed
to be given when actually received by the addressee.
6.2 Governing Law. This Note is being delivered in the
State of Connecticut and shall be construed in accordance with
the laws thereof.
6.3 Headings. Article, section and subsection headings in
this Note are included herein for convenience of reference only
and shall not constitute a part of this Note for any other
purpose.
6.4 Binding Effect; Assignment or Transfer. The
obligations of the Company and the Holder set forth herein shall
be binding upon each of their respective successors and assigns,
whether or not such successors or assigns are permitted by the
terms hereof or of the Subscription Agreement.
6.5 Delays or Omissions. No delay or omission to exercise
any right, power or remedy accruing to the holder of this Note,
upon any breach or default of the Company under this Note or the
Subscription Agreement to which the Holder is a party, shall
impair any such right, power or remedy of such holder nor shall
it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part
of any holder of any breach or default under this Note or the
Subscription Agreement to which the Holder is a party, or any
waiver on the part of any holder of any provisions or conditions
of this Note or the Subscription Agreement to which the Holder
is a party must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All
remedies, either under this Note or by law or otherwise afforded
to any holder, shall be cumulative and not alternative.
6.6 Acceptance by Holder; Effectiveness of Note. By the
Holder's signature set forth below, the Holder does expressly
agree to be bound by the terms and provisions of this Note
regarding the Holder's obligations and agreements herein
contained, including, without limitation, the terms and
provisions set forth in Sections 3.6, 3.8 and 3.10 hereof. This
Note shall not be effective until executed and delivered by the
Company and accepted by the Holder, which acceptance by the
Holder shall be evidenced by the Holder countersigning this Note
where and as indicated below.
IN WITNESS WHEREOF, Shared Technologies Cellular, Inc. has
caused this Note to be executed and delivered for and on its
behalf by its duly authorized officer as of the day and year
first above written.
SHARED TECHNOLOGIES CELLULAR, INC.
By:____________________________
Its:
Agreed and accepted this
___ day of May, 1998.
[Holder]
By: ______________________
Its:
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MARCH-31-1998
<CASH> 462
<SECURITIES> 0
<RECEIVABLES> 2803
<ALLOWANCES> 826
<INVENTORY> 100
<CURRENT-ASSETS> 3441
<PP&E> 3267
<DEPRECIATION> 2334
<TOTAL-ASSETS> 12299
<CURRENT-LIABILITIES> 9961
<BONDS> 0
0
0
<COMMON> 72
<OTHER-SE> 328
<TOTAL-LIABILITY-AND-EQUITY> 12299
<SALES> 4927
<TOTAL-REVENUES> 4927
<CGS> 2872
<TOTAL-COSTS> 2872
<OTHER-EXPENSES> 2840
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> (830)
<INCOME-TAX> 3
<INCOME-CONTINUING> (833)
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