SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/ X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ___________ to ___________
Commission file number: 0-27378
NUCO2 INC.
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(Exact Name of Registrant as Specified in Its Charter)
FLORIDA 65-0180800
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2800 S.E Market Place, Stuart, Florida 34997
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (561) 221-1754
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of Class)
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. /X/
(continued next page)
<PAGE>
The aggregate market value at September 18, 1998 of shares of the
Registrant's common stock, $.001 par value per share (based upon the closing
price of $6.1875 per share of such stock on the Nasdaq National Market on such
date), held by non-affiliates of the Registrant was approximately $34,807,701.
Solely for the purposes of this calculation, shares held by directors and
executive officers of the Registrant have been excluded. Such exclusion should
not be deemed a determination or an admission by the Registrant that such
individuals are, in fact, affiliates of the Registrant.
At September 18, 1998, there were outstanding 7,216,664 shares of
the Registrant's common stock, $.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Items 10, 11, 12 and 13 of Part III is
incorporated by reference to the Registrant's definitive proxy statement to be
filed not later than October 28, 1998 pursuant to Regulation 14A.
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PART I
1. BUSINESS.
GENERAL
NuCo2 Inc., a Florida corporation organized in 1990 (together with its
subsidiaries, the "Company"), is the dominant national supplier of liquid carbon
dioxide ("bulk CO2") to retail establishments such as restaurants, convenience
stores, taverns, theaters, theme parks, resorts and stadiums for use in the
carbonation and dispensing of fountain beverages.
For the fiscal year ended June 30, 1998, the Company had net sales of
approximately $35.1 million, compared to net sales of approximately $18.9
million for the fiscal year ended June 30, 1997, an increase of 85.2%. The
Company believes that earnings before interest, taxes, depreciation and
amortization ("EBITDA") is the principal financial measure by which the Company
should be measured as it continues to achieve national market presence and to
build route density. EBITDA for the fiscal year ended June 30, 1998 was
approximately $7.1 million, compared to EBITDA of approximately $4.1 million for
the fiscal year ended June 30, 1997, with fourth quarter fiscal 1998 net sales
and EBITDA setting record levels.
Starting from its Florida base, the Company, through a combination of
internal growth and over 30 acquisitions, expanded its service area to 44
states, operating 68 service and supply depots and servicing over 47,700 bulk
CO2 customers as of August 31, 1998. During the fiscal year ended June 30, 1998,
the Company expanded its service area by 13 states and during the fiscal year
ended June 30, 1997, the Company expanded its service area by 12 states. The
Company services most of the major national and regional restaurant and
convenience store chains, movie theater operators and theme parks throughout the
continental United States including McDonald's, Pizza Hut, Kentucky Fried
Chicken, Burger King, Checkers, Chevy's, 7-Eleven, Circle K, EZ Serve, Conoco,
Carmike Cinemas, AMC Theaters, Friendly's Restaurant, Applebee's, Cracker
Barrel, Shoney's, Inc., Hard Rock Cafe, Planet Hollywood, Universal Studios,
Walt Disney World, Raymond James Stadium and Pro Player Stadium.
The Company offers its customers two principal services: a stationary
bulk CO2 system installed on the customer's premises and routine filling of the
system with bulk CO2 on a defined schedule. The bulk CO2 system utilizes a
cryogenic vessel that preserves carbon dioxide in its liquid form and then
converts the liquid product to gaseous carbon dioxide, the necessary ingredient
for beverage carbonation. Typically the bulk CO2 system is owned by the Company
and leased to the customer under a five year noncancelable contract, although
some customers own their own bulk CO2 system.
Carbon dioxide is universally used for the carbonation and dispensing
of fountain beverages. In most instances, carbon dioxide is presently supplied
to fountain beverage users in the form of gas, which is transported and stored
in high pressure cylinders. The Company's 44 state service area enables the
Company to reach over 96% of potential CO2 beverage users in the continental
United States. The Company believes that bulk CO2 systems will eventually
displace most high pressure cylinders in the beverage CO2 market because from a
user's perspective, bulk CO2 systems enjoy several qualitative and economic
advantages over high pressure cylinders, and, therefore, the bulk CO2 industry
presents substantial opportunity for growth. The Company estimates that it
currently services approximately 9,000 high pressure CO2 customers and that
there is a total of approximately 800,000 potential beverage CO2 users in the
United States.
<PAGE>
The Company intends to continue to expand its bulk CO2 business through
a combination of internal growth, conversion of high pressure CO2 beverage users
and acquisitions, building route densities in order to achieve operating
economies of scale and profitability throughout its service area.
In April 1997, the Company signed an agreement with MiCell Technologies
Inc. ("MiCell") to be the exclusive United States and Canadian supplier of bulk
CO2 systems and liquid carbon dioxide to the MiCell customer base in the
industrial laundry and professional garment care industry (dry cleaning) that
will utilize the MiCare garment cleaning fluid system technology developed and
patented by MiCell. This system utilizes carbon dioxide in conjunction with
non-toxic cleaning solutions. MiCell surfacants allow for a wide range of
performance in liquid CO2 systems, that in addition to garment care, also
includes parts cleaning, precision cleaning and textile processing. MiCell is
currently field testing its system and expects to commence commercialization by
the end of 1998.
In July 1997, the Company reached an agreement with Geotechnical
Instruments, Inc. to be the exclusive distributor in the United States of
stationary carbon dioxide detectors.
INDUSTRY OVERVIEW
CO2 is universally used for the carbonation and dispensing of
fountain beverages. The Company believes that bulk CO2 technology will
eventually displace most high pressure cylinders in the beverage CO2 market and,
therefore, the bulk CO2 industry presents substantial opportunity for growth.
Major restaurant and convenience store chains continue to adopt this new
technology and search for qualified suppliers to install and service these
systems. Unlike high pressure cylinders, which are typically changed when empty
and transported to the supplier's depot for refilling, bulk CO2 systems are
permanently installed at the customer's site and are kept charged by filling by
the supplier from a specialized bulk CO2 truck on a constant "stay filled"
basis. Advantages to users of bulk CO2 systems include enhanced safety, improved
beverage quality and product yields, reduced employee handling and cylinder
storage requirements, and elimination of system downtime and product waste
during cylinder changeovers.
Many types of businesses compete in the beverage CO2 business, and
market share is fragmented. High pressure cylinders and bulk CO2 service are
most frequently provided by distributors of industrial gases. These companies
generally provide a number of products and services in addition to CO2, and
often view bulk CO2 systems as high-service adjuncts to their core business.
Industrial gas distributors generally have been reluctant to attempt to convert
their cylinder CO2 customers to bulk CO2 systems for several reasons, that
include the capital outlays required to purchase the bulk CO2 systems, the
idling of high pressure cylinders and associated equipment, and the
inefficiencies that would result from splitting their CO2 customer base between
two CO2 technologies. Other competitors in the beverage CO2 market include
fountain supply companies and distributors of restaurant supplies and groceries,
which firms vary greatly in size. There are a number of small companies that
provide bulk CO2 service that operate on a local or regional geographic scope.
Many of these suppliers lack the capital necessary to offer bulk CO2 systems to
customers on lease, or to purchase additional or replacement specialized bulk
CO2 trucks and stationary depots.
Management believes that demand for bulk CO2 systems will be driven
by the safety, product quality and other operating advantages afforded to users
by such systems, and the increasing availability and acceptance within the food
and beverage industry of bulk CO2 systems. In addition, the Company believes
that, other than the Company, qualified suppliers of bulk CO2 systems do not
presently exist in many regions of the United States.
COMPETITIVE STRATEGY
The central elements of the Company's competitive strategy are the
following:
Focus on Bulk CO2 Market. Unlike many of its competitors for whom
bulk CO2 is a secondary service line, the Company has no material lines of
business at present other than the provision of bulk CO2, and does not
anticipate diversifying into other product or service lines. All aspects of the
Company's operations are guided by its focus on the bulk CO2 business, including
its selection of operating equipment, design of delivery routes, location of
depots, structure of customer contracts, content of employee training programs
and design of management information and accounting systems. By restricting its
scope of activities to the bulk CO2 business, and largely avoiding the dilution
of management time and Company resources that would be required by other service
lines, the Company believes it is able to maximize the level of service it
provides to its bulk CO2 customers. The Company also believes that its focus on
this product line also helps minimize operating costs through the use of
equipment dedicated to bulk CO2 applications and through the high level of
product experience held by its employees.
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<PAGE>
Company Owned Equipment. The Company generally places a Company
owned bulk CO2 system on the customer's premises under a long-term supply
contract. This arrangement is often appealing to the customer since the Company
bears the initial capital cost of the equipment and installation, with the
customer only facing a predictable and modest monthly usage fee. The Company
believes that its ability to place its equipment on the customers premises helps
create customer loyalty.
Long term Customer Contracts. The Company typically enters into five
year bulk CO2 system lease agreements with its customers. Generally, these
contracts are classified as one of two types: "budget plan" service contracts
and "rental plus per pound charge" contracts. Pursuant to budget plan contracts,
customers pay fixed monthly charges for the lease of a Company owned bulk CO2
system installed on the customer's premises and refills of bulk CO2 according to
a predetermined schedule. The bulk CO2 is included in the monthly rental charge
up to a predetermined maximum annual volume. If the maximum annual volume is
exceeded, the customer is charged for additional bulk CO2 delivered. Pursuant to
rental plus per pound charge contracts, the Company also leases a bulk CO2
system to the customer, but the customer is charged on a per pound basis for all
bulk CO2 delivered. In exchange for a noncancelable monthly charge, the Company
installs and rents to its customers a Company owned bulk CO2 system and, through
a delivery routing system, services the bulk CO2 system and supplies bulk CO2 to
the customer's site on a regular basis. Even with customers that own their own
bulk CO2 systems, the Company seeks to arrange for multi-year supply contracts.
The Company believes that the use of long-term contracts provides benefits to
both itself and its customers. Customers are able to largely eliminate CO2
supply interruptions and the need to operate CO2 equipment themselves, while the
contract adds stability to the Company's revenue base. After the expiration of
the initial term of a contract, the term of the contract continues in effect
until either the Company or the customer notifies the other of its desire to
terminate. Generally, the Company has been successful contracting with its
customers for a new long-term supply contract. To date, the Company's experience
has been that contracts roll-over without a significant portion of contracts
expiring without renewal in any one year. The largest number (approximately 40%)
of the Company's current contracts with customers expire by their terms in 2003.
Capture Advantages of Scale and Route Density. In many of its
current markets the Company has established itself as the leading or dominant
supplier of bulk CO2, and believes it enjoys cost advantages over its
competitors due to the greater density of the Company's route structure; a lower
average time and distance traveled between stops, and a lower average cost per
delivery. Greater scale may also lead to better vehicle and fixed asset
utilization, as well as the ability to spread fixed marketing and administrative
costs over a broader revenue base.
Superior Customer Service. The Company seeks to differentiate itself
through its attention to customer service. Each bulk CO2 system serviced by the
Company has a label with a toll-free help line for the customer's use. The
Company has an advanced dispatch and delivery system, including the ability to
communicate by radio with route personnel at all times. The Company responds to
service calls on a 24-hour, seven day a week basis, and the experience level of
its personnel aids in the resolution of equipment failures or other service
interruptions, whether or not caused by the Company's equipment. Recognizing the
public visibility of its customers, the Company carefully maintains the
appearance of its vehicles and the professional image of its employees.
Rapid Installation and Diverse Configurations. The bulk CO2 system
installed at the customer's site consists of a cryogenic vessel for the storage
of liquid CO2 and related valves, regulators and gas lines. The Company operates
a fleet of 77 installation vehicles with dedicated installation personnel. A key
attribute in marketing the Company's services to multi-unit customers is its
ability to rapidly install bulk CO2 systems at customers' locations with minimal
disruption. The Company offers systems ranging from 50 to 600 pounds of CO2
capacity. With the recent introduction of the 50 pound capacity system, the
range of system sizes permits the Company to market its services to a broad
range of potential customers.
Attractive Pricing to Customer. The Company carefully monitors the
prices offered in its markets by providers of high pressure CO2 cylinders.
Despite the customer-level advantages of bulk CO2 systems over high pressure
cylinders, the Company generally prices its services comparably to the price of
high pressure cylinders. This has proved an effective inducement to cause
customers to convert from cylinders to bulk CO2 systems. When appropriate, the
Company will adjust pricing to meet local market conditions in order to build
route density.
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GROWTH STRATEGY
The objective of the Company is to strengthen its position as the
dominant national supplier of bulk CO2 systems for beverage applications. The
Company intends to implement its strategy through (i) internal market
development by which it builds route densities necessary to become the lowest
cost operator and (ii) a program of strategic acquisitions, by which it will
enter a new market area, or through tuck-in acquisitions whereby it consolidates
an underpenetrated existing market.
Internal Market Development. The majority of growth is driven by the
conversion of high pressure cylinder CO2 users to bulk CO2 systems. The
Company's ability to drive conversion is illustrated by its success in the
Florida market, where it continues to rapidly add new bulk CO2 system
installations, even after actively marketing in the state since 1990. The
Company's internal growth initiatives consist of marketing multi-system
placements to corporate and franchised operations of large restaurant,
convenience store and theater chains. The Company's relationships with chain
customers in one geographic market frequently help it to establish service with
these same chains when the Company expands to new markets. As the Company enters
a new market, the Company may seek to establish an initial presence through
acquisition. After accessing the chain accounts in a new market, the Company
attempts to rapidly build route density by leasing bulk CO2 systems to
independent restaurants, convenience stores and theaters.
The Company believes that optimal route density is achieved at
approximately 350 accounts per bulk CO2 truck, and the Company typically employs
targeted sales efforts to build density within an existing route. The Company
maintains a "hub and spoke" route structure and establishes additional
stationary bulk CO2 depots as a service area expands through geographic growth.
The Company's route density and market share is highest in Florida, and is less
developed in the other areas where the Company presently has operations. The
Company's entry to these states was accomplished largely by acquisitions of
businesses with more thinly developed route networks than are typical for the
Company. The Company expects to benefit from route efficiencies and other
economies of scale as it builds its customer base in these states through more
intensive internal marketing initiatives.
Strategic Acquisitions. It has been the Company's experience that
acquisition opportunities on satisfactory terms have been regularly available.
The Company estimates that there are more than 100 distributors throughout the
United States that service between 250 and 750 bulk CO2 accounts and
approximately 10 distributors that each service between 1,000 and 6,000
accounts, many of which may represent attractive acquisition candidates for the
Company. The Company has generally been able to acquire smaller distributors at
prices near their asset value. Since this cost per system is similar to the
Company's internal installation costs, these acquisitions represent an economic
means of acquiring accounts. The Company's strategy is to acquire bulk CO2
operations in strategic markets in new territories, as well as, target tuck-in
operations that can be easily integrated into established routes. These
transactions typically involve the purchase of installed bulk CO2 systems,
equipment and customer lists and require little additional administrative
expense to operate. With these acquisitions, all administrative functions such
as billing, dispatching and accounting are moved to the Company's headquarters
in Stuart, Florida.
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<PAGE>
As the Company enters a new market, or consolidates an existing
market, incumbent bulk CO2 distributors may be willing to be acquired on
satisfactory terms for the following reasons: (i) distributors realize that
successful competition with the Company will be difficult if the Company has
already achieved greater route density; (ii) a distributor's primary business
often is distribution of other industrial gases and welding supplies, with bulk
CO2 not representing a key service, and a reasonable offer to purchase a
non-core business is often appealing; (iii) because of the operating
efficiencies the Company brings to the accounts serviced, the accounts have more
value for the Company than for the seller; (iv) a distributor may have little
opportunity for growth because of its inability to access capital; and (v) there
are few other credible buyers competing with the Company.
MARKETING AND CUSTOMERS
The Company markets its bulk CO2 systems to large customers such as
restaurant and convenience store chains, movie theater operators and theme
parks. The Company's customers include most of the major national and regional
chains throughout the United States. The Company approaches large chains on a
corporate or regional level for approval to become the exclusive supplier of
bulk CO2 on a national basis or within a designated territory. The Company then
directs its sales efforts to the managers or owners of the individual or
franchised operating units. Whereas the large chains offer immediate penetration
on a national or regional basis, the small operators are important accounts
because they provide geographic density which optimizes delivery efficiency and
reduces cost on a per customer basis. The introduction of smaller bulk CO2
systems (50 and 100 pound capacity vessels), which the Company helped develop,
allows the Company to penetrate the market for lower volume users of CO2 such as
mall-based food courts, small restaurants and mass-market retailers.
As of August 31, 1998, the Company distributed bulk CO2 to over
47,700 customers, none of which accounted for more than 5% of the Company's
fiscal 1998 net sales. The Company has negotiated multi-system placements or CO2
supply contracts with numerous customers, including McDonald's, Pizza Hut,
Kentucky Fried Chicken, Burger King, Checkers, Chevy's,7-Eleven, Circle K, EZ
Serve, Conoco, Carmike Cinemas, AMC Theaters, Friendly's Restaurant, Applebee's,
Cracker Barrel, Shoney's, Inc., Hard Rock Cafe, Planet Hollywood, Universal
Studios, Walt Disney World , Raymond James Stadium and Pro Player Stadium. The
Company's relationships with chain customers in one geographic market frequently
help it establish service with these same chains when the Company expands to new
markets. After accessing the chain accounts in a new market, the Company
attempts to rapidly build route density by leasing bulk CO2 systems to
independent restaurants, convenience stores and theaters.
The Company also supplies high pressure gases in cylinder form,
including CO2, helium and nitrogen. The Company estimates that it currently
services approximately 9,000 high pressure CO2 customers, most of whom were
either customers of acquired companies or are low volume users for which it is
not economical to convert to bulk CO2 systems. However, with the introduction of
50 and 100 pound capacity bulk CO2 systems, the Company anticipates that many
low volume users will convert from high pressure cylinders. Helium and nitrogen
are mostly supplied to existing bulk customers in connection with filling
balloons and dispensing beer, respectively.
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<PAGE>
OPERATIONS
As of August 31, 1998, the Company operated 68 bulk CO2 service and
supply depots located throughout its service area and operates 153 specialized
bulk CO2 trucks, 77 installation and service vehicles and 17 high pressure
cylinder delivery trucks. Each specialized bulk CO2 truck covers up to 350
accounts, depending on market density, refilling customer systems on a regular
schedule. All delivery quantities are measured by flow meters installed on the
Company's tank trucks. This information is then loaded onto the Company's
centralized billing system, which is maintained on an IBM AS/400 computer.
Service and supply depots are equipped with large storage tanks (up to 40 tons)
which receive liquefied CO2 from large capacity tanker trucks and from which the
Company's bulk CO2 trucks refill for delivery to customers. In most cases, the
tank is accessible from the outside of the establishment.
The Company has a record of timely bill collections, with accounts
receivable historically averaging 37 days of sales. The Company attributes its
successful collection history to several factors: (i) the Company generates
invoices immediately after delivery; (ii) since fountain soda is generally a
highly profitable item, customers are less likely to risk their CO2 supply by
not paying their bills; (iii) the Company performs continuous proprietary
account monitoring and may interrupt service to those customers that are behind
on their accounts; and (iv) the use of a locking device on the fill port
prevents customers from receiving bulk CO2 from other sources while bills to the
Company remain unpaid.
All dispatch and billing functions are conducted from the Company's
corporate headquarters, with route drivers, installers and service personnel
operating from the Company's depots.
BULK CO2 SUPPLY
Bulk CO2 is currently a readily available commodity product which is
processed and sold by various sources. In May 1997, the Company entered into an
exclusive ten year carbon dioxide supply agreement with The BOC Group, Inc. (the
"BOC CO2 Supply Agreement"). The agreement provides readily available, high
quality CO2 as well as relatively stable bulk carbon dioxide prices at
competitive levels.
BULK CO2 SYSTEMS
The Company purchases new bulk CO2 systems from Minnesota Valley
Engineering, Inc. and Taylor-Wharton Cryogenics (a division of Harsco
Corporation), the two major manufacturers. The Company believes that it has been
the largest single purchaser of bulk CO2 systems from the two principal
manufacturers combined. The Company purchases vessels in six sizes (50, 100,
250, 300, 400 or 600 lbs.) depending on the CO2 needs of its customers. The
Company's vessels are vacuum insulated containers with extremely high insulation
characteristics allowing the storage of CO2, in its liquid form, at very low
temperatures. The vessels operate under low pressure, are fully automatic and
require no electricity. The service life of the Company's vessels, based upon
manufacturers' estimates, is expected to exceed 20 years with minimal
maintenance.
The Company's in-house service department coordinates all
installations and repairs of equipment. In addition to the normal single unit
bulk CO2 system installation, the Company has performed many complex multi-unit
installations in stadiums (e.g., Pro Players Stadium and Miami Arena) and
amusement parks (e.g. Universal Studios). These installations involve erecting
custom-designed piping systems to link bulk CO2 systems situated in remote
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locations. The Company's strong technical capabilities represent an important
competitive advantage and have often resulted in the equipment manufacturers
consulting with the Company on product modifications.
TRADEMARKS
"NuCo2(R)" is a registered trademark of the Company. The Company
markets its services utilizing the "NuCo2(R)" trademark.
REGULATORY MATTERS
The business of the Company is subject to federal and state laws and
regulations adopted for the protection of the environment, the health and safety
of employees and users of the Company's products. The transportation of bulk CO2
is subject to regulation by various federal, state and local agencies, including
the U.S. Department of Transportation. These regulatory authorities have broad
powers, and the Company is subject to regulatory and legislative changes that
can affect the economics of the industry by requiring changes in operating
practices or by influencing the demand for, and the costs of providing services.
In addition, the Company voluntarily complies with applicable safety standards.
Management believes that the Company is in compliance in all material respects
with all such laws, regulations and standards currently in effect and that the
cost of compliance with such laws, regulations and standards has not and is not
anticipated to have a material adverse effect on the Company.
COMPETITION
The Company competes with other distributors of bulk CO2 and high
pressure CO2, including several regional industrial gas distributors, numerous
small independent operators and distributors of restaurant supplies and
groceries. Bulk CO2 systems typically are serviced by industrial and welding
supply companies, specialty gas distributors and fountain supply companies.
These suppliers range widely in size. Some of the Company's competitors have
significantly greater financial, technical or marketing resources than the
Company. The Company believes that its ability to compete depends on a number of
factors, including price, product quality, availability and reliability, credit
terms, name recognition, delivery time and post-sale service and support.
EMPLOYEES
At June 30, 1998 the Company had 451 full-time employees, of whom
147 were involved in an executive, marketing or administrative capacity, 214 of
whom were route drivers and 90 of whom were in installation functions. The
Company considers its relationship with its employees to be good.
SEASONALITY
Of the Company's over 46,000 bulk CO2 customers, as of June 30, 1998
approximately 8,300 were billed utilizing a "rental plus per pound charge"
program. Additionally, 6,800 accounts use their own bulk CO2 systems and are
billed by the pound for bulk CO2 delivered. Customers purchasing bulk CO2 by the
pound will tend to consume less CO2 in the winter months and the Company's net
sales to such customers will be correspondingly lower in times of cold or
inclement weather.
BACKLOG
As of June 30, 1998, the Company had a backlog of approximately
2,500 orders for its budget plan service.
2. PROPERTIES.
The Company's corporate headquarters are located in a 32,400 square
foot facility in Stuart, Florida. This facility accommodates corporate,
administrative, marketing, sales and warehouse space. Annual rent for the
facility is $237,175. As of August 31, 1998, the Company also leased liquid CO2
service and supply depots at 68 locations in 35 states. The properties on which
such facilities are located are leased on terms consistent with market rentals
prevailing in the location's area. The Company believes that its existing
facilities are adequate for its current needs and that additional facilities in
its service area are available to meet future needs.
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3. LEGAL PROCEEDINGS.
The Company is involved from time to time in litigation arising in
the ordinary course of business, none of which is expected to have a material
adverse effect on the financial condition or results of operations of the
Company.
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock trades on the Nasdaq National Market under the
symbol "NUCO".
The following table sets forth, for the periods indicated, the
highest and lowest bid quotations for the Common Stock, as reported by the
Nasdaq National Market. The prices reported reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not reflect actual
transactions.
CALENDAR 1996 HIGH LOW
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Third Quarter 31 19 1/2
Fourth Quarter 22 11 1/4
CALENDAR 1997
First Quarter 17 5/8 11
Second Quarter 18 3/8 11 7/8
Third Quarter 18 1/4 14 3/8
Fourth Quarter 16 1/8 10 1/4
CALENDAR 1998
First Quarter 13 3/4 10 1/2
Second Quarter 13 1/4 9 7/8
At June 30, 1998, there were approximately 196 holders of record of
the Company's Common Stock. This number does not include an indeterminate number
of shareholders whose shares are held by brokers in "street name."
The Company has not paid any cash dividends on the Common Stock
since its inception and the Board of Directors does not anticipate declaring any
cash dividends on the Common Stock in the foreseeable future. The Company
currently intends to utilize any earnings it may achieve for the development of
its business and working capital purposes. In addition, the payment of cash
dividends on the Common Stock is restricted by financial covenants in the
Company's credit facility with SunTrust Bank, South Florida, National
Association and 12% Senior Subordinated Notes due October 31, 2004.
6. SELECTED CONSOLIDATED FINANCIAL DATA.
The Selected Consolidated Financial Data set forth below reflect the
historical results of operations, financial condition and operating data of the
Company for the periods indicated and should be read in conjunction with the
consolidated financial statements and notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operations included elsewhere
herein.
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<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
--------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(in thousands, except per share amounts and Operating Data)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Net sales.............................................. $ 35,077 $ 18,944 $ 11,966 $ 6,062 $ 4,221
Cost of products sold.................................. 18,578 8,992 5,177 2,503 1,897
Selling, general and administrative expenses........... 9,396 5,859 3,066 1,448 1,093
Depreciation and amortization.......................... 8,912 4,246 2,417 1,380 803
--------- -------- --------- -------- ---------
Operating income (loss)................................ (1,809) (153) 1,305 731 428
Interest expense, net.................................. 3,639 (681) 1,258 1,264 953
Other expenses......................................... - - - - 145
--------- -------- --------- -------- ---------
Income (loss) before extraordinary item................ (5,448) 527 47 (533) (670)
Extraordinary item..................................... 187 - 860 - -
--------- -------- --------- -------- ---------
Net income (loss)...................................... (5,635) 527 (813) (533) (670)
Dividends on Preferred Stock........................... - - (111) - -
--------- -------- ---------- -------- ---------
Net income (loss)...................................... $ (5,635) $ 527 $ (924) $ (533) $ (670)
========== ======== ========= ======== =========
Income (loss) per common share before
extraordinary item............................... $ (0.75) $ .07 $ (.02) $ (.17)
Extraordinary item..................................... (0.03) - (.19) -
--------- -------- ---------- --------
Net income (loss) per common share $ (0.78) $ .07 $ (.21) $ (.17)
Weighted average shares outstanding.................... 7,210 7,318 4,500 3,379
OTHER DATA:
EBITDA (1)............................................. $ 7,103 $ 4,093 $ 3,722 $ 2,111 $ 1,231
OPERATING DATA:
Company owned bulk CO2 systems serviced:
Beginning of period.............................. 21,919 12,884 7,967 4,237 2,558
New installations, net........................... 9,446 5,817 3,337 1,703 1,329
Acquisitions..................................... 7,930 3,218 1,580 2,027 350
--------- --------- --------- -------- ---------
Total Company owned bulk CO2 systems serviced:......... 39,295 21,919 12,884 7,967 4,237
Customer owned bulk CO2 systems serviced............... 6,800 4,800 2,900 2,300
--------- --------- --------- --------
Total bulk CO2 systems serviced........................ 46,095 26,719 15,784 10,267
Service and supply depots.............................. 65 38 24 15 7
BALANCE SHEET DATA:
Cash and cash equivalents.............................. 337 11,673 43,001 562 58
Total assets........................................... 124,498 73,344 74,633 21,143 9,864
Total debt (including short-term debt)................. 59,328 9,546 10,844 17,391 9,369
Total shareholders' equity (deficit)................... 55,643 60,702 60,684 743 (724)
</TABLE>
- ---------------------
(1) EBITDA represents operating income plus depreciation and amortization.
Information regarding EBITDA is presented because of its use by certain
investors as one measure of an issuer's ability to generate cash flow.
EBITDA should not be considered an alternative to, or more meaningful
than, operating income or cash flows from operating activities as an
indicator of an issuer's operating performance.
-10-
<PAGE>
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements. Factors that may cause such
differences include, but are not limited to, the Company's expansion into new
markets, competition, technological advances, Year 2000 issues and availability
of managerial personnel.
OVERVIEW
At June 30, 1998 the Company leased approximately 39,300 bulk CO2
systems to its customers, principally pursuant to five year noncancelable lease
contracts. These customers include restaurants, convenience stores, theaters,
taverns and other businesses which dispense carbonated beverages. Generally,
these contracts are classified as one of two types: "budget-plan" service
contracts and "rental plus per pound charge" contracts. Pursuant to budget plan
service contracts, customers pay a fixed monthly charge for the lease of a
Company owned bulk CO2 system installed on the customer's premises and refills
of bulk CO2 according to a predetermined schedule. The bulk CO2 is included in
the monthly rental charge up to a predetermined maximum annual volume. If the
maximum annual volume is exceeded, the customer is charged for additional bulk
CO2 delivered. Pursuant to rental plus per pound charge contracts, the Company
also leases a bulk CO2 system to the customer, but the customer is charged on a
per pound basis for all bulk CO2 delivered. The Company's contracts generally
provide for price increases based upon increases in the consumer price index.
The Company provides some services besides those offered under the
above two types of contracts. As of June 30, 1998, the Company provided "fill
only" service to approximately 6,800 customers.
As of June 30, 1998, approximately 15,100 of the Company's
approximately 46,100 bulk CO2 customers were billed on a per pound basis which
varies with the quantity of bulk CO2 delivered. These customers will tend to
consume less CO2 in the winter months, and this may cause the Company's revenues
and earnings for its fiscal quarters ending in December and March to be
relatively lower than for its other quarters. As of June 30, 1998, approximately
31,000 of the Company's approximately 46,100 bulk CO2 customers were billed at a
flat monthly rate which generally does not vary throughout the year.
The Company's installed base of bulk CO2 systems has increased
through internally generated new customers and through acquisitions. As route
density increases, route profitability increases as the fixed costs associated
with the route are spread over a larger revenue base. Since the Company's
inception in February 1990 to June 30, 1998, approximately 23,800 Company owned
bulk CO2 systems have been installed and approximately 21,800 customer accounts
have been acquired through 35 acquisitions.
The Company intends to continue to grow through a combination of
internal growth and acquisitions. The Company requires significant capital to
purchase and install bulk CO2 systems at customers' locations and to grow the
network of service and supply depots and specialized CO2 delivery vehicles
required to service these installations. Once installed, however, there are
minimal additional capital requirements for bulk CO2 systems in service, and the
Company has generally experienced significant positive cash flows on a per-unit
basis, represented by per-unit operating income adjusted for per-unit non-cash
charges for depreciation and amortization. The Company believes its current
installed base of bulk CO2 systems is stable, partly due to the existence of
long-term contracts with its customers. In fiscal 1996, 1997 and 1998, less than
5% of Company owned bulk CO2 systems experienced service termination. Service
termination is typically caused by restaurant closure. Affected bulk CO2 systems
are either removed and reconditioned for use with other customers, or left in
place when prospects for a new restaurant in the same location are deemed
favorable.
GENERAL
Under the budget plan, the Company's net sales consist of charges to
customers for the use of Company owned bulk CO2 systems and a predetermined
quantity of liquid CO2. On customer invoices, the Company does not separate
charges for equipment use from charges for liquid CO2 delivered; customers are
presented with a single amount payable. Customers are invoiced monthly in
advance of services rendered. For customers on rental plus per pound charge
contracts, invoices are broken down into the two respective services, with the
charge for liquid CO2 supply varying with the amount delivered.
-11-
<PAGE>
The Company's net sales also include revenues received from customers to which
it supplies only CO2 refill services, based on the amount delivered.
Cost of products sold is comprised of purchased CO2 and labor,
vehicle and depot costs associated with the Company's storage and delivery of
bulk CO2 to customers. Selling, general and administrative expenses consist of
salaries, dispatch and communications costs, and expenses associated with
marketing, administration, accounting and employee training. Consistent with the
capital intensive character of its business, the Company incurs significant
depreciation and amortization expenses. These stem from the depreciation of
Company owned bulk CO2 systems; depreciation and amortization of bulk system
installation costs; amortization of sales commissions, and amortization of
goodwill, deferred financing costs and other intangible assets.
With respect to bulk CO2 systems, the Company only capitalizes costs
that are associated with specific successful placements of such systems with
customers under noncancelable contracts and which would not be incurred by the
Company but for a successful placement. All other service, marketing and
administrative costs are expensed as incurred. Capitalized component parts and
direct costs associated with installation of bulk CO2 equipment leased to
customers was approximately $3.2 million, $6.3 million and $12.4 million at the
end of fiscal 1996, 1997 and 1998, respectively. Depreciation and amortization
expense related to capitalized component parts and direct costs associated with
installation was approximately $406,000, $924,000 and $1.8 million for fiscal
1996, 1997 and 1998, respectively.
The Company believes EBITDA is useful as a means of measuring the
growth and earning power of its business. In addition, the Company's current
bank credit facility utilizes EBITDA for its formal calculation of financial
leverage, affecting the amount of funds available to the Company for borrowing
under such credit facility. EBITDA represents operating income plus depreciation
and amortization. Information regarding EBITDA is presented because of its use
by certain investors as one measure of a corporation's ability to generate cash
flow. EBITDA should not be considered an alternative to, or more meaningful
than, operating income or cash flows from operating activities as an indicator
of a corporation's operating performance. EBITDA excludes significant costs of
doing business and should not be considered in isolation from GAAP measures.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentage relationship which the various items bear to net sales:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1998 1997 1996
---- ---- ----
Income Statement Data:
<S> <C> <C> <C>
Net sales.............................................. 100.0% 100.0% 100.0%
Cost of products sold.................................. 53.0 47.5 43.3
Selling, general and administrative expenses........... 26.8 30.9 25.6
Depreciation and amortization.......................... 25.4 22.4 20.2
-------- ------ ------
Operating income (loss)................................ (5.2) (.8) 10.9
Interest expense (income).............................. 10.4 (3.6) 10.5
-------- ------- ------
Income (loss) before extraordinary item................ (15.6) 2.8 .4
Extraordinary item..................................... .5 -- (7.2)
-------- ------- ------
Net income (loss)...................................... (16.1%) 2.8% (6.8%)
========= ===== =======
Other Data:
EBITDA.............................................. 20.3% 21.6% 31.1%
========= ===== =======
</TABLE>
-12-
<PAGE>
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
Net sales increased $16.1 million, or 85.2%, from $18.9 million in
fiscal 1997 to $35.1 million in fiscal 1998. Approximately $6.1 million of the
increase represented net sales from the 15 acquisitions during the fiscal year
ended June 30, 1998. In addition, approximately $2.9 million of the increase
represented net sales from the nine acquisitions during fiscal 1997 which are
included for the full year in fiscal 1998 as compared to from their dates of
acquisition in fiscal 1997. At June 30, 1998, there were approximately 39,300
Company owned bulk systems in service, an increase of 17,400 over the
approximately 21,900 Company owned bulk systems in service at the end of fiscal
1997. Of such increase, approximately 7,900 resulted from acquisitions of
businesses completed during fiscal 1998 and the remaining 9,500 resulted from
internal marketing efforts. Increases in net sales due to price increases were
insignificant.
Cost of products sold increased by $9.6 million from $9.0 million in
fiscal 1997 to $18.6 million in fiscal 1998, and increased as a percentage of
net sales from 47.5% in fiscal 1997 to 53.0% in fiscal 1998. This increase was
attributable to the expansion of the Company into new territories. Fully loaded
route drivers increased by $3.2 million from $3.0 million in fiscal 1997 to $6.2
million in fiscal 1998, and increased as a percentage of net sales from 16.0% to
17.7%. The number of depots operated by the Company at June 30, 1998 increased
to 65, compared to 38 at June 30, 1997. Rent expense and utilities increased by
$850,000 from $729,000 in fiscal 1997 to $1.6 million in fiscal 1998, and
increased as a percentage of net sales from 3.8% to 4.5%. Auto and truck expense
increased by $1.5 million from $1.5 million in fiscal 1997 to $3.0 million in
fiscal 1998 and increased as a percentage of net sales from 7.8% to 8.5%. When
the Company opens new depots and expands into new markets, higher costs
expressed as a percentage of net sales are incurred until route density is
achieved. The Company typically services approximately 350 customers per
delivery vehicle in its mature markets. In new territories, a delivery vehicle
can initially service as few as 100 customers.
Selling, general and administrative expenses increased by $3.5
million from $5.9 million in fiscal 1997 to $9.4 million in fiscal 1998, and
decreased as a percentage of net sales from 30.9% in fiscal 1997 to 26.8% in
fiscal 1998. The dollar increase was primarily attributable to growth in the
number of marketing and administrative personnel and their associated expenses,
as well as the costs of expanding the Company's geographic areas of service.
Fully loaded marketing, administrative and executive personnel increased by $2.4
million from $3.2 million in fiscal 1997 to $5.6 million in fiscal 1998, and
decreased as a percentage of net sales from 16.9% in fiscal 1997 to 16.1% in
fiscal 1998. The percentage decrease is attributable to economies of scale. At
June 30, 1997 the Company had operations in 30 states and at the end of fiscal
1998, the Company had operations in 43 states.
Depreciation and amortization increased by $4.7 million from $4.2
million in fiscal 1997 to $8.9 million in fiscal 1998. As a percentage of net
sales, such expense increased from 22.4% in fiscal 1997 to 25.4% in fiscal 1998.
Depreciation expense increased by $2.9 million from $3.1 million in fiscal 1997
to $6.0 million in fiscal 1998 principally due to the increase in bulk CO2
systems leased to customers. As a percentage of net sales, depreciation expense
increased from 16.5% in fiscal 1997 to 17.2% in fiscal 1998. Amortization
expense increased by $1.8 million from $1.1 million in fiscal 1997 to $2.9
million in fiscal 1998 primarily due to the increase in amortization of deferred
lease acquisition costs and goodwill and customer lists resulting from
acquisitions. As a percentage of net sales, amortization expense increased from
5.9% in fiscal 1997 to 8.2% in fiscal 1998.
Net interest income in fiscal 1997 was $681,000 compared to net
interest expense in fiscal 1998 of $3.6 million. This change is attributable to
the decreased level of cash and cash equivalents and the increased level of
long-term and subordinated debt in fiscal 1998 as compared to fiscal 1997.
During fiscal 1998, the Company wrote-off $187,000 of deferred
financing costs related to its NationsBank credit facility which was replaced by
a new syndicated bank group facility led by SunTrust Bank.
For the reasons described above, the Company's net income in fiscal
1997 was $527,000 compared to a net loss of $5.6 million in fiscal 1998. The
Company has made no provision for income tax expense in either fiscal 1997 or
fiscal 1998 due to its historical net losses. At June 30, 1998, the Company had
net operating loss carryforwards for federal income tax purposes of $26.2
million, which are available to offset future federal taxable income through
2013.
For the reasons described above, EBITDA increased from $4.1 million
in fiscal 1997 to $7.1 million in fiscal 1998, but decreased as a percentage of
net sales from 21.6% to 20.3%.
-13-
<PAGE>
FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996
Net sales increased $7.0 million, or 58.3%, from $12.0 million in
fiscal 1996 to $18.9 million in fiscal 1997. Approximately $938,000 of the
increase represented net sales resulting from the May 1996 acquisition of the
BevServ Division of The Coca-Cola Bottling Company of New York, Inc.
("BevServ"). In addition, approximately $332,000 of the increase represented net
sales from three acquisitions in fiscal 1996 which are included for the full
year in fiscal 1997 as compared to from their dates of acquisition in fiscal
1996 and approximately $1.4 million of the increase represented net sales from
the eight acquisitions in fiscal 1997. At June 30, 1997, there were 21,919
Company owned systems in service, an increase of 9,035 over the 12,884 Company
owned systems in service at the end of fiscal 1996. Of such increase, 3,218
resulted from acquisitions of businesses completed during fiscal 1997 and the
remaining 5,817 resulted from internal marketing efforts. Approximately 31% of
the acquired systems were obtained through the May 1997 acquisition of the bulk
CO2 assets of BOC Gases ("BOC"). Increases in net sales due to price increases
were insignificant.
Cost of products sold increased by $3.8 million from $5.2 million in
fiscal 1996 to $9.0 million in fiscal 1997, and increased as a percentage of net
sales from 43.3% in fiscal 1996 to 47.5% in fiscal 1997. This increase was
attributable to the expansion of the Company into new territories. Fully loaded
route drivers increased by $1.3 million from $1.8 million in fiscal 1996 to $3.0
million in fiscal 1997, and increased as a percentage of net sales from 14.8% to
16.0%. The number of depots operated by the Company at June 30, 1997 increased
to 38, compared to 24 at June 30, 1996. Rent expense and utilities increased by
$451,000 from $278,000 in fiscal 1996 to $729,000 in fiscal 1997, and increased
as a percentage of net sales from 2.3% to 3.8%. When the Company opens new
depots and expands into new markets, higher costs expressed as a percentage of
net sales are incurred until route density is achieved. The Company typically
services approximately 350 customers per delivery vehicle in its mature markets.
In new territories, a delivery vehicle can initially service as few as 100
customers.
Selling, general and administrative expenses increased by $2.8
million from $3.1 million in fiscal 1996 to $5.9 million in fiscal 1997, and
increased as a percentage of net sales from 25.6% in fiscal 1996 to 30.9% in
fiscal 1997. The increase was primarily attributable to growth in the number of
marketing and administrative personnel and their associated expenses, as well as
the costs of expanding the Company's geographic areas of service. Fully loaded
marketing, administrative and executive personnel increased by $1.6 million from
$1.6 million in fiscal 1996 to $3.2 million in fiscal 1997, and increased as a
percentage of net sales from 13.5% in fiscal 1996 to 16.9% in fiscal 1997. At
June 30, 1996 the Company had operations in 18 states and at the end of fiscal
1997, the Company had operations in 30 states.
Depreciation and amortization increased by $1.8 million from $2.4
million in fiscal 1996 to $4.2 million in fiscal 1997. As a percentage of net
sales, such expense increased from 20.2% in fiscal 1996 to 22.4% in fiscal 1997.
Depreciation expense increased by $1.5 million from $1.6 million in fiscal 1996
to $3.1 million in fiscal 1997 principally due to the increase in bulk CO2
systems leased to customers. As a percentage of net sales, depreciation expense
increased from 13.4% in fiscal 1996 to 16.5% in fiscal 1997. Amortization
expense increased by $308,000 from $808,000 in fiscal 1996 to $1.1 million in
fiscal 1997 primarily due to the increase in amortization of deferred lease
acquisition costs, goodwill and customer lists resulting from acquisitions. As a
percentage of net sales, amortization expense decreased from 6.8% in fiscal 1996
to 5.9% in fiscal 1997.
Net interest expense in fiscal 1996 was $1.3 million compared to net
interest income in fiscal 1997 of $681,000. This change is attributable to the
repayment of debt from the proceeds of the Company's initial public offering in
December 1995 (the "IPO") and the increased level of cash and cash equivalents
in the 1997 period from the Company's secondary public offering in June 1996
(the "Secondary Offering").
During fiscal 1996, the Company wrote-off $785,000 of deferred
financing costs and incurred $75,000 in prepayment penalties related to debt
which was repaid with the proceeds of the IPO.
For the reasons described above, the Company's net loss in fiscal
1996 was $813,000 compared to net income of $527,000 in fiscal 1997; however,
net income before extraordinary item in fiscal 1996 was $46,822. The Company has
made no provision for income tax expense in either fiscal 1996 or fiscal 1997
due to its historical net losses. At June 30, 1997 the Company had net operating
loss carryforwards for federal income tax purposes of $12.5 million, which are
available to offset future federal taxable income through 2012.
For the reasons described above, EBITDA increased from $3.7 million
in fiscal 1996 to $4.1 million in fiscal 1997, but decreased as a percentage of
net sales from 31.1% to 21.6%.
-14-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements consist principally of capital
expenditures associated with placing new bulk CO2 systems into service at
customers' locations; payments of interest on its outstanding indebtedness;
payments for acquired businesses; and working capital. Whenever possible, the
Company seeks to obtain the use of vehicles, land, buildings, and other office
and service equipment under operating leases as a means of conserving capital.
As of June 30, 1998, the Company anticipated making cash capital expenditures of
at least $20.0 million to $30.0 million during each of fiscal 1999 and fiscal
2000, primarily for purchases of bulk C02 systems that it expects to place into
service during this time. Once bulk CO2 systems are placed into service, the
Company has generally experienced positive cash flows on a per-unit basis, as
there are minimal additional capital expenditures required for ordinary
operations. In addition to the capital expenditures related to internal growth,
the Company continually reviews opportunities to acquire bulk CO2 service
businesses, and may require cash in an amount dictated by the scale and terms of
any such transactions successfully concluded.
During the fiscal year ended June 30, 1998, the Company's capital
resources included cash flows from operations, available borrowing capacity
under the Company's credit facilities (NationsBank credit facility through
October 1997 and SunTrust Facility thereafter) and proceeds from the sale of its
12% Senior Subordinated Promissory Notes due 2004 (the "Notes"). In July and
September of 1997, certain assets, primarily consisting of bulk CO2 systems,
were acquired for $6.0 million in cash and $6.8 million in borrowings under the
Company's NationsBank credit facility. Effective October 1, 1997, a newly formed
wholly-owned subsidiary of the Company purchased all of the issued and
outstanding shares of common stock of Koch Compressed Gases, Inc. for an
aggregate purchase price of $5.0 million which was funded through a borrowing
under the NationsBank credit facility. On October 31, 1997, the Company repaid
its outstanding indebtedness under the NationsBank credit facility which totaled
approximately $21.0 million with a portion of the proceeds of the Notes. The
Notes which aggregated $30.0 million were sold with seven year warrants to
purchase an aggregate of 655,738 shares of Common Stock at an exercise price of
$16.40 per share. Additionally, NationsBanc Montgomery Securities, Inc., the
placement agent for the Notes, received a warrant to purchase an aggregate of
30,000 shares of Common Stock at an exercise price of $14.64 per share which
expires on October 31, 2004.
On October 31, 1997, the Company finalized a $50.0 million senior
secured revolving credit facility with SunTrust Bank, South Florida, National
Association ("SunTrust Facility"). Pursuant to the SunTrust Facility, upon the
achievement of $15.0 million annualized one quarter EBITDA on a pro-forma basis
for acquisitions, the Company shall automatically request that the SunTrust
Facility be increased by an additional $50.0 million to a total of $100.0
million. Additionally, the SunTrust Facility provides for interest and an unused
facility fee based on a pricing grid calculated quarterly on senior funded debt
to annualized EBITDA. The SunTrust Facility expires on October 31, 2000;
however, it contains a two year renewal option. Additionally, it is
collateralized by substantially all of the assets of the Company. In December
1997, SunTrust closed on a syndication of the SunTrust Facility with three
additional banks.
In July and August 1998, the 12% Senior Subordinated Promissory Note
Agreement and the SunTrust Facility, respectively, were amended to adjust
certain financial covenants as of June 30, 1998 and prospectively. In exchange
for the amendment to the 12% Senior Subordindated Promissory Note Agreement, the
exercise price for 612,023 warrants was reduced from $16.40 per stock unit to
$12.40 per stock unit. The Company believes that it will be able to comply with
all of the financial covenants, as amended, during the next fiscal year.
For the period November 1997 through March 1998, the Company
purchased assets from various carbonic gas distributors consisting primarily of
bulk CO2 and high pressure assets for $5.3 million cash, $18.7 million in
borrowings under the Company's SunTrust Facility and the issuance of 18,835
shares of Common Stock with a market value of $275,000.
As of June 30, 1998, a total of $29.0 million was outstanding under
the SunTrust Facility with interest at two hundred twenty-five basis points
above the 90-day London InterBank Offering Rate ("LIBOR") (7.875% to 8.00% at
June 30, 1998).
Working Capital. At June 30, 1997 the Company had working capital of
$9.5 million. At June 30, 1998, the Company had negative working capital of $3.1
million.
Cash Flows from Operating Activities. During fiscal 1997 and fiscal
1998, net cash provided by operating activities was $4.3 million and $7.4
million, respectively. Cash flows from operating activities increased by $3.1
million for the fiscal year ended June 30, 1998 compared to the same period in
1997 primarily due to an increase in accounts payable and depreciation and
amortization.
-15-
<PAGE>
Cash Flows from Investing Activities. During fiscal 1997 and fiscal
1998, the Company made net capital expenditures of $16.9 million and $23.5
million, respectively, for new bulk CO2 systems and associated installation and
direct placement costs. In addition, during the year ended June 30, 1997, the
Company made eight acquisitions and expended cash of $17.7 million and during
fiscal 1998 the Company made15 acquisitions and expended cash of $12.4 million.
Cash Flows From Financing Activities. During fiscal 1997 cash flows
used in financing activities were $2.4 million. During fiscal 1998, cash flows
provided by financing activities were $18.6 million. For the fiscal year ended
June 30, 1997, cash flows used in financing activities were primarily from
repayment of long-term debt owed and the redemption of a warrant. For the fiscal
year ended June 30, 1998, cash flows provided by financing activities were
primarily from the issuance of subordinated debt and borrowings under the
Company's SunTrust Facility.
The Company believes that cash from operating activities and
available borrowings under the SunTrust Facility will be sufficient to fund
proposed operations for at least the next 12 months at its anticipated rate of
growth.
YEAR 2000
The Company has conducted a review to identify which of its computer
and other business operating systems will be affected by the "Year 2000" problem
and has developed a project plan and schedule to solve this issue. Among the
functions and systems impacted could be inventory and accounting systems,
dispatch and delivery systems, electronic data interchange, and mechanical
systems operating everything from office building environmental controls to
telephone switches and fax machines. The Company is on schedule to be Year 2000
compliant by June 30, 1999. The Company believes that the costs of
modifications, upgrades, or replacements of software, hardware, or capital
equipment which would not be incurred but for Year 2000 compatibility
requirements have not and will not have a material impact on the Company's
financial position or results of operations.
The Company is also engaged in communications with its significant
business partners, suppliers and customers to determine the extent to which the
Company is vulnerable to such third parties' failure to address their own Year
2000 issues. The Company's assessment of the impact of its Year 2000 issues
includes an assessment of the Company's vulnerability to such third parties. The
Company is seeking assurances from its significant business partners, suppliers
and customers that their computer applications will not fail due to Year 2000
problems. Nevertheless, the Company does not control, and can give no assurances
as to the substance or success of the Year 2000 compliance efforts of such
independent third parties and the Company believes that there is a risk that
certain of these third parties on whom the Company's finances and operations
depend will experience Year 2000 problems that could affect the financial
position or results of operations of the Company. These risks include, but are
not limited to, the potential inability of suppliers to correctly or timely
provide necessary services, materials and components for the Company's
operations; the inability of the Company's customers to timely or correctly
process and pay the Company's invoices; and the inability of lenders, lessors or
other sources of the Company's necessary capital and liquidity to make funds
available to the Company when required.
In case the Company does experience severe Year 2000 financial and
operating problems, notwithstanding its efforts to avoid or mitigate problems
inherent in its own computer systems or the adverse effects of Year 2000
problems experienced by third parties on whom it is substantially reliant, the
Company has begun development of contingency plans.
INFLATION
The modest levels of inflation in the general economy since the
Company began business in 1990 have not affected its results of operations.
Additionally, the Company's contracts with its customers generally contain an
annual lease rate adjustment clause based on any increases in the consumer price
index. The Company believes that inflation will not have a material adverse
effect on its future results of operations.
The BOC CO2 Supply Agreement contains annual adjustments over the
prior contract year for an increase or decrease in the Producer Price Index for
Chemical and Allied Products ("PPI") or the average percentage increase in the
selling price of bulk merchant carbon dioxide purchased by BOC's large,
multi-location beverage customers in the United States. However, such increases
shall not exceed 3% per year in the first five contract years.
-16-
<PAGE>
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As discussed under "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
above, as of June 30, 1998, a total of $29.0 million was outstanding under the
SunTrust Facility with interest at two hundred twenty-five basis points above
the 90 day LIBOR rate (7.875% to 8.00% at June 30, 1998). Based upon $29.0
million outstanding under the SunTrust Facility at June 30, 1998, the Company's
annual interest cost under the SunTrust Facility would increase by $290,000 for
each one percent increase in LIBOR (i.e., from 8.0% to 9.0%).
In order to reduce the Company's exposure to increases in LIBOR, and
consequently to increases in interest payments, on June 9, 1998 the Company
entered into an interest rate swap transaction (the "Swap") with SunTrust Bank,
Atlanta, in the amount of $10.0 million (the "Notional Amount"). The effective
date of the Swap is September 2, 1998 and it terminates on September 5, 2000.
Pursuant to the Swap, the Company pays a fixed interest rate of 6% per annum and
receives a LIBOR-based floating rate. The effect of the Swap is to neutralize
any changes in LIBOR on the Notional Amount. If LIBOR decreases below 6% during
the period the Swap is in effect, interest payments by the Company on the
Notional Amount will be greater than if the Company had not entered into the
Swap, since by exchanging LIBOR for a fixed interest rate, the Company would not
benefit from falling interest rates on LIBOR, a variable interest rate.
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See page F-1
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On July 2, 1996, the Audit Committee of the Board of Directors of
the Company dismissed KPMG Peat Marwick LLP ("KPMG") as independent accountants
to the Company and appointed Cooper, Selvin & Strassberg LLP as the new
independent accountants to the Company. KPMG's accountant's report on the
financial statements of the Registrant for the fiscal year ended June 30, 1995
(the period for which KPMG was engaged as independent accountants) did not
contain any adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope, or accounting principles. In November
1997, the partners and employees of Cooper, Selvin & Strassberg LLP joined the
firm of Margolin, Winer & Evens LLP.
PART III
The information required by Items 10, 11, 12 and 13 of this Part III
is incorporated by reference to the definitive proxy statement to be filed by
the Company no later than October 28, 1998 pursuant to Regulation 14A.
-17-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
(1) Financial statements.
See Index to Financial Statements which appears on page F-1
herein.
(2) Financial Statement Schedules
II - Valuation and Qualifying Accounts.
(3) Exhibits:
EXHIBIT NO. EXHIBIT
**3.1 -- Amended and Restated Articles of Incorporation of
the Company.
*3.2 -- Articles of Amendment to the Articles of
Incorporation of the Company, dated December 18,
1995.
*3.3 -- Articles of Amendment to the Articles of
Incorporation of the Company, dated December 17,
1996.
**3.4 -- Bylaws of the Company.
*10.1 -- 1995 Stock Option Plan.
**10.2 -- Directors' Stock Option Plan.
**10.3 -- Noncompetition Agreement between the Company and
Joseph M. Criscuolo, dated November 30, 1995.
**10.4 -- Noncompetition Agreement between the Company and
Edward M. Sellian, dated November 30, 1995.
**10.5 -- Lease for 2528 North Tamiami Trail, Ft. Myers,
Florida, between the Company and Edward M.
Sellian.
***10.6 -- Lease for 2800 Southeast Market Place, Stuart,
Florida between the Company and Edward M. Sellian.
*10.7 -- Lease for 2820 Southeast Market Place, Stuart,
Florida between the Company and Edward M. Sellian
dated as of February 1, 1998.
****10.8 -- Employment agreement between the Company and Joann
Sabatino, dated October 16, 1996.
*10.9 -- Revolving Credit Agreement, dated as of October
31, 1997 by and between the Company and SunTrust
Bank, South Florida, National Association.
*10.10 -- Waiver and Amendment No. 1 to Revolving Credit
Agreement dated as of August 25, 1998 by and among
the Company and SunTrust Bank, South Florida,
National Association.
*10.11 -- Senior Subordinated Note Purchase Agreement, dated
as of October 31, 1997 between the Company, the
Subsidiary Guarantors and the Investors.
-18-
<PAGE>
*10.12 -- Amendment No. 1 to Senior Subordinated Note
Purchase Agreement dated as of November 14, 1997
between the Company, the Subsidiary Guarantors and
the Investors.
*10.13 -- Amendment No. 2 to Senior Subordinated Note
Purchase Agreement dated as of June 30, 1998
between the Company, the Subsidiary Guarantors and
the Investors.
*10.14 -- Warrant Agreement dated as of October 31, 1997
among the Company and the Initial Holders.
*10.15 -- Amendment No. 1 to Warrant Agreement dated as of
November 14, 1997, between the Company and the
Initial Holders.
*11 -- Statement re: computation of per share earnings.
*****16 -- Letter of KPMG Peat Marwick dated July 2, 1996.
*21 -- Subsidiaries
*23 -- Consent of Margolin, Winer & Evens LLP to the
incorporation by reference to the Company's
Registration Statement on Form S-8 (No. 333-06705)
of the independent auditors' report included
herein.
*27 -- Financial Data Schedule.
(b) REPORTS ON FORM 8-K
No reports were filed on Form 8-K in the quarter ended June 30,
1998.
- ---------------------------
* Included herein.
** Incorporated by reference to the Company's Registration Statement on
Form SB-2, filed with the Commission on November 7, 1995 (Commission
File No. 33-99078), as amended.
*** Incorporated by reference to the Company's Registration Statement on
Form SB-2, filed with the Commission on June 7, 1996 (Commission
File No. 333-3352).
**** Incorporated by reference to the Company's Form 10-KSB for the
fiscal year ended June 30, 1997.
***** Incorporated by reference to the Company's Form 8-K dated July 2,
1996.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
NUCO2 INC.
Dated: September 24, 1998 /S/ EDWARD M. SELLIAN
---------------------
Edward M. Sellian,
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ EDWARD M. SELLIAN Director September 24, 1998
- ------------------------
Edward M. Sellian
/S/ JOHN A. KERNEY Director September 24, 1998
- ------------------------
John A. Kerney
/S/ ROBERT L. FROME Director September 24, 1998
- ------------------------
Robert L. Frome
/S/ ROBERT RANIERI Director September 24, 1998
- -----------------------
Robert Ranieri
/S/ DANIEL RAYNOR Director September 24, 1998
- ------------------------
Daniel Raynor
/S/ JOANN SABATINO Chief Financial Officer September 24, 1998
- ------------------------
Joann Sabatino
-20-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
NUCO2 INC.
<S> <C>
REPORT OF INDEPENDENT AUDITORS ...............................................................................F-2
CONSOLIDATED FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1997 AND 1998...................................................F-3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND
1998.....................................................................................................F-4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE FISCAL YEARS ENDED JUNE 30, 1996,
1997 AND 1998............................................................................................F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND
1998.....................................................................................................F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....................................................................F-8
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE FISCAL YEARS ENDED JUNE 30, 1996,
1997 AND 1998............................................................................................F-22
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
NuCo2 Inc.
Stuart, Florida
We have audited the accompanying consolidated balance sheets of NuCo2 Inc. as of
June 30, 1997 and 1998, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended June 30, 1998. We have also audited the financial statement schedule
listed in the accompanying index. These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of NuCo2
Inc. as of June 30, 1997 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1998 in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule when considered in
relation to the basic financial statement taken as a whole, presents fairly, in
all material respects, the information set forth therein.
MARGOLIN, WINER & EVENS LLP
Garden City, New York
September 18, 1998
F-2
<PAGE>
NuCo2 INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(NOTE 6)
<TABLE>
<CAPTION>
JUNE 30,
--------
1997* 1998
----- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 11,672,506 $ 336,510
Trade accounts receivable; net of allowance for doubtful
accounts of $113,054 and $395,491, respectively 2,120,880 4,457,505
Inventories 85,601 211,027
Prepaid expenses and other current assets 276,858 262,437
----------- -----------
Total current assets 14,155,845 5,267,479
----------- -----------
Property and equipment, net (Note 4) 46,803,050 85,435,933
----------- -----------
Other assets:
Goodwill, net 7,580,763 22,891,846
Deferred charges, net 272,608 2,004,259
Customer lists, net 1,755,919 3,963,588
Restrictive covenants, net 1,401,833 2,275,964
Deferred lease acquisition costs, net 1,274,577 2,475,139
Deposits 99,863 184,059
----------- -----------
12,385,563 33,794,855
----------- -----------
$ 73,344,458 $124,498,267
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 6) $ 2,180,601 $ 139,251
Accounts payable 1,514,048 6,596,722
Accrued expenses 709,507 323,254
Accrued interest 19,568 844,153
Accrued payroll 232,469 476,458
Other current liabilities 22,699 7,179
----------- -----------
Total current liabilities 4,678,892 8,387,017
Long-term debt, excluding current maturities (Note 6) 7,365,740 29,460,614
Subordinated debt (Note 7) - 29,728,571
Customer deposits 598,177 1,279,178
----------- -----------
Total Liabilities 12,642,809 68,855,380
----------- -----------
Commitments and contingencies (Note 14)
Shareholders' equity (Note 8):
Preferred Stock; no par value; 5,000,000 shares authorized;
none issued - -
Common Stock; par value $.001 per share; 30,000,000 shares authorized;
issued and outstanding 7,197,718 shares at June 30, 1997 and 7,216,664
shares at June 30, 1998 7,198 7,217
Additional paid-in capital 63,233,043 63,809,014
Accumulated deficit (2,538,592) (8,173,344)
------------- -------------
Total shareholders' equity 60,701,649 55,642,887
----------- -----------
$ 73,344,458 $124,498,267
=========== ============
</TABLE>
* Restated to conform to current year's classifications.
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
NuCo2 INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
1996 1997 1998
-------- ---------- -------
<S> <C> <C> <C>
Net sales $ 11,965,999 $ 18,943,569 $ 35,077,361
----------- --------------- -------------
Costs and expenses:
Cost of products sold 5,177,320 8,991,823 18,578,063
Selling, general and administrative expenses 3,066,381 5,858,934 9,396,003
Depreciation and amortization 2,417,492 4,246,035 8,912,124
----------- --------------- --------------
10,661,193 19,096,792 36,886,190
----------- --------------- --------------
Operating income (loss) 1,304,806 (153,223) (1,808,829)
Other expenses (income):
Interest expense 1,402,773 884,627 3,809,138
Interest (income) (144,789) (1,565,289) (170,160)
------------ ---------------- --------------
Income (loss) before extraordinary item 46,822 527,439 (5,447,807)
----------- --------------- --------------
Extraordinary item - loss on extinguishment of debt (Note 6) 859,522 - 186,945
----------- --------------- -------------
Net income (loss) $ (812,700) $ 527,439 $ (5,634,752)
============ =============== ==============
Dividends on Preferred Stock $ (110,917) $ - $ -
============ =============== ==============
Net income (loss) available to common shareholders $ (923,617) $ 527,439 $ (5,634,752)
============ =============== ==============
Basic and Diluted EPS
Income (loss) before extraordinary item $ (0.02) $ 0.07 $ (0.75)
Extraordinary item (0.19) - (0.03)
------------ ---------------- -------------
Net income (loss) $ (0.21) $ 0.07 $ (0.78)
============ ================ =============
Weighted average number of common and common
equivalent shares outstanding
Basic 4,499,989 7,164,924 7,210,350
============ ================ ============
Diluted 4,499,989 7,317,926 7,210,350
============ ================ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
NuCo2 INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A Series B Series C Series D
--------------------- ------------------ ----------------- -------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995 485 $ 485,000 500 $500,000 500 $ 500,000 1,500 $1,500,000
Redemption of Series A (485) (485,000) - - - - - -
Redemption of Series B - - (500) (500,000) - - - -
Conversion of Series C - - - - (500) (500,000) - -
Conversion of Series D - - - - - - (1,500)
Conversion of subordinated debt
and exercise of warrants and
options - - - - - - - -
Issuance of 2,022,576 shares of com-
mon stock - Initial Public Offering - - - - - - - -
Issuance of 1,761,165 shares of com-
mon stock - secondary offering - - - - - - - -
Net (loss) - - - - - - - -
Dividends declared on
preferred stock - - - - - - - -
---------- ---------- ------- --------- -------- --------- ------- --------
Balance, June 30, 1996 - - - - - - - -
Issuance of 34,289 shares of
common stock - exercise of options - - - - - - - -
Redemption of warrant - - - - - - - -
Additional expense - secondary
offering - - - - - - - -
Issuance of 33,962 shares of common
stock - asset acquisition - - - - - - - -
Net income - - - - - - - -
---------- ---------- ------- --------- -------- --------- ------- ---------
Balance, June 30, 1997 - - - - - - - -
Issuance of 18,835 shares of common
stock - asset acquisition - - - - - - - -
Issuance of 111 shares of common
stock - exercise of options - - - - - - - -
Issuance of warrants - - - - - - - -
Net (loss) - - - - - - - -
---------- ---------- ------- --------- -------- --------- ------- ---------
Balance, June 30, 1998 - - - - - - - -
========== ========== ======= ========= ======== ========= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid-in Accumulated Shareholders'
Shares Amount Capital Deficit Equity
-------- ------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1995 1,932,953 $ 1,933 $9,317 $ (2,253,331) $ 742,919
Redemption of Series A - - - - (485,000)
Redemption of Series B - - 499,500 - (500)
Conversion of Series C 155,164 155 499,845 - 0
Conversion of Series D (1,500,000) 300,266 300 1,499,700 0
Conversion of subordinated debt
and exercise of warrants and
options 957,343 957 805,400 - 806,357
Issuance of 2,022,576 shares of com-
mon stock - Initial Public Offering 2,022,576 2,023 16,149,341 - 16,151,364
Issuance of 1,761,165 shares of com-
mon stock - secondary offering 1,761,165 1,761 44,641,484 - 44,643,245
Net (loss) - - - (812,700) (812,700)
Dividends declared on
preferred stock - - (361,275) (361,275)
------------ --------- ------------- -------------- --------------
Balance, June 30, 1996 7,129,467 7,129 63,743,312 (3,066,031) 60,684,410
Issuance of 34,289 shares of
common stock - exercise of options 34,289 34 152,319 - 152,353
Redemption of warrant - - (1,143,450) - (1,143,450)
Additional expense - secondary
offering - - (59,100) - (59,100)
Issuance of 33,962 shares of common
stock - asset acquisition 33,962 35 539,962 - 539,997
Net income - - - 527,439 527,439
------------ --------- ------------- ------------- -------------
Balance, June 30, 1997 7,197,718 7,198 63,233,043 (2,538,592) 60,701,649
Issuance of 18,835 shares of common
stock - asset acquisition 18,835 19 274,972 - 274,991
Issuance of 111 shares of common
stock - exercise of options 111 - 999 - 999
Issuance of warrants - - 300,000 - 300,000
Net (loss) - - - (5,634,752) (5,634,752)
------------ --------- ------------ --------------- ---------------
Balance, June 30, 1998 7,216,664 $ 7,217 $ 63,809,014 $ (8,173,344) $ 55,642,887
============ ========= ============ =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
NuCo2 INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1996* 1997* 1998
----------- ---------- -------
<S> <C> <C> <C>
Net income (loss) before extraordinary item $ 46,822 $ 527,439 $ (5,447,807)
Extraordinary item - loss on extinguishment of debt 859,522 - 186,945
------------- ------------ -------------
Net income (loss) (812,700) 527,439 (5,634,752)
Cash flows from operating activities:
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization of property and equipment 1,609,063 3,130,022 6,045,652
Amortization of other assets 808,429 1,116,013 2,866,471
Loss on disposal of property and equipment 155,592 294,411 499,704
Write-off of deferred financing costs 784,069 - 186,945
Changes in operating assets and liabilities:
Decrease (increase) in:
Trade accounts receivable (646,224) (735,238) (2,189,832)
Inventories (11,441) (33,176) (115,968)
Prepaid expenses and other current assets (356,368) 108,090 14,421
Increase (decrease) in:
Accounts payable 278,794 (712,747) 4,542,532
Accrued expenses (42,347) 363,361 (395,794)
Accrued payroll 22,954 (93,592) 243,989
Accrued interest (84,517) 193,800 824,585
Other current liabilities 39,064 (50,830) (41,061)
Customer deposits 100,463 236,392 591,296
--------------- ------------ ------------
Net cash provided by operating activities 1,844,831 4,343,945 7,438,188
--------------- ------------ ------------
Cash flows from investing activities:
Proceeds from disposal of property and equipment 126,850 2,133,776 410,868
Purchase of property and equipment (6,971,472) (16,945,522) (23,456,104)
Acquisition of businesses (1,767,460) (17,692,662) (12,406,907)
Increase in deferred lease acquisition costs (514,258) (914,999) (1,805,874)
(Increase) decrease in deposits (238,364) 160,500 (79,661)
---------------- ------------ -------------
Net cash used in investing activities $ (9,364,704) $(33,258,907) $(37,337,678)
---------------- ------------- -------------
</TABLE>
* Restated to conform to current year's classifications.
F-6
<PAGE>
NuCo2 INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1996 1997 1998
------- ---------- -------
Cash flows from financing activities:
<S> <C> <C> <C>
Proceeds from issuance of Common Stock $ 60,794,609 $ (59,100) $ -
Net proceeds from issuance of long-term debt
and subordinated debt 10,551,728 - 21,610,820
Repayment of long-term debt (19,943,243) (1,309,704) (831,409)
Increase in loan payable to shareholder 200,000 - -
Repayment of loan payable to shareholder (200,000) - -
Increase in deferred charges (694,457) (53,307) (2,216,916)
Decrease in deferred interest payable (306,535) - -
Exercise of warrants and options 403,444 152,353 999
Preferred stock dividends (361,275) - -
Redemption of Series A preferred stock (485,000) - -
Redemption of Series B preferred stock (500) - -
Redemption of warrant - (1,143,450) -
-------------- ------------- -------------
Net cash provided by (used in) financing activities 49,958,771 (2,413,208) 18,563,494
-------------- ------------- -------------
Increase (decrease) in cash and cash equivalents 42,438,898 (31,328,170) (11,335,996)
Cash and cash equivalents, beginning of year 561,778 43,000,676 11,672,506
-------------- ------------ -------------
Cash and cash equivalents, end of year $ 43,000,676 $ 11,672,506 $ 336,510
============== ============ =============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 1,661,645 $ 903,729 $ 2,966,659
============= =========== =============
Income taxes $ - $ - $ -
============= =========== =============
Supplemental schedule of noncash investing and financing activities:
Acquisition of businesses:
Fair value of assets acquired $ 4,269,535 $ 1,098,718 $ 26,426,234
Cost in excess of net assets of businesses acquired 746,910 244,000 16,256,879
Liabilities assumed or incurred (3,248,985) (56,250) (30,001,215)
Issuance of Common Stock (539,996) (274,991)
------------- ----------- -------------
Cash paid 1,767,460 $ 746,472 $ 12,406,907
============= =========== =============
</TABLE>
In connection with the IPO in December 1995, the Company converted
$2.0 million of Series C and Series D Preferred Stock into Common Stock. In
addition, the Company converted $406,707 of subordinated debt and $499,500 of
Series B Preferred Stock into shares of Common Stock and additional paid-in
capital, respectively.
In 1996 and 1997 the Company purchased equipment and incurred debt
in the amount of $89,570 and $11,604, respectively.
In 1998, the Company wrote-off a restrictive covenant and the
related liability in the amount of $19,231 due to the employee resigning.
In 1998, the Company repaid long-term debt in the amount of
$20,782,995 with the proceeds of the issuance of subordinated debt. In
connection therewith, detachable warrants were issued and original issue
discount in the amount of $300,000 was recorded.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
NuCo2 INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Description of Business and Summary of Significant Accounting
Policies
(a) Basis of Presentation
The consolidated financial statements include the accounts of NuCo2
Inc. and its wholly-owned subsidiary, NuCo2 Acquisition Corp. which was formed
during the year ended June 30, 1998 to acquire the stock of Koch Compressed
Gases, Inc. (see Note 3). All material intercompany accounts and transactions
have been eliminated.
(b) Description of Business
The Company is a supplier of bulk CO2 dispensing systems to customers
in the food, beverage, lodging and recreational industries in the United States.
(c) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents.
(d) Inventories
Inventories, consisting primarily of carbon dioxide gas, are stated
at the lower of cost or market. Cost is determined by the first-in, first-out
method.
(e) Property and Equipment
Property and equipment are stated at cost. The Company does not
depreciate bulk systems held for installation until the systems are in service
and leased to customers. Upon installation, the systems, component parts and
direct costs associated with the installation are transferred to the leased
equipment account. These costs are associated with successful placements of such
systems with customers under noncancelable contracts and which would not be
incurred by the Company but for a successful placement. Upon early service
termination, the unamortized portion of direct costs associated with the
installation are charged to cost of products sold. Depreciation and amortization
is computed using the straight-line method over the estimated useful lives of
the respective assets or the lease terms for leasehold improvements, whichever
is shorter.
The depreciable lives of property and equipment are as follows:
ESTIMATED LIFE
--------------
Leased equipment 5-20 years
Equipment and cylinders 3-20 years
Vehicles 3-5 years
Computer equipment 3-7 years
Office furniture and fixtures 5-7 years
Leasehold improvements lease term
F-8
<PAGE>
NuCo2 INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Description of Business and Summary of Significant Accounting
Policies - (Continued)
(f) Other Assets
Goodwill, Net
Goodwill, net, represents costs in excess of net assets of
businesses acquired and is being amortized on a straight-line basis over twenty
years. Accumulated amortization of goodwill was $390,603 and $1,370,779 at June
30, 1997 and 1998, respectively. The Company periodically assesses the
recoverability of the cost of its goodwill, as well as of its other intangible
assets, based on a review of projected undiscounted cash flows of the related
operating assets. These cash flows are prepared and reviewed by management in
connection with the Company's annual long range planning process.
Deferred Charges, Net
Deferred charges, net, consist of the unamortized portion of
financing costs which are being amortized over the term of the related
indebtedness, ranging from thirty-six to eighty-four months. Accumulated
amortization of deferred charges was $368,238 and $417,646 at June 30, 1997 and
1998, respectively. Included in the consolidated statements of operations for
the years ended June 30, 1996 and 1998 are extraordinary write-offs of deferred
financing fees in connection with the reduction of certain indebtedness.
Customer Lists, Net
Customer lists, net, consist of the unamortized portion of
customer lists acquired in connection with asset acquisitions which are being
amortized over five years, the average life of customer leases. Accumulated
amortization of customer lists was $565,090 and $1,380,411 at June 30, 1997 and
1998, respectively. The Company's policy is to value customer lists based on the
estimated value of future cash flows over the life of the customer lease.
Restrictive Covenants, Net
Restrictive covenants, net, consist of covenants not to compete
arising in connection with asset acquisitions which are being amortized over
their contractual lives ranging from thirty to one hundred and twenty months.
Accumulated amortization of restrictive covenants was $173,167 and $353,993 at
June 30, 1997 and 1998, respectively. The Company's policy is to value
restrictive covenants based on the negotiated contractual value of the
restrictive covenant or a third party appraisal.
Deferred Lease Acquisition Costs, Net
Deferred lease acquisition costs, net, consist of commissions
associated with the acquisition of new leases and are being amortized over the
life of the related leases, generally five years. Accumulated amortization of
deferred lease acquisition costs was $709,830 and $1,197,756 at June 30, 1997
and 1998, respectively. Upon early service termination, the unamortized portion
of deferred lease acquisition costs are charged to selling, general and
administrative expenses.
(g) Revenue Recognition
The Company earns its revenues from the leasing of CO2 systems
and related gas sales. The Company, as lessor, recognizes revenue from leasing
of CO2 systems on a straight-line basis over the life of the related leases. The
majority of CO2 system leases generally include payments for leasing of
equipment and a continuous supply of CO2 until usage reaches a pre-determined
maximum annual level, beyond which the customer pays for CO2 on a per pound
basis. Other CO2 and gas sales are recorded upon delivery to the customer.
F-9
<PAGE>
NuCo2 INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Description of Business and Summary of Significant Accounting
Policies - (Continued)
(h) Income Taxes
Income taxes are accounted for under Financial Accounting
Standards Board Statement No. 109, Accounting for Income Taxes. Statement No.
109 requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Under
Statement No. 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date.
(i) Net Income or Loss Per Common Share
Net income or loss per common share is presented in accordance
with SFAS No. 128, "Earnings per Share." Basic earnings per common share are
computed using the weighted average number of common shares outstanding during
the period. Diluted earnings per common share incorporate the incremental shares
issuable upon the assumed exercise of stock options and warrants to the extent
they are not anti-dilutive.
In connection with the Initial Public Offering (IPO), 155,164 and
300,266 shares of Common Stock were issued upon conversion of the Company's
Series C convertible preferred stock and Series D convertible preferred stock,
respectively. An additional 805,209 shares of Common Stock were issued upon the
conversion of the convertible portion of the Senior Subordinated Notes and
118,167 shares of Common Stock upon exercise of warrants and options. The above
shares have been treated as outstanding since July 1, 1995. Stock options and
warrants to purchase an additional 152,851 shares of Common Stock granted during
1995 have also been treated as outstanding since July 1, 1995, using the
treasury stock method.
(j) Use Of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(k) Employee Benefit Plan
On June 1, 1996, the Company adopted a deferred compensation plan
under Section 401(K) of the Internal Revenue Code which covers all eligible
employees. Under the provisions of the plan, eligible employees may defer a
percentage of their compensation subject to the Internal Revenue Service limits.
Contributions to the plan are made only by employees.
NOTE 2 - Public Offerings
(a) Initial Public Offering (IPO)
In connection with the Company's Initial Public Offering,
2,022,576 shares of Common Stock were sold in December 1995. In addition,
representatives of the Underwriters acquired warrants to purchase up to 110,000
shares of Common Stock. Such warrants are exercisable for a period of five
years, at an exercise price of $10.80. In July 1996, the Company redeemed and
canceled a warrant to purchase 77,000 shares of its Common Stock for $1,143,450.
This amount represented the approximate market value of such warrant on the date
of redemption.
F-10
<PAGE>
NuCo2 INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Public Offerings - (Continued)
The gross proceeds the Company received from the sale of the
2,022,576 shares of Common Stock were $18,203,184. After deducting the
underwriters' discounts and commissions and other offering expenses, the net
proceeds were $16,151,364.
Prior to the IPO, the Company had outstanding approximately $2.9
million in principal amount of Senior Subordinated Notes, a portion of which was
convertible at the option of the holders thereof into Common Stock. The holders
of the Senior Subordinated Notes converted, effective upon the closing of the
IPO, approximately $407,000 of the principal amount of the Senior Subordinated
Notes into an aggregate of 805,209 shares of Common Stock. The Company repaid
the remaining principal of the Senior Subordinated Notes and accrued interest
thereon with a portion of the net proceeds of the IPO. The Company also had
outstanding 485 shares of Series A Preferred Stock, 500 shares of Series B
Preferred Stock, 500 shares of Series C Preferred Stock and 1,500 shares of
Series D Preferred Stock. Effective upon closing of the IPO, (i) the Company
redeemed with a portion of the net proceeds of the IPO all of the outstanding
Series A Preferred Stock and Series B Preferred Stock for an aggregate of
$485,500 plus approximately $243,000 of dividends and (ii) all of the
outstanding Series C Preferred Stock and Series D Preferred Stock automatically
converted into an aggregate of 455,430 shares of Common Stock. The Company used
a portion of the net proceeds of the IPO to pay dividends of approximately
118,000 on the Series C Preferred Stock and Series D Preferred Stock. In
addition, the holders of warrants to purchase an aggregate of 118,167 shares of
Common Stock exercised such warrants effective upon the closing of the IPO.
Prior to the IPO, the board of directors approved, among other
things, an increase in the number of shares authorized of Common Stock of the
Company to 20,000,000 shares, reduced the par value to $ .001 per share, and
increased the number of authorized shares of preferred stock to 5,000,000
shares.
The Company's board of directors also declared an approximate
3,866-for-1 stock split of the Company's Common Stock. This stock split resulted
in the issuance of an additional 1,932,453 shares of Common Stock of the
Company. All share, per share and conversion amounts relating to Common Stock,
stock options and warrants, included in the accompanying consolidated financial
statements have been restated to reflect this stock split.
In December 1996, the shareholders voted and approved another
increase in the number of shares authorized of the Company's Common Stock to
30,000,000 shares.
(b) Secondary Public Offering
In connection with the Company's Secondary Public Offering,
1,425,165 shares of Common Stock were sold in June 1996. In addition, an
over-allotment option for an additional 336,000 shares of Common Stock was
exercised.
The net proceeds the Company received from the sale of the
1,761,165 shares of Common Stock, after deducting the underwriters' discounts
and commissions and other offering expenses was $44,584,145. The Company repaid
$1,963,486 of indebtedness outstanding under its credit facility with the
proceeds. The Company utilized the remaining proceeds to fund internal growth,
for the acquisition of additional bulk CO2 systems leasing businesses and for
general corporate purposes.
NOTE 3 - Acquisitions
Effective May 15 1996, the Company acquired substantially all of
the assets associated with the bulk CO2 operating segment of the BevServ
Division of The Coca-Cola Bottling Company of New York, Inc. (BevServ) for
$2,914,374. The Company financed the acquisition through available borrowings
under its NationsBank credit facility (see Note 6).
In August 1996, the Company acquired the bulk CO2 operations of
two affiliated companies operating in Ohio, Kentucky and Indiana for an
aggregate purchase of approximately $1,350,000. The Company paid cash for these
transactions.
F-11
<PAGE>
NuCo2 INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Acquisitions - (Continued)
In March 1997, the Company acquired certain assets of three
unrelated companies operating in Texas for an aggregate purchase price of
approximately $2,875,000. The Company paid cash for these transactions.
In April 1997, the Company acquired certain assets of Texas
Oxygen, Inc./Texas CO2, Inc. for an aggregate purchase price of approximately
$3,925,000. The Company paid cash for these transactions.
In May 1997, the Company acquired certain assets from two
companies, City Carbonic Company, Inc. and the BOC Group, Inc. City Carbonic
Company, Inc. operating in Oklahoma, Kansas, Texas and Arkansas, sold assets for
an aggregate purchase price of approximately $3,290,000. The BOC Group, Inc.
beverage bulk CO2 operations were located in Massachusetts, Pennsylvania and
Tennessee and were acquired for an aggregate purchase price of approximately
$5,233,000. The Company paid cash for these transactions.
In June 1997, the Company acquired certain assets of a business
operating in Georgia for a purchase price of $1,350,000. The Company paid
approximately $750,000 cash, incurred liabilities of $60,000 and issued 33,962
shares of Common Stock at market, for a value of $540,000.
Effective July 15, 1997, the Company purchased substantially all
of the assets of a bulk CO2 company operating in Colorado for a purchase price
of $675,000. The purchase price was funded through a borrowing under the
Company's NationsBank credit facility (see Note 6).
Effective July 31, 1997, the Company purchased certain assets
from CC Acquisition Corp. (Carbo Co.) for an aggregate purchase price of
$11,000,000. Carbo Co. had operations in Nebraska, Kansas, Oklahoma, Iowa,
Missouri, Arkansas and South Dakota. The Company funded $5,000,000 through a
borrowing under its $30 million NationsBank credit facility (see Note 6) and
paid cash for the balance.
In September 1997, the Company purchased certain assets of a bulk
CO2 company with operations in Arizona for an aggregate purchase price of
$1,084,250. The Company funded $1,075,000 through a borrowing under its
NationsBank credit facility (see Note 6) and paid cash for the balance.
Effective October 1, 1997, a newly formed wholly-owned subsidiary
of the Company purchased all of the issued and outstanding shares of Common
Stock of Koch Compressed Gases, Inc. ("Koch") for an aggregate purchase price of
approximately $5,000,000. Koch operated a bulk CO2 business as well as provided
carbon dioxide and other gases in high-pressure cylinders throughout the
tri-state New York metropolitan area. The purchase price was funded through a
borrowing under the Company's NationsBank credit facility (see Note 6).
In November 1997, the Company purchased substantially all of the
assets of a bulk CO2 company operating in Texas for a purchase price of
$949,240. The Company paid $674,249 cash and issued 18,835 shares of Common
Stock at market, for a value of $274,991.
Effective December 2, 1997, the Company purchased certain assets
from four related carbonic gas distributors, Miller Carbonic Systems Co. Inc.,
Miller Carbonic, Inc., Carbonic National Systems, Inc., and Carbonic Gas
Service, Inc., operating primarily in Illinois, Indiana, Wisconsin and Michigan
for an aggregate purchase price of $11,150,000. The Company paid approximately
$4,650,000 cash and funded $6,500,000 through a borrowing under the Company's
SunTrust Facility (see Note 6).
Effective December 2, 1997, the Company purchased certain assets
of a bulk CO2 company with operations in Kansas for a purchase price of
approximately $990,000. The purchase price was funded through a borrowing under
the Company's SunTrust Facility (see Note 6).
F-12
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Acquisitions - (Continued)
Effective January 23, 1998, the Company purchased substantially
all of the assets of a bulk CO2 company operating in California for a purchase
price of $4,500,000. The purchase price was funded through a borrowing under the
Company's SunTrust Facility (see Note 6).
Effective March 2, 1998, the Company purchased certain assets
from Florida Carbonic Distributor, Inc., a carbonic gas distributor operating in
Florida for a purchase price of $6,300,000. The purchase price was funded
through a borrowing under the Company's SunTrust Facility (see Note 6).
In March 1998, the Company purchased certain assets from three
unrelated carbonic gas distributors with operations in Texas, Maine and Alabama
for an aggregate purchase price of $406,000. The Company paid cash for these
transactions.
These acquisitions were accounted for by the purchase method of
accounting and, accordingly, the purchase prices and direct costs of the
acquisitions have been allocated to the respective assets and liabilities of the
acquired companies based upon their estimated fair market values at the date of
acquisition. This resulted in goodwill of approximately $775,000, $4,732,000 and
$16,257,000 in the three years ended June 30, 1998, respectively, which is being
amortized on a straight-line basis over twenty years. The results of operations
of the acquired companies are included in the Company's consolidated financial
statements since the effective date of the acquisitions.
The following summarized, unaudited, pro forma results of
operations assume that the acquisitions described above occurred as of the
beginning of the fiscal year preceding the date of acquisition:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net sales $ 18,923,657 $33,104,161 $39,078,542
Income (loss) before extraordinary item (681,264) (1,751,557) (6,133,862)
Net (loss) (1,540,786) (1,751,557) (6,320,807)
Net (loss) per common share (0.34) (0.24) (0.88)
</TABLE>
NOTE 4 - Property and Equipment, Net
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------
1997 1998
---- ----
<S> <C> <C>
Leased equipment $42,207,142 $ 77,378,765
Equipment and cylinders 6,114,340 12,126,813
Systems held for installation 2,028,937 3,925,539
Vehicles 209,190 622,092
Computer equipment 798,421 1,516,153
Office furniture and fixtures 766,901 997,142
Leasehold improvements 1,005,173 1,039,442
Construction in progress - 221,999
---------- ------------
53,130,104 97,827,945
Less accumulated depreciation and amortization 6,327,054 12,392,012
---------- ------------
$46,803,050 $ 85,435,933
========== ============
</TABLE>
Capitalized component parts and direct costs associated with
installation of equipment leased to others included in leased equipment was
$6,335,593 and $12,429,913 at June 30, 1997 and 1998, respectively. Accumulated
depreciation and amortization of these costs were $1,934,704 and $3,525,574 at
June 30, 1997 and 1998, respectively.
Depreciation and amortization of property and equipment was
$1,609,063, $3,130,022 and $6,045,652 for the years ended June 30, 1996, 1997
and 1998, respectively.
F-13
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - Leases
The Company leases equipment to its customers generally pursuant
to five-year noncancelable operating leases which expire on varying dates
through June 2004. At June 30, 1998, future minimum rentals due from customers
which includes, where applicable, a continuous supply of CO2 (see Note 1(g)),
are as follows:
YEAR ENDING JUNE 30,
1999 $ 18,809,633
2000 17,439,211
2001 14,839,213
2002 10,853,434
2003 4,324,464
Thereafter 1,194
-----------
$ 66,267,149
===========
NOTE 6 - Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------
1997 1998
---- ----
<S> <C> <C>
Note payable issued in connection with a 1995 asset acquisition of $479,000, principal
and interest (at 7%) payments of $9,485 payable monthly, maturing January 2000
and collateralized by the purchased assets with a net book value of $440,638 at June
30, 1998. $ 268,263 $ 170,114
Note payable to bank of $6,000,000, interest only for 12 months and principal payments
of $100,000 plus interest at a fixed rate of 8.51% payable monthly for twenty-three
months commencing January 1997 (repaid October 1997). 5,400,000 -
Note payable to bank of $10,000,000, interest only for 12 months at two hundred
seventy-five basis points above the 30-day London InterBank Offering Rate
("LIBOR"), with the principal amount outstanding at the end of 12 months
(December 1996) and 24 months (December 1997) converted to term loans
calculated on a 60 month amortization schedule. The first converted, acquisition
facility, term loan of $3,248,010 is due in monthly installments of approximately
$54,144 (repaid October 1997). 2,977,343 -
Note payable to bank of $13,000,000, interest only for 12 months at two hundred
seventy-five basis points above LIBOR with the principal amount outstanding at the
end of 12 months (December 1996) and 24 months (December 1997) converted to
term loans calculated on a 60 month amortization schedule. The first converted,
tank facility, term loan of $908,455 is due in monthly installments of
approximately $15,141 (repaid October 1997). 832,750 -
Note payable to bank of $29,000,000 under a $50 million facility, interest only through
October 2000. Drawings at June 30, 1998 are at 6 month LIBOR rates plus 2.25%.
(7.875% to 8.00%) (a) - 29,000,000
Note payable assumed in connection with the acquisition of the stock of Koch of
$388,082, principal and interest (9%) payments of $4,413 through April 2003 and
$5,405 from May 2003 through April 2008. - 375,741
Various notes payable 67,985 54,010
--------- ----------
9,546,341 29,599,865
Less current maturities of long-term debt 2,180,601 139,251
--------- -----------
Long-term debt, excluding current maturities $7,365,740 $29,460,614
========== ============
</TABLE>
F-14
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Long-Term Debt - (Continued)
(a) The $50.0 million syndicated bank facility ("SunTrust
Facility") replaced the Company's prior facility with NationsBank of Florida,
N.A. ("NationsBank"). Pursuant to the SunTrust Facility, upon the achievement of
$15.0 million annualized one quarter EBITDA pro-formaed for acquisitions, the
Company shall automatically request that the SunTrust Facility be increased by
an additional $50.0 million to a total of $100.0 million. As of June 30, 1998,
$21.0 million is currently available under the initial facility. Additionally,
the SunTrust Facility contains interest rates and an unused facility fee based
on a pricing grid calculated quarterly on senior funded debt to annualized
EBITDA. The applicable LIBOR margin pursuant to the pricing grid ranges from
1.25% to 2.75%, the applicable unused facility fee pursuant to the pricing grid
ranges from 0.1875% to 0.50% and the applicable base rate margin pursuant to the
pricing grid ranges from 0.00% to 0.50%.
The Company is entitled to select the Base Rate or LIBOR, plus
applicable margin, for principal drawings under the SunTrust Facility. Base Rate
is defined as the higher of the prime lending rate of SunTrust or the Federal
Funds rate plus one-half of one percent (1/2%) per annum. Interest only is
payable periodically until the expiration of the SunTrust Facility at which time
all outstanding principal and interest is due. The SunTrust Facility expires on
October 31, 2000; however, it contains a two year renewal option subject to
approval. Additionally, it is collateralized by substantially all of the assets
of the Company. The Company is precluded from declaring or paying any dividends
and is required to meet certain affirmative and negative covenants including,
but not limited to financial covenants.
On June 9, 1998, the Company entered into an interest rate swap
transaction (the "Swap") with SunTrust Bank, Atlanta, in the amount of $10.0
million (the "Notional Amount"). The effective date of the Swap is September 2,
1998 and terminates on September 5, 2000. Pursuant to the Swap, the Company pays
a fixed interest rate of 6% per annum and receives a LIBOR-based floating rate.
The aggregate maturities of long-term debt for each of the five
years subsequent to June 30, 1998 are as follows:
YEAR ENDING JUNE 30,
1999 $ 139, 251
2000 96,977
2001 29,033,495
2002 36,638
2003 40,073
Thereafter 253,431
-----------
$ 29,599,865
Extraordinary item - loss on extinguishment of debt
For the years ended June 30, 1996 and 1998, the Company incurred
an extraordinary charge of $859,522 and $186,945, respectively, for the
write-off of deferred financing costs and prepayment penalties in connection
with the early repayment of debt.
NOTE 7 - SUBORDINATED DEBT
Represents unsecured Senior Subordinated Promissory Notes
("Notes") with interest only at 12% per annum payable semi-annually on April 30
and October 31, due October 31, 2004. The Notes were sold with detachable seven
year warrants to purchase an aggregate of 655,738 shares of the Company's Common
Stock at an exercise price of $16.40 per share (see Note 16). The face amount of
the Notes is $30,000,000. The effective rate of the notes is 12.1% per annum
after giving effect to the amortization of the original issue discount. The
Company is required to meet certain affirmative and negative covenants including
financial covenants. Additionally, NationsBanc Montgomery Securities, Inc., the
placement agent, received a warrant to purchase an aggregate of 30,000 shares of
the Company's Common Stock at an exercise price of $14.64 per share which
expires on October 31, 2004.
F-15
<PAGE>
NuCo2, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - Shareholders' Equity
See Note 2 for discussion of conversion and repayment of
preferred stock and dividends declared and paid.
(a) Stock Option Plans
The board of directors adopted the 1995 Option Plan (the "1995
Plan"). Under the 1995 Plan, the Company has reserved 850,000 shares of Common
Stock for employees of the Company. Under the terms of the 1995 Plan, options
granted may be either incentive stock options or non-qualified stock options, or
both. The exercise price of incentive options shall be at least equal to 100% of
the fair market value of the Company's Common Stock at the date of the grant,
and the exercise price of non-qualified stock options issued to employees may
not be less than 75% of the fair market value of the Company's Common Stock at
the date of the grant. The maximum term for all options is 10 years. Options
granted to date vest in three or four installments commencing one year from the
date of grant. As of June 30, 1997 and 1998, options for 41,437 shares and
105,900 shares are exercisable, respectively. As of June 30, 1996, no options
were exercisable. The weighted-average fair value of options granted during the
years June 30, 1996, 1997 and 1998 were $5.67, $2.93 and $2.81, respectively. As
of June 30, 1998, the weighted-average remaining life of the options was 7.04
years.
The following table summarizes the transactions pursuant to the
1995 Plan.
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE EXERCISE PRICE
------ -------------- ----------------
<S> <C> <C> <C>
Outstanding at June 30, 1995 -0- -0- -0-
Granted 130,991 $9-$17.50 $13.87
Expired or canceled 340 $9 $9
Exercised -0- -0- -0-
------- --------- -------
Outstanding at June 30, 1996 130,651 $9-$17.50 $13.88
Granted 222,500 $11.25 $11.25
Expired or canceled 6,225 $9-11.25 $9.31
Exercised 322 $9 $9
------- --------- ------
Outstanding at June 30, 1997 346,604 $9-$17.50 $12.28
Granted 343,000 $10.25-$11.28 $10.43
Expired or canceled 77,067 $9-$17.50 $17.29
Exercised 111 $9 $9
------- --------- ------
Outstanding at June 30, 1998 612,426 $9-$11.28 $10.61
======= ========= ======
</TABLE>
The board of directors of the Company adopted the Directors'
Stock Option Plan (the "Directors' Plan"). Under the Directors' Plan, each
non-employee director will receive options for 6,000 shares of Common Stock on
the date of his or her first election to the board of directors. In addition, on
the third anniversary of each director's first election to the Board, and on
each three year anniversary thereafter, each non-employee director will receive
an additional option to purchase 6,000 shares of Common Stock. The exercise
price per share for all options granted under the Directors' Plan will be equal
to the fair market value of the Common Stock as of the date of grant. All
options vest in three equal annual installments beginning on the first
anniversary of the date of grant. The maximum term for all options is ten years.
As of June 30, 1998, options to purchase a total of 16,000 shares of Common
Stock at an exercise price of $9 per share and a total of 6,000 shares of Common
Stock at an exercise price of $12.50 per share had been issued and were
outstanding. As of June 30, 1997 and 1998, options for 8,000 shares and 14,000
shares were currently exercisable. As of June 30, 1996, no options were
exercisable. No options have been exercised under the Directors' Plan. The
weighted-average fair value of options granted during the years ended June 30,
1996 and 1998 were $3.07 and $4.11, respectively. No options were granted during
the year ended June 30, 1997. As of June 30, 1998, the weighted-average
remaining life of the options was 8.05 years.
(b) Warrants
In August 1994, the Company granted a five year warrant to
purchase 73,042 shares of Common Stock at $3.22 per share to a shareholder of
the Company in connection with the guarantee of certain indebtedness. This
warrant was exercised in 1996. Proceeds to the Company for the exercise of this
warrant aggregated $235,195.
In May 1997, the Company granted a warrant to purchase 1,000,000
shares of Common Stock to BOC pursuant to the supply agreement (see Note 14c).
The warrant is exercisable from May 1, 1999 to May 1, 2002 at an exercise price
of $17 per share and from May 1, 2002 until April 30, 2007 at an exercise price
of $20 per share. The option may be exercised earlier for a material breach in
the supply contract or a change in control of the Company. As of June 30, 1998,
the warrant was not exercisable.
F-16
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Shareholders' Equity - (Continued)
(c) Non-Qualified Stock Options
During 1995, the Company granted options to purchase 67,934
shares of Common Stock at $4.40 per share to certain officers and employees.
These options vest one year after date of grant and are exercisable for 10
years. In June and July 1996, these options were exercised. In 1992, the Company
also granted options to purchase 45,125 shares of Common Stock to a company in
connection with the issuance of the senior subordinated convertible notes. These
options were also exercised in 1996. Proceeds to the Company for the exercise of
non qualified stock options in 1996 and 1997 aggregated $164,455 and $149,455,
respectively.
Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, defines a fair value based method of
accounting for stock options. It is effective for fiscal years beginning after
December 15, 1995. The Statement allows an entity to continue to measure cost
using the accounting method prescribed by APB Opinion No. 25, Accounting for
Stock Issued to Employees, and to make pro forma disclosures of net income and
earnings per share as if the fair value based method of accounting had been
applied. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in fiscal 1996, 1997 and 1998; expected volatility
of 40%, risk-free interest rate of 5.4% to 6.5%, expected dividend yield of 0%
and expected lives of one to five years. The Company adopted SFAS 123 in fiscal
year ended June 30, 1997 and presents the following pro forma disclosures rather
than change its present method of accounting for employee stock options:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net income (loss) available to common shareholders $ (993,617) $ 27,439 $ (5,974,752)
Net income (loss) per common share $ (0.22) $ 0.01 $ (0.83)
========== ========= ==============
Weighted average number of common and
common equivalent shares outstanding 4,499,989 7,302,662 7,210,350
========== ========= ==============
</TABLE>
The pro forma adjustment for stock based compensation costs under
SFAS 123 for the years ending 1996, 1997 and 1998 is approximately $70,000,
$500,000 and $340,000, respectively. No stock based compensation was recognized
in the financial statements pursuant to APB Opinion No. 25.
NOTE 9 - Earnings per Share
In February 1997, the FASB issued Statement 128, "Earnings Per
Share". Statement 128 supersedes APB Opinion No. 15, "Earnings Per Share" and
specifies the computation, presentation and disclosure requirements for earnings
per share ("EPS") for entities with publicly held Common Stock or potential
Common Stock. It replaces the presentation of primary EPS with the presentation
of basic EPS and replaces fully diluted EPS with diluted EPS. It also requires
dual presentation of basic and diluted EPS on the face of the statement of
operations for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Statement 128 is
effective for financial statements for periods ending after December 15, 1997.
Earnings per share of Common Stock for the years ended June 30,
1996 and 1997 have been restated to conform to the guidelines of Statement 128.
F-17
<PAGE>
NuCo2 INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Earnings Per Share - (Continued)
Incremental shares for stock options and warrants pursuant to
the treasury stock method for the year ended June 30, 1996 were 179,197. These
shares were not included in diluted EPS because after giving effect to preferred
stock dividends their inclusion would have been antidilutive. Additionally,
options to purchase 75,000 shares at $17.50 were outstanding for a portion of
1996 but were not included in the computation of diluted EPS because the
exercise price was greater than the average market price of common shares.
Following is a reconciliation of the numerator and denominator
of the basic and diluted per share computations for income from continuing
operations for the year ended June 30, 1997.
<TABLE>
<CAPTION>
Weighted Per-Share
Net Income Average Shares Amount
Basic EPS
<S> <C> <C> <C>
Income available to common shareholders $ 527,439 7,164,924 $ 0.07
Effect of dilutive options and warrants - 153,002 -
-------- ---------- --------
Diluted EPS $ 527,439 7,317,926 $ 0.07
======== ========== ========
</TABLE>
Incremental shares for stock options and warrants calculated
pursuant to the treasury stock method for the year ended June 30, 1998 were
136,972. These shares were not included in diluted EPS because they would have
been antidilutive. Additionally, options and warrants to purchase 75,000 shares,
1,000,000 shares, 655,738 shares, 30,000 shares and 6,000 shares for $17.50,
$17.00, $16.40, $14.64 and $12.50, respectively, were outstanding during all or
a portion of the year ended June 30, 1998 but were not included in the
computation of diluted EPS because the options and warrants exercise price was
greater than the average market price of the common shares.
NOTE 10 - Income Taxes
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and deferred tax liabilities are as
follows:
<TABLE>
<CAPTION>
JUNE 30,
--------
1997 1998
---- ----
Deferred tax assets:
<S> <C> <C>
Allowance for doubtful accounts $ 42,500 $ 111,000
Amortization expense 137,800 269,900
Other 3,700 4,200
Net operating loss carryforwards 4,696,200 9,862,700
----------- ----------
Total gross deferred tax assets 4,880,200 10,247,800
Less valuation allowance (636,400) (2,766,200)
----------- ----------
Net deferred tax assets 4,243,800 7,481,600
----------- ----------
Deferred tax liabilities:
Depreciation expense (4,243,800) (7,481,600)
----------- ----------
Total gross deferred tax liabilities (4,243,800) (7,481,600)
----------- ----------
Net deferred taxes $ - $ -
=========== ==========
</TABLE>
At June 30, 1998, the Company had net operating loss carryforwards
for Federal income tax purposes of approximately $26,230,000, which are
available to offset future Federal taxable income, if any, in varying amounts
through June 2013. The net change in the total valuation allowance for the years
ended June 30, 1997 and 1998 was a decrease of $206,100 and an increase of
$2,129,800, respectively.
F-18
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - Related Party Transactions
The Company entered into leases with the chairman of the board
and chief executive officer for certain warehouse/depots and office facilities
with annual rentals of approximately:
YEAR ENDING JUNE 30,
1999 $ 274,000
2000 274,000
2001 233,000
2002 109,000
2003 60,000
------------
$ 950,000
Rental expense was $87,081, $166,549 and $246,551 in 1996, 1997
and 1998, respectively, under these leases.
NOTE 12 - Lease Commitments
The Company leases office equipment, trucks and warehouse/depot
and office facilities under operating leases (including related party leases,
see Note 11) that expire at various dates through December 2004. Primarily all
of the leases contain renewal options and escalations for real estate taxes,
common charges, etc. Future minimum lease payments under noncancelable operating
leases (that have initial noncancelable lease terms in excess of one year) are
as follows:
YEAR ENDING JUNE 30,
1999 $ 3,543,000
2000 3,101,000
2001 2,767,000
2002 2,392,000
2003 1,503,000
Thereafter 694,000
----------------
$ 14,000,000
Total rental expense under noncancelable operating leases was
approximately $763,900, $1,413,000 and $3,284,000 in 1996, 1997 and 1998,
respectively.
NOTE 13 - Concentration of Credit and Business Risks
The Company's business activity is with customers located within
the United States. As of June 30, 1996, 1997 and 1998, the Company's sales to
customers in the food and beverage industry were approximately 97%, 98% and 99%,
respectively.
There were no customers that accounted for greater than 5% of
total sales for the three years ended June 30, 1998, nor were there any
customers that accounted for greater than 5% of total accounts receivable at
June 30, 1997 or 1998.
The Company purchases new bulk CO2 systems from the two major
manufacturers of such systems. The inability of both or either of these
manufacturers to deliver new systems to the Company could cause a delay in the
Company's ability to fulfill the demand for its services and a possible loss of
sales, which could affect operating results adversely.
NOTE 14 - Commitments and Contingencies
(a) Employment Agreement
The Company has an employment agreement with an officer of the
Company that currently provides minimum annual compensation of $150,000 per year
through October 1999. The contract provides for additional compensation in the
form of bonuses to be determined by the board of directors and incentive and
non-qualified stock options pursuant to the Company's 1995 Plan to purchase up
to 100,000 shares of the Company's Common Stock. The agreement also calls for a
covenant against competition which extends one year beyond termination for any
reason.
F-19
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Commitments and Contingencies - (Continued)
(b) Consulting Agreement
Effective April 13, 1998, the Company entered into a three year
consulting agreement with the former president of the Company. Pursuant to the
terms of the agreement, the former president shall receive $50,000 per annum and
shall not compete with the Company for a period of two years after the
expiration of the contract. Simultaneously, options to purchase 75,000 shares of
Common Stock were canceled.
(c) Supply Agreement
In May 1997, the Company entered into an exclusive ten-year
carbon dioxide supply agreement with The BOC Group, Inc. ("BOC"). The agreement
ensures readily available high quality CO2 as well as relatively stable liquid
carbon dioxide prices. Pursuant to the agreement, the Company must purchase all
of its liquid CO2 requirements from BOC. The agreement contains annual
adjustments over the prior contract year for an increase or decrease in the
Producer Price Index for Chemical and Allied Products ("PPI") or the average
percentage increase in the selling price of bulk merchant carbon dioxide
purchased by BOC's large, multi-location beverage customers in the United
States. However, such increases shall not exceed 3% per year in the first five
contract years.
(d) Other
Carbonic Designs, Inc. ("CDI") had asserted claims against the
Company and three other defendants for violation of the Texas Free Enterprise
and AntiTrust Act of 1983, business disparagement, tortious interference with
contract and prospective business relations. CDI sought damages in unspecified
amounts. The Company settled this lawsuit in December 1997 for an immaterial
amount.
The Company is a defendant in legal actions which arise in the
normal course of business. In the opinion of management, the outcome of these
matters will not have a material effect on the Company's financial position or
results of operations.
NOTE 15 - Disclosures about Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments.
(a) Cash and cash equivalents
The carrying amount approximates fair value due to the short
maturity of these instruments.
(b) Long-term debt
The fair value of the Company's long-term debt has been estimated
based on the current rates offered to the Company for debt of the same remaining
maturities.
The carrying amounts and fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
June 30,
1997 1998
------- ----
Carrying Amount Carrying Amount
and Fair Value and Fair Value
-------------- --------------
<S> <C> <C>
Cash and cash equivalents $ 11,672,506 $ 336,510
Long-term debt, including current maturities 9,546,341 29,599,865
Subordinated debt - 29,728,571
</TABLE>
As of June 30, 1998, the fair value of the Company's interest rate swap (see
Note 6) was not material.
F-20
<PAGE>
NuCo2 Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - Subsequent Events
In July and August 1998, the 12% Senior Subordinated Promissory
Note Agreement and the SunTrust Facility, respectively, were amended to adjust
certain financial covenants as of June 30, 1998 and prospectively. In exchange
for the amendment to the 12% Senior Subordinated Promissory Note Agreement, the
exercise price for 612,023 warrants was reduced from $16.40 per stock unit to
$12.40 per stock unit.
F-21
<PAGE>
NuCo2 Inc.
Schedule II
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Column B Column C - Additions Column E
-------- -------------------- ----------
Balance at Charged to Charged to Column D Balance at
beginning costs and other -------- end of
of period expenses accounts Deductions period
--------- -------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1996
Allowance for doubtful accounts $172,468 $122,129 $ - $ 83,968 $ 210,629
Year ended June 30, 1997
Allowance for doubtful accounts $210,629 $143,210 $ - $ 240,785 $ 113,054
Year ended June 30, 1996
Allowance for doubtful accounts $113,054 $450,871 $43,276(1) $ 211,710 $ 395,491
</TABLE>
(1) Initial reserve of acquired company
F-22
EXHIBIT 3.2
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
FOWLER CARBONICS, INC.
================================================================================
To the Department of State
State of Florida
Pursuant to the provisions of Section 607.1006 of the Florida Business
Corporation Act, the corporation hereinafter named (the "Corporation") does
hereby adopt the following Articles of Amendment.
1. The name of the Corporation is Fowler Carbonics, Inc.
2. Article I of the Articles of Incorporation of the Corporation is
amended so as henceforth to read as follows:
ARTICLE I
---------
The name of the corporation is NuCo2 Inc. (hereinafter called the
"Corporation").
3. The date of adoption of the aforesaid amendment was December 13,
1995.
4. The designation of each voting group entitled to vote separately on
the said amendment is hereby stated as follows: Common Stock, Series
A Cumulative Deferred Preferred Stock, Series B Preferred Stock,
Series C Convertible Preferred Stock, Series D Cumulative Preferred
Stock.
<PAGE>
5. The number of votes cast for the said amendment by each said voting
group was sufficient for the approval thereof.
* * * * * * *
Executed on December 18, 1995.
FOWLER CARBONICS, INC.,
By:/s/ Jean Houghton
--------------------
Name of officer: Jean Houghton
Title of officer: Vice President
-2-
EXHIBIT 3.3
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
NUCO2 INC.
================================================================================
To the Department of State
State of Florida
Pursuant to the provisions of Section 607.1006 of the Florida Business
Corporation Act, the corporation hereinafter named (the "Corporation") does
hereby adopt the following Articles of Amendment.
1. The name of the Corporation is NuCo2 Inc.
2. Article III of the Articles of Incorporation of the Corporation is
amended so as henceforth to read as follows:
ARTICLE III
-----------
The aggregate number of shares of all classes of capital stock which
this Corporation shall have authority to issue is Thirty Five Million
(35,000,000), consisting of (i) Thirty Million (30,000,000) shares of common
stock, par value $0.001 per share (the "Common Stock"), and (ii) Five Million
(5,000,000) shares of preferred stock, without par value but with a stated value
of $1,000 per share (the "Preferred Stock").
A. COMMON STOCK.
-------------
Section 1. VOTING. Except as otherwise required by law or as
otherwise provided in any Preferred Stock designation including paragraph B of
this Article III below, the holders of the Common Stock shall exclusively
possess all voting power and each share of Common Stock shall have one vote.
<PAGE>
Section 2. DIVIDENDS. The holders of Common Stock shall be entitled
to receive dividends, when, as and if declared by the Board of Directors out of
funds legally available for such purpose and subject to any preferential
dividend rights of any then outstanding Preferred Stock.
Section 3. LIQUIDATION, DISSOLUTION, WINDING UP. After distribution
in full of the preferential amount, if any (fixed in accordance with the
provisions of paragraph B of this Article III), to be distributed to the holders
of Preferred Stock in the event of voluntary or involuntary liquidation,
distribution or sale of assets, dissolution or winding-up, of the Corporation,
the holders of the Common Stock shall be entitled to receive all the remaining
assets of the Corporation, tangible and intangible, of whatever kind available
for distribution to stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
B. PREFERRED STOCK.
----------------
Preferred Stock may be issued from time to time in one or more
series, each of such series to have such terms as stated or expressed herein or
in the resolution or resolutions providing for the issue of such series adopted
by the Board of Directors of the Corporation as hereinafter provided. Any shares
of Preferred Stock which may be redeemed, purchased or acquired by the
Corporation may be reissued except as otherwise provided herein or by law.
Different series of Preferred Stock shall not be construed to constitute
different classes of shares for the purposes of voting by classes unless
expressly provided for herein or by law.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, conversion rights, redemption privileges
and liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the Florida
Business Corporation Act. Without limiting the generality of the foregoing, the
resolutions providing for issuance of any series of Preferred Stock may provide
that such series shall be superior or rank equally or be junior to the Preferred
Stock of any other series to the extent permitted by law. Except as expressly
provided elsewhere in this Article III or the Florida Business Corporation Act,
no vote of the holders of the Preferred Stock or Common Stock shall be required
in connection with the designation or the issuance of any shares of any series
of the Preferred Stock authorized by and complying with the conditions of the
Articles of Incorporation, the right to have such vote being expressly waived by
all present and future holders of the capital stock of the Corporation.
3. The date of adoption of the aforesaid amendment was December 9, 1996.
4. The number of votes cast for the aforesaid amendment by the shareholders was
sufficient for the approval thereof.
-2-
<PAGE>
* * * * * * *
Executed on December 17, 1996.
NUCO2 INC.
By:/S/ JEAN HOUGHTON
Name of officer: Jean Houghton
Title of officer: Vice President-Administration
-3-
EXHIBIT 10.1
NUCO2 INC.
1995 STOCK OPTION PLAN
1. PURPOSES
The purpose of the Plan is to provide additional
incentive to the officers and employees of the Company who are primarily
responsible for the management and growth of the Company, or otherwise
materially contribute to the conduct and direction of its business, operations
and affairs, in order to strengthen their desire to remain in the employ of the
Company and to stimulate their efforts on behalf of the Company, and to retain
and attract to the employ of the Company persons of competence. Each option
granted pursuant to the Plan shall be designated at the time of grant as either
an "incentive stock option" or as a "non-qualified stock option." The terms and
conditions of the Plan shall be set forth or incorporated by reference in the
option agreements evidencing the options.
2. DEFINITIONS
For the purposes of the Plan, unless the context
otherwise requires, the following definitions shall be applicable:
(a) "Board" or "Board of Directors" means the
Company's Board of Directors.
(b) "Code" means the Internal Revenue Code of
1986, as amended.
(c) "Committee" means the Stock Option Committee
composed of two or more members of the Board of Directors, and who shall be
responsible for administering the Plan. Each of the members of the Committee
shall be a Disinterested Person.
(d) "Company" means NuCo2 Inc.
(e) "Disinterested Person" means a disinterested
person, as defined in Rule 16b-3 under the Exchange Act.
<PAGE>
(f) "Employee" means an employee of the Company
or of a Subsidiary (including a director or officer of the Company or a
Subsidiary who is also an employee).
(g) "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
(h) "Fair Market Value" of the Shares means the
closing price of publicly traded Shares on the national securities exchange on
which the Shares are listed (if the Shares are so listed) or on the Nasdaq
National Market (if the Shares are regularly quoted on the Nasdaq National
Market), or, if not so listed or regularly quoted, the mean between the closing
bid and asked prices of publicly traded Shares in the over-the-counter market,
or, if such bid and asked prices shall not be available, as reported by any
nationally recognized quotation service selected by the Company, or as
determined by the Committee in a manner consistent with the provisions of the
Code.
(i) "ISO" means an option intended to qualify as
an incentive stock option under Section 422 of the Code.
(j) "NQO" means an option that does not qualify
as an ISO.
(k) "Plan" means the 1995 Stock Option Plan of
the Company.
(l) "Securities Act" means the Securities Act of
1933, as amended.
(m) "Shares" means shares of the Company's
Common Stock, $.001 par value, including authorized but unissued shares and
shares that have been previously issued and reacquired by the Company.
(n) "Subsidiary" of the Company means and
includes a "Subsidiary Corporation," as that term is defined in Section 425(f)
of the Code.
3. ADMINISTRATION
-2-
<PAGE>
Subject to the express provisions of the Plan, the
Committee shall have authority to interpret and construe the Plan, to prescribe,
amend and rescind rules and regulations relating to it, to determine the terms
and conditions of the respective option agreements (which need not be identical)
and to make all other determinations necessary or advisable for the
administration of the Plan. Subject to the express provisions of the Plan, the
Committee, in its sole discretion, shall from time to time determine the persons
from among those eligible under the Plan to whom, and the time or times at
which, options shall be granted, the number of Shares to be subject to each
option, whether an option shall be designated an ISO or an NQO and the manner in
and price at which such option may be exercised. In making such determination,
the Committee may take into account the nature and period of service rendered by
the respective optionees, their level of compensation, their past, present and
potential contributions to the Company and such other factors as the Committee
shall in its discretion deem relevant. The determination of the Committee with
respect to any matter referred to in this Section 3 shall be conclusive.
4. ELIGIBILITY FOR PARTICIPATION
Any Employee shall be eligible to receive ISOs or NQOs
granted under the Plan.
5. LIMITATION ON SHARES SUBJECT TO THE PLAN
Subject to adjustment as hereinafter provided, no more
than 850,000 Shares may be issued pursuant to the exercise of options granted
under the Plan. If any option shall expire or terminate for any reason, without
having been exercised in full, the unpurchased Shares subject thereto shall
again be available for the purposes of the Plan.
6. TERMS AND CONDITIONS OF OPTIONS
Each option granted under the Plan shall be subject to
the following terms and conditions:
(a) Except as provided in Subsection 6(j), the
option price per Share shall be determined by the Committee, but (i) as to an
ISO shall not be less than 100% of the Fair Market Value of a
-3-
<PAGE>
Share on the date such ISO option is granted; and (ii) as to an NQO, shall not
be less than 75% of the Fair Market Value of a Share on the date such NQO is
granted.
(b) The Committee shall, in its discretion, fix
the term of each option, provided that the maximum length of the term of each
option granted hereunder shall be 10 years and provided further than the
provisions of Subsection 6(j) hereof shall be applicable to the grant of ISOs to
Employees therein identified.
(c) If a holder of an option dies while he is
employed by the Company or a Subsidiary, such option may, to the extent that the
holder of the option was entitled to exercise such option on the date of his
death, be exercised during a period after his death fixed by the Committee, in
its discretion, at the time such option is granted, but in no event to exceed
one year, by his personal representative or representatives or by the person or
persons to whom the holder's rights under the option shall pass by will or by
the applicable laws of descent and distribution or by a qualified domestic
relations order; provided, however, that no option granted under the Plan may be
exercised to any extent by anyone after its expiration.
(d) In the event that a holder of an option
shall voluntarily retire or quit his employment without the written consent of
the Company or a Subsidiary or if the Company shall terminate the employment of
a holder of an option for cause, the options held by such holder shall forthwith
terminate. If a holder of an option shall voluntarily retire or quit his
employment with the written consent of the Company or a Subsidiary, or if the
employment of such holder shall have been terminated by the Company or a
Subsidiary for reasons other than cause, such holder may (unless his option
shall have previously expired pursuant to the provisions hereof) exercise his
option at any time prior to the first to occur of the expiration of the original
option period or the expiration of a period after termination of employment
fixed by the Committee, in its discretion, at the time the option is granted,
but in no event to exceed three months, to the extent of the number of Shares
subject to such option which were purchasable by him on the date of termination
of his employment. Options granted under the Plan shall not be affected by any
change of employment so long as the holder thereof continues to be an Employee.
-4-
<PAGE>
(e) Anything to the contrary contained herein or
in any option agreement executed and delivered hereunder, no option shall be
exercisable unless and until the Plan has been approved by stockholders of the
Company in accordance with Section 13 hereof.
(f) Each option shall be nonassignable and
nontransferable by the option holder otherwise than by will or by the laws of
descent and distribution and shall be exercisable during the lifetime of the
option holder solely by him.
(g) An option holder desiring to exercise an
option shall exercise such option by delivering to the Company written notice of
such exercise, specifying the number of Shares to be purchased, together with
payment of the purchase price therefor; provided, however that no option may be
exercised in part with respect to fewer than 100 Shares, except to purchase the
remaining Shares purchasable under such option. Payment shall be made as
follows: (i) in United States dollars by cash or by check, certified check, bank
draft or money order payable to the order of the Company; (ii) at the discretion
of the Committee, by delivering to the Company Shares already owned by the
option holder and having a Fair Market Value on the date of exercise equal to
the exercise price, or a combination of such Shares and cash; or (iii) by any
other proper method specifically approved by the Committee.
(h) In order to assist an option holder with the
acquisition of Shares pursuant to the exercise of an option granted under the
Plan, the Committee may, in its discretion and subject to the requirements of
applicable statutes, rules and regulations, whenever, in its judgment, such
assistance may reasonably be expected to benefit the Company, authorize, either
at the time of the grant of the option or thereafter (i) the extension of a loan
to the option holder by the Company, (ii) the payment by the option holder of
the purchase price of the Shares in installments, or (iii) the guaranty by the
Company of a loan obtained by the option holder from a third party. The
Committee shall determine the terms of any such loan, installment payment
arrangement or guaranty, including the interest rate and other terms of
repayment thereof. Loans, installment payment arrangements and guaranties may be
authorized with or without security and the maximum amount thereof shall be the
option price for the Shares being acquired plus related interest payments.
-5-
<PAGE>
(i) The aggregate Fair Market Value (determined
at the time an ISO is granted) of the Shares as to which an Employee may first
exercise ISOs in any one calendar year under all incentive stock option plans of
the Company and its Subsidiaries may not exceed $100,000.
(j) An ISO may be granted to an Employee owning,
or who is considered as owning by applying the rules of ownership set forth in
Section 425(d) of the Code, over 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary if the option price of such
ISO equals or exceeds 110% of the Fair Market Value of a Share on the date the
option is granted and such ISO shall expire not more than five years after the
date of grant.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) Subject to any required regulatory approval,
new option rights may be substituted for the option rights granted under the
Plan, or the Company's duties as to options outstanding under the Plan may be
assumed, by a corporation other than the Company, or by a parent or subsidiary
of the Company or such corporation, in connection with any merger,
consolidation, acquisition, separation, reorganization, liquidation or like
occurrence in which the Company is involved. Notwithstanding the foregoing or
the provisions of Subsection 7(b) hereof, in the event such corporation, or
parent or subsidiary of the Company or such corporation, does not substitute new
option rights for, and substantially equivalent to, the option rights granted
hereunder, or assume the option rights granted hereunder, the option rights
granted hereunder shall terminate and thereupon become null and void (i) upon
dissolution or liquidation of the Company, or similar occurrence, (ii) upon any
merger, consolidation, acquisition, separation, reorganization, or similar
occurrence, in which the Company will not be a surviving entity or (iii) upon a
transfer of substantially all of the assets of the Company or more than 80% of
the outstanding Shares; provided, however, that each option holder shall have
the right immediately prior to or concurrently with such dissolution,
liquidation, merger, consolidation, acquisition, separation, reorganization or
similar occurrence, to exercise any unexpired option rights granted hereunder
whether or not then exercisable. If the exercise of the foregoing right by the
holder of an ISO would be deemed to result in a violation of the
-6-
<PAGE>
provisions of Subsection 6(i) of the Plan, then, without further act on the part
of the Committee or the option holder, such ISO shall be deemed an NQO to the
extent necessary to avoid any such violation.
(b) The existence of outstanding options shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issuance of Common Stock or subscription
rights or any merger or consolidation of the Company, or any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Shares
or the rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise;
provided, however, that if the outstanding Shares shall at any time be changed
or exchanged by declaration of a stock dividend, stock split, combination of
shares or recapitalization, the number and kind of Shares subject to the Plan or
subject to any options theretofore granted, and the option prices, shall be
appropriately and equitably adjusted so as to maintain the proportionate number
of Shares without changing the aggregate option price.
(c) Adjustments under this Section 7 shall be made by
the Committee whose determination as to what adjustments, if any, shall be made,
and the extent thereof, shall be final.
8. PRIVILEGES OF STOCK OWNERSHIP
No option holder shall be entitled to the privileges of
stock ownership as to any Shares not actually issued and delivered to him.
9. SECURITIES REGULATION
(a) Each option shall be subject to the requirement that
if at any time the Board of Directors or Committee shall in its discretion
determine that the listing, registration or qualification of the Shares subject
to such option upon any securities exchange or under any Federal or state law,
or the
-7-
<PAGE>
approval or consent of any governmental regulatory body, is necessary or
desirable in connection with the issuance or purchase of Shares thereunder, such
option may not be exercised in whole or in part unless such listing,
registration, qualification, approval or consent shall have been effected or
obtained free from any conditions not reasonably acceptable to the Board of
Directors or Committee.
(b) Unless at the time of the exercise of an option and
the issuance of the Shares thereby purchased by any option holder hereunder
there shall be in effect as to such Shares a Registration Statement under the
Securities Act and the rules and regulations of the Securities and Exchange
Commission, or there shall be available an exemption from the registration
requirements of the Securities Act, the option holder exercising such option
shall deliver to the Company at the time of exercise a certificate (i)
acknowledging that the Shares so acquired may be "restricted securities" within
the meaning of Rule 144 promulgated under the Securities Act, (ii) certifying
that he is acquiring the Shares issuable to him upon such exercise for the
purpose of investment and not with a view to their sale or distribution; and
(iii) containing such option holder's agreement that such Shares may not be sold
or otherwise disposed of except in accordance with applicable provisions of the
Securities Act. The Company shall not be required to issue or deliver
certificates for Shares until there shall have been compliance with all
applicable laws, rules and regulations, including the rules and regulations of
the Securities and Exchange Commission.
10. EMPLOYMENT OF EMPLOYEE
Nothing contained in the Plan or in any option agreement
executed and delivered thereunder shall confer upon any option holder any right
to continue in the employ of the Company or any Subsidiary or to interfere with
the right of the Company or any Subsidiary to terminate such employment at any
time.
11. WITHHOLDING; DISQUALIFYING DISPOSITION
(a) The Company shall deduct and withhold from any
salary or other compensation for employment services of an option holder, all
amounts required to satisfy withholding tax liabilities arising from the grant
or exercise of an option under the Plan or the acquisition or disposition of
Shares acquired upon exercise of any such option.
-8-
<PAGE>
(b) In the discretion of the Committee and in lieu of
the deduction and withholding provided for in subsection (a) above, the Company
shall deduct and withhold Shares otherwise issuable to the option holder having
a fair market value on the date income is recognized pursuant to the exercise of
an option equal to the amount required to be withheld.
(c) In the case of disposition by an option holder of
Shares acquired upon exercise of an ISO within (i) two years after the date of
grant of such ISO, or (ii) one year after the transfer of such Shares to such
option holder, such option holder shall give written notice to the Company of
such disposition not later than 30 days after the occurrence thereof, which
notice shall include all such information as may be required by the Company to
comply with applicable provisions of the Code and shall be in such form as the
Company shall from time to time determine.
12. AMENDMENT, SUSPENSION AND TERMINATION OF THE PLAN
Subject to any required regulatory approval, the Board
of Directors or Committee may at any time amend, suspend or terminate the Plan,
provided that, except as set forth in Section 7 above, no amendment may be
adopted without the approval of stockholders which would:
(a) increase the number of Shares which may be issued
pursuant to the exercise of options granted under the Plan;
(b) permit the grant of an option under the Plan with an
option price less than 100% of the Fair Market Value of the Shares at the time
such option is granted;
(c) change the provisions of Section 4;
(d) extend the term of an option or the period during
which an option may be granted under the Plan; or
(e) decrease an option exercise price (provided that the
foregoing does not preclude the cancellation of an option and a new grant at a
lower exercise price without stockholder approval).
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<PAGE>
Unless the Plan shall theretofore have been terminated by the Board of Directors
or Committee, the Plan shall terminate on November 6, 2005. No option may be
granted during the term of any suspension of the Plan or after termination of
the Plan. The amendment or termination of the Plan shall not, without the
written consent of the option holder to be affected, alter or impair any rights
or obligations under any option theretofore granted to such option holder under
the Plan.
13. EFFECTIVE DATE
The effective date of the Plan shall be November 7,
1995, subject to its approval by shareholders of the Company not later than
November 7, 1996.
EXHIBIT 10.7
THIS LEASE ("Lease"), dated as of February 1, 1998, by and between
Edward M. Sellian ("Landlord"), having an office at 6794 SE Isle Way, Stuart,
Florida and NuCo2 Inc. ("Tenant") having an office at 2800 S.E. Marketplace,
Stuart, Florida 34997.
W I T N E S S E T H:
IN CONSIDERATION OF THE MUTUAL COVENANTS AND CONDITIONS CONTAINED
HEREIN, the parties hereby agree as follows:
1. DEMISED PREMISES: Landlord hereby leases to Tenant and Tenant
hereby takes and leases from Landlord, upon the terms and conditions hereinafter
set out, the property located at 2820 SE Market Place, Stuart, Florida and all
improvements located thereon, including, without limitation, the building (the
"Building"), together with all the rights and appurtenances thereunto
appertaining, [including, without limitation, the parking area on the sides and
rear of the Building up to the adjoining street and property line, as
appropriate], hereinafter collectively referred to as the "Premises", [said
premises being more particularly described on Exhibit A1].
2. Intentionally Deleted.
3. TERM: The term (the "Term") hereof shall commence on February 1,
1998(the "Commencement Date") and expire on January 21, 2003 (the "Expiration
Date").
4. EXTENSION OPTION: Tenant shall have the right, at its option, to
extend the term of this Lease for an additional term of five years (the
"Extension Option"), commencing from and after the expiration of the original
term, upon the same terms and conditions as are herein set forth.
<PAGE>
5. RENT: The rent (the "Rent") during the Term shall be $5,500.00
per month, due and payable on the first day of each month during the Term, made
payable to Landlord and delivered to Landlord at its address set forth above. If
the Commencement Date is not the first day of a calendar month, then the Rent
shall be prorated to the end of that calendar month.
6. SECURITY DEPOSIT: Tenant has this day deposited with Landlord the
sum of $0(the "Security Deposit") as security for the full and faithful
performance by Tenant of all the terms, covenants and conditions of this Lease
upon Tenant's part to be performed, which said sum (with interest) shall be
returned to Tenant after the time fixed as the expiration of the Term, provided
Tenant has fully and faithfully carried out all of said terms, covenants and
conditions on Tenant's part to be performed.
7. USE: The Premises are for the use and occupation by Tenant as
office and warehouse space and all related uses. In connection therewith, NuCo2
Inc. intends to use the Premises for the storage, sale and distribution of
Carbon Dioxide products for the restaurant industry.
8. ASSIGNMENT AND SUBLETTING: Tenant shall not assign this Lease or
sublet any portion of the Premises without the prior written consent of
Landlord, which consent shall not be unreasonably delayed or withheld.
Notwithstanding anything in this Lease to the contrary, including, without
limitation, the immediately preceding sentence, (a) Tenant may assign or
sublease part or all of the Premises without Landlord's consent to: (i) any
corporation or partnership that controls, is controlled by, or is in common
control with, Tenant; or (ii) any corporation resulting from the merger or
consolidation with Tenant or to any entity that acquires all of Tenant's assets
as a going concern of the business that is being conducted on the Premises, as
long as the assignee or sublessee is a bona fide entity and assumes the
obligations of Tenant, and (b) Tenant may assign, mortgage, encumber, pledge or
otherwise transfer its interest in this Lease to a lender and/or in connection
with any financing transaction. Notwithstanding anything in this Lease to the
contrary, a transfer of control of shares of Tenant shall not be deemed an
assignment or sublease of this Lease.
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<PAGE>
9. COMPLIANCE; QUIET ENJOYMENT; CONDITION: Landlord warrants and
represents that it is the fee simple title holder to the Premises. Landlord
further warrants and represents that it has full power and authority to lease
the Premises as herein provided. Landlord covenants and agrees with Tenant that
so long as Tenant keeps and performs all of the covenants and conditions on the
part of the Tenant to be kept and performed hereunder, Tenant shall have quiet,
undisturbed and continued possession of the Premises, 24 hours a day, 365 days a
year, free from any claims against Landlord and all persons claiming under, by
or through Landlord, during the Term and any renewal terms hereunder.
Landlord warrants and represents that on the
Commencement Date:
(a) all applicable laws, ordinances, regulations and
restrictive covenants permit the Premises to be used by
Tenant as described in Section 7 herein;
(b) the Premises will be in compliance with all
applicable laws, ordinances, rules and regulations of governmental authorities;
(c) the Premises shall be in broom clean condition;
(d) all utility services (including, without limitation,
natural gas, heat, light, power, three phase electrical
power, sewer service, telephone, and water) serving the
Premises are (1) sufficient for the Premises, (2) in
good working order, and (3) separately metered;
(e) the Premises are in good repair and the heating and
air conditioning units, the plumbing and electrical
systems as well as all mechanical systems, doors, locks
and windows are in good working order;
(f) the Taxes (as hereinafter defined) have been paid to
date;
(g) the Premises are free and clear of all mortgages,
liens, encumbrances, easements, restrictions, mortgages,
tenancies or right of any party to possess or occupy the
Premises; and
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<PAGE>
(h) there are (A) no common area charges or charges of
similar import, (B) no merchant association or similar
type of charges, and (iii) no taxes, charges, costs,
fees, or expenses to be incurred by, or imposed upon,
the Tenant other than those set forth in this Lease.
10. MAINTENANCE, REPAIRS, ALTERATIONS: (a) Tenant shall keep the
Premises in good repair; provided however, Landlord shall be responsible for
maintaining, repairing and replacing, the roof, exterior walls, structural
foundations, heating, ventilation and air conditioning systems, and sewage and
plumbing systems. Tenant shall permit no waste, damage or intentional injury to
the Premises. Subject to the terms hereof, Tenant shall surrender the same, on
the Expiration Date, in as good condition as received, normal wear and tear
excepted.
(b) Except as may otherwise be provided herein, Tenant will make no
material alterations in or to the Demised Premises without the written consent
of Landlord, said consent not to be unreasonably withheld or delayed.
11. IMPROVEMENTS: Tenant shall be permitted to install a copper pipe
(the "Pipe") through a wall in the Premises leading to the outdoors, in order to
facilitate the delivery of carbon dioxide products to the Tenant. Tenant shall
remove said pipe and restore said portion of the wall upon vacating the
Premises. Except for the Pipe and the Work, no material improvement or material
alteration of the Premises shall be made without the prior written consent of
Landlord, which consent shall not be unreasonably delayed or withheld.
12. INDEMNIFICATION OF LANDLORD: Tenant will indemnify and save
harmless Landlord from any damages or loss by reason of any breach, violation or
non-performance of any condition hereof on the part of Tenant. Tenant will
indemnify, protect and save harmless Landlord herein, from any loss, cost,
damage, or expense caused by injuries to persons or property, while in, on or
about the Premises. Notwithstanding anything in the Lease to the contrary,
including, without limitation, the immediately preceding two sentences, Landlord
shall be liable, and Tenant shall not indemnify or hold harmless Landlord, for
injuries to persons or damage to property sustained by Tenant or other persons
where such injury and damage is the result of the failure of Landlord to comply
with Landlord's obligations under the Lease or the result of the gross
negligence or wilful misconduct of Landlord, its employees, invitees, customers,
contractors, servants, licensees or agents.
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<PAGE>
13. ENTRY AND INSPECTION: Tenant shall permit Landlord or Landlord's
agents to enter upon the Premises at reasonable times and upon reasonable
notice, for the purpose of inspecting the same, and will permit Landlord, at
reasonable times and upon reasonable notice, within sixty (60) days prior to the
expiration of this Lease, to place upon the Premises a standard for "rent and/or
sale" sign, and permit persons desiring to lease or purchase the same to inspect
the Premises thereafter, at reasonable times and upon reasonable notice. In the
event of an emergency situation, Landlord shall be able to enter the Premises
without notice, but shall notify Tenant immediately thereafter if Tenant is not
in Premises upon Landlord's entry thereof.
14. NON-DISTURBANCE: If any mortgage, deed of trust or similar
security agreement (each such mortgage, deed of trust or security agreement
being hereinafter referred to as a "Mortgage") is placed on the Premises,
I.E.,becomes an encumbrance on the Premises, Landlord shall deliver a
non-disturbance agreement from the holder (the "Holder") of said Mortgage, said
non-disturbance agreement to provide that if no Event of Default exists under
this Lease, then, notwithstanding a default by Landlord under the Mortgage (a)
Tenant's possession of the Premises shall not be disturbed, and (b) the
obligations of Landlord (and its successors or assigns, including, without
limitation, the Holder) under this Lease shall remain unchanged.
15. TAXES: Tenant shall be required to pay(a) all real property
taxes, assessments or governmental charges levied or assessed against the
Premises and/or the Rent or any charges in lieu thereof; (b) any charge for
depreciation of the Building and any interest or other financing charge in
connection therewith; (c) any charge for Landlord's income, excise, profit,
franchise or any tax of similar nature that is or may be imposed in connection
with this Lease on Landlord or Tenant; (d) any sales tax of any nature relating
to this Lease imposed on Landlord or Tenant; and (e) any commercial rent tax or
other charges assessed against the Premises or in connection with this Lease
(items (a) - (e) being collectively referred to as the "Taxes").
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<PAGE>
16. UTILITIES: Tenant shall be responsible for the payment of all
utilities, including water, gas, electricity and heat delivered to the Premises.
Notwithstanding anything herein to the contrary, Landlord shall be responsible
and shall pay for, if not already done, bringing ("hooking up") all utilities
and utility services to the Premises.
17. INSURANCE: Tenant shall maintain at Tenant's expense public
liability insurance covering the Premises and operations of Tenant having limits
of liability of not less than $500,000 bodily injury per occurrence plus
$1,000,000 property damage per occurrence, or a combined single limit of
liability not less than $500,000 per occurrence. Tenant may carry any or all of
such insurance under blanket policies.
To the maximum extent permitted by insurance policies
which may be owned by Landlord or Tenant, Tenant and Landlord, for the benefit
of each other, waive any and all rights of subrogation which might otherwise
exist.
18. SIGNS: Tenant shall not construct any projecting sign or awning
without prior written consent of Landlord, which consent shall not be
unreasonably delayed or withheld.
19. CONDEMNATION: If the Premises, or any part thereof, shall be
taken or condemned for public use, and said taking or condemnation would prevent
or materially interfere with the use of the Premises for the purposes then being
used, then, Tenant shall have the option to terminate this Lease and, if Tenant
exercises said option, the terms hereby granted and all rights and obligations
of Tenant hereunder shall immediately cease and terminate, except that the Rent
shall be adjusted as of the date of such termination of the Lease.
If this Lease is not terminated pursuant to the
immediately foregoing paragraph, this Lease shall continue in full force and
effect, but the Rent shall be adjusted as of the time of such taking to
equitably reflect the change in the size of the remaining property. In the event
of such taking, Landlord and Tenant shall each be entitled to receive and retain
such separate awards as may be allocated to their respective interest in any
condemnation proceeding.
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<PAGE>
20. TRADE FIXTURES: Any and all improvements made to the Premises
during the term hereof shall belong to the Landlord, except trade fixtures of
the Tenant. Notwithstanding anything to the contrary in the Lease, including,
without limitation, the immediately preceding sentence, Tenant shall have the
right to remove its furniture, equipment, furnishing, trade fixtures, tangible
and intangible personal property at any time during, and after expiration of,
the Term at its sole discretion and none of the foregoing items shall ever be
deemed to be the property of Landlord, but Tenant shall repair or pay for all
repairs necessary for damages to the Premises occasioned by the foregoing
described removal. Furthermore, Landlord hereby waives any and all liens it has
or may hereinafter have on Tenant's furniture, equipment, furnishings, trade
fixtures, tangible and intangible personal property.
21. DESTRUCTION OF PREMISES: In the event of a destruction of the
Premises, or part thereof, during the term hereof, from any cause, Landlord
shall forthwith repair the same, provided that such repairs can be made within
sixty (60) days under existing governmental laws and regulations, but such
destruction shall not terminate this Lease, except that Tenant shall be entitled
to a proportionate reduction of Rent while such repairs are being made, based
upon the extent to which the said destruction and the making of such repairs
shall interfere with the business of Tenant on the Premises. If such repairs
cannot be made within said sixty (60) days, then this Lease may be terminated at
the option of either party. If (a) the repairs can be made within 60 days, and
(b) Landlord has undertaken said repairs, then, if said repairs are not complete
within said 60 days, Tenant may terminate this Lease.
22. INSOLVENCY: In the event a receiver is appointed to take over
the business of Tenant, or in the event Tenant makes a general assignment for
the benefit of creditors, or Tenant takes or suffers any action under any
solvency or bankruptcy act, and any of the same shall not be reversed or
dismissed within sixty days from the date thereof, then such event shall
constitute an Event of Default (as defined herein).
23. REMEDIES OF OWNER ON DEFAULT: In the event any material breach
of this Lease by Tenant is not cured within ten business days after Tenant
receives notice thereof from Landlord, such breach shall be an event of default
("Event of Default") and Landlord shall have the right to:
(a) annul and terminate this Lease, and thereupon re-enter and take
possession of the Premises; or
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<PAGE>
(b) re-enter and re-let the Premises from time to time, as agents of
Tenant, and such re-entry and/or re-letting shall not discharge
Tenant from any liability or obligations hereunder, except that
rents collected as a result of such re-letting shall be a credit on
Tenant's liability for rents under the terms of this Lease.
Notwithstanding anything herein to the contrary, the failure of
Tenant to cure any material breach of this Lease within said ten
business days shall not be an Event of Default if such breach cannot
be cured within said ten business days and Tenant is diligently
pursuing the remedy of said breach.
24. Intentionally Deleted.
25. ATTORNEY'S FEES: In case suit should be brought for recovery of
the Premises, or for any sum due hereunder, or because of any act which may
arise out of the possession of the Premises, by either party, the prevailing
party shall be entitled to all costs incurred in connection with such action,
including a reasonable attorney's fee.
26. WAIVER: No failure of Landlord to enforce any term hereof shall
be deemed to be a waiver.
27. NOTICES: All notices, request, demands and other communications
which are required or may be given under this Lease shall be in writing and
shall be deemed to have been duly given when delivered (a) personally, (b) by
nationally recognized overnight courier, or (c) by registered or certified mail,
return receipt requested, postage prepaid, in any case, with receipt
acknowledged:
(a) If to Tenant to:
NuCo2 Inc.
2800 S.E. Market Place
Stuart, Florida 34997
Attention: Robert Ranieri
(b) If to Landlord to:
Edward M. Sellian
6794 SE Isle Way
Stuart, FL 34996
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<PAGE>
or to any such other address as any party shall have specified by notice in
writing to the other in compliance with this Section.
28. HOLDING OVER: If Tenant continues to occupy the Premises after
the expiration of the Term or after a forfeiture, then Tenant shall continue as
a tenant under the terms of the Lease (except as to duration) from month to
month and each holding over thereafter shall in like manner create and cause a
similar extension of this Lease from month to month.
29. SUCCESSORS IN INTEREST: Every provision hereof applicable to
Landlord and every provision hereof applicable to Tenant shall also bind, apply
to and run in favor of "their respective successors in interest, heirs,
executors, administrators or personal representatives" as fully as if said
quoted words were inserted after the word "Landlord" and "Tenant" wherever they
appear herein, except that this provision shall not permit the assignment of the
Lease, or subleasing of the Premises except on the conditions here imposed.
30. ENVIRONMENTAL: Tenant shall have no obligation, liability or
responsibility with respect to any environmental liability pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, and the regulations promulgated thereunder and all other applicable
federal, state and local laws, rules and regulations, which results from the
business or operations of Landlord at the Premises on or prior to the date
hereof or after the expiration of this lease or which results from the acts or
omissions of anyone other than Tenant, Tenant's employees, agents or invitees.
31. RECORDING: Either party hereto may record a memorandum
evidencing the existence of this Lease, said memorandum to contain information
customary for memoranda evidencing similar leased premises in ______________.
Each party hereto agrees to timely execute such a memorandum if requested by the
other party.
32. COUNTERPART: This Lease may be executed in counterpart, each of
which shall be deemed an original and all of which, together, shall be deemed to
be the same instrument.
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<PAGE>
33. RIDERS: All riders attached hereto are by reference made a part
hereof and any terms or conditions of such rider, in conflict or inconsistent
with this printed lease, shall supersede and control.
34. CAPTIONS: The captions in the margin of this Lease are for
convenience only and are not a part of this Lease and do not in any way limit or
amplify the terms and provisions of this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed
this Lease as of the date first above set forth.
/S/ EDWARD M. SELLIAN
-------------------------------
, Landlord
NUCO2 INC., Tenant
By:/S/ ROBERT RANIERI
----------------------
Name:
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EXHIBIT 10.9
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of October 31, 1997 (the
"AGREEMENT") by and among (a) NUCO2 INC., a Florida corporation (the "COMPANY"),
(b) SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION, a national banking
association ("SUNTRUST") and any other banks or other lending institutions that
are or will become parties to this Agreement (collectively, the "LENDERS" and
individually, a "LENDER"), and (c) SUNTRUST BANK, SOUTH FLORIDA, NATIONAL
ASSOCIATION, as agent for the Lenders (in such capacity, the "AGENT").
W I T N E S S E T H :
WHEREAS, the Company has requested, and SunTrust and the Lenders
have agreed to commit to a revolving credit facility to the Company on the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, for and in consideration of the sum of $10.00 in
hand paid by SunTrust and the Lenders to the Company, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. In addition to the other terms defined
herein, the following terms used herein shall have the meanings herein specified
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"ADDITIONAL GUARANTOR" shall have the meaning assigned to such term
in Section 5.13(a).
"ADVANCE" shall mean any advance by a Lender under the Commitments.
"AGENT" shall mean SunTrust Bank, South Florida, National
Association, as agent for the Lenders hereunder and under the other Loan
Documents, and each successor agent.
<PAGE>
"AGENT FEE" shall mean the administrative fee described in the
Commitment Letter, payable on the Closing Date and thereafter annually in
advance to the Agent during the period prior to the Commitment Termination
Date.
"AFFILIATE" shall mean, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, such first Person. A
Person shall be deemed to control another Person if such first Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall mean this Revolving Credit Agreement, either as
originally executed or as hereafter amended, restated, renewed, extended,
supplemented or otherwise modified from time to time.
"ANNUALIZED EBITDA" shall mean EBITDA for the fiscal quarter ending
on the last day of such quarter, MULTIPLIED BY four.
"APPLICABLE COMMITMENT FEE PERCENTAGE" shall mean the percentage
designated below based on the Company's Senior Funded Debt to Annualized
EBITDA ratio for each fiscal quarter-end, as indicated below:
Senior Funded Debt to Applicable Commitment
Annualized EBITDA Ratio Fee Percentage
Less than 1.50:1.0 0.1875%
Greater than or equal to 1.50:1.0 0.25%
and less than 2.25:1.0
Greater than or equal to 2.25:1.0 0.375%
and less than 3.00:1.0
Greater than or equal to 3.00:1.0 0.50%
Until the first quarterly pricing adjustment, the Applicable Commitment Fee
Percentage shall be 0.375%, PROVIDED, HOWEVER, that if, subsequent to the
Closing Date but prior to making the first quarterly pricing adjustment,
the Company closes and lenders fund a subordinated debt issue of at least
$15,000,000, on terms and conditions satisfactory to the Agent and the
Lenders, the Applicable Commitment Fee Percentage will be reduced to 0.25%.
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<PAGE>
"APPLICABLE LAW" shall mean, anything in Section 10.05
notwithstanding, (i) all applicable common law and principles of
equity and (ii) all applicable provisions of all (a) constitutions,
statutes, rules, regulations and orders of governmental bodies, (b)
Governmental Approvals, and (c) orders, decisions, judgments and
decrees of all courts and arbitrators.
"APPLICABLE MARGIN" shall mean the percentage designated
below based on the Company's Senior Funded Debt to Annualized EBITDA
ratio for each fiscal quarter-end, as indicated below:
Senior Funded Debt to Applicable Margin Applicable Margin
Annualized EBITDA Ratio (LIBOR Advance) (Base Rate Advance)
Less than 1.50:1.0 1.25% 0.00%
Greater than or equal to 1.50:1.0 1.75% 0.00%
and less than 2.25:1.0
Greater than or equal to 2.25:1.0 2.25% 0.00%
and less than 3.00:1.0
Greater than or equal to 3.00:1.0 2.75% 0.50%
Until the first quarterly pricing adjustment, the Applicable Margin on LIBOR
Advances and Base Rate Advances shall be 2.25% and 0.00% respectively,
PROVIDED, HOWEVER that if, subsequent to the Closing Date but prior to
making the first quarterly pricing adjustment, the Company closes and
lenders fund a subordinated debt issue of at least $15,000,000, on terms and
conditions satisfactory to the Agent and the Lenders, the Applicable Margin
on LIBOR Advances will be reduced to 1.75%.
"ASSET VALUE" shall mean, with respect to any property or
asset of the Company or any of its Subsidiaries as of any particular date,
an amount equal to the greater of (i) the then book value of such property
or asset as established in accordance with GAAP, and (ii) the then fair
market value of such property or asset as determined in good faith by the
board of directors of the Company or such Subsidiary.
"ASSIGNMENT AGREEMENT" shall mean an agreement in the form of
EXHIBIT J.
"ASSIGNMENT OF LEASES" shall mean that certain Assignment of
Leases agreement, dated as of the date hereof, executed by the Company and
each Subsidiary in favor of the Agent, assigning the Company's and each
Subsidiary's lessee's interest in any leasehold (except those leaseholds
whose terms prohibit assignments), as the same may be hereafter amended,
restated, renewed, extended, supplemented or otherwise modified from time to
time.
"AVAILABILITY" shall mean, with respect to any Commitment, at
any time, the amount by which such Commitment exceeds all Advances
outstanding under such Commitment.
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<PAGE>
"BANKRUPTCY LAW" shall mean laws governing bankruptcy,
suspension of payments, reorganization, arrangement, adjustment of debts,
relief of debtors, dissolution, or other similar laws relating to the
enforcement of creditors' rights generally.
"BASE RATE" shall mean the higher of (i) the rate which
SunTrust designates from time to time as its prime lending rate, as in
effect from time to time, and (ii) the Federal Funds rate, as in effect from
time to time, plus one-half of one percent (2%) per annum (any changes in
such rates to be effective as of the date of any change in such rate). The
SunTrust prime lending rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. SunTrust
may make commercial loans or other loans at rates of interest at, above, or
below the SunTrust prime lending rate.
"BASE RATE ADVANCE" shall mean any advance made to the Company
by the Lenders at an interest rate equal to the Base Rate PLUS the
Applicable Margin for such advance.
"BORROWING" shall mean a borrowing under the Commitments
consisting of simultaneous Advances by the Lenders, including Swing Line
Borrowings.
"BUSINESS DAY" shall mean a day of the year other than
Saturday, Sunday or any other day on which the Agent is required to close.
"CAPITAL EXPENDITURES" shall mean, for any period,
expenditures made by the Company and its Subsidiaries to acquire or
construct fixed assets, property, plant and equipment (including renewals,
improvements and replacements, but excluding repairs) during such period
computed in accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act (42 U.S.C. ' 9601 ET SEQ.).
A "CHANGE IN CONTROL" shall be deemed to have occurred if (a)
any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Exchange Act) shall become the "beneficial owner(s)" (as defined in
said Rule 13d-3) of more than forty percent (40%) of the shares of the
outstanding common stock of the Company entitled to vote for members of the
Company's board of directors; (b) a majority of the seats (other than vacant
seats) on the board of directors of the Company shall at any time be
occupied by persons who were neither (i) nominated by the board of directors
of the Company, nor (ii) appointed by directors so nominated; (c) any event
or condition shall occur or exist which requires or permits the holder(s) of
Indebtedness of the Company to require that such Indebtedness be redeemed,
repurchased, defeased, prepaid or repaid, in whole or in part, or the
maturity of such Indebtedness to be accelerated in any respect as a result
of a change in control provision of such Indebtedness; or (d) any person or
group (other than the group in control of the Company on the date hereof)
shall otherwise directly or indirectly control the Company.
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<PAGE>
"CLOSING DATE" shall mean October 31, 1997.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"COLLATERAL" shall mean all real and personal property and
assets, now or hereafter existing, of the Company and its Subsidiaries over
which the Company or such Subsidiary has granted a Lien to the Agent
pursuant to the Security Documents, and all proceeds and products thereof.
"COMMITMENT" shall mean, for any Lender at any time, the
aggregate revolving credit facility severally established by such Lender in
favor of the Company pursuant to Section 2.01, including, without
duplication, in the case of SunTrust, the Swing Line, as the same may be
increased or decreased from time to time as a result of any reduction
thereof pursuant to Section 2.04, any assignment thereof pursuant to Section
10.08, or any amendment thereof pursuant to Section 10.02.
"COMMITMENT FEE" shall have the meaning set forth in Section
2.10(c).
"COMMITMENT LETTER" means that certain Letter Agreement, dated
as of September 16, 1997, executed by SunTrust and SunTrust Capital Markets,
Inc., and accepted and agreed to by the Company.
"COMMITMENT TERMINATION DATE" shall have the meaning set forth
in Section 2.01.
"COMMITTED AMOUNT" shall mean, with respect to any Facility,
the maximum principal amount of such Facility committed by the Lenders or
any of them, including any portion of the Committed Amount of such Facility
in which such Lender has purchased a participation as permitted by this
Agreement and excluding any portion of the Committed Amount of such Facility
in which such Lender has sold a participation as permitted by this
Agreement, as such amount may be reduced from time to time.
"COMPANY PLEDGE AGREEMENT" shall mean that certain Stock and
Notes Pledge Agreement (Company), dated as of the date hereof, executed by
the Company in favor of the Agent, as hereafter amended, restated,
supplemented or otherwise modified from time to time.
"COMPANY SECURITY AGREEMENT" shall mean that certain Security
Agreement (Company), dated as of the date hereof, executed by the Company in
favor of the Agent, as hereafter amended, restated, supplemented or
otherwise modified from time to time.
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"COMPANY TRADEMARK SECURITY AGREEMENT" shall mean that certain
Trademark Security Agreement (Company), dated as of the date hereof,
executed by the Company in favor of the Agent, as hereafter amended,
restated, supplemented or otherwise modified from time to time.
"CONSOLIDATED COMPANIES" shall mean, collectively, the Company
and all of its Subsidiaries.
"CONSOLIDATED EBIT" shall mean, for any fiscal period of the
Company, an amount equal to the sum of (a) Consolidated Net Income (Loss),
PLUS (b) to the extent deducted in determining Consolidated Net Income
(Loss), (i) provisions for taxes based on income of the Company and its
Subsidiaries determined on a consolidated basis in accordance with GAAP,
(ii) Interest Expense, and (iii) extraordinary items determined according to
GAAP.
"CONSOLIDATED NET INCOME (LOSS)" shall mean, for any fiscal
period of the Company, the net income (or loss) of the Company and its
Subsidiaries determined on a consolidated basis for such period (taken as a
single accounting period), in accordance with GAAP.
"CONSOLIDATED NET WORTH" shall mean, as of the date of
determination, the total shareholders' equity of the Company and its
Subsidiaries, determined in accordance with GAAP.
"CONTRACTUAL OBLIGATIONS" of any Person shall mean any
provision of any security issued by such Person or of any agreement,
instrument or undertaking under which such Person is obligated or by which
it or any of its property is bound.
"CONTRIBUTION AGREEMENT" shall mean that certain Contribution
Agreement, dated as of the date hereof, executed by the Company and each of
the Guarantors, substantially in the form of EXHIBIT E attached hereto, as
hereafter amended, restated, supplemented or otherwise modified from time to
time.
"DEFAULT" shall mean any event that, with the giving of
notice, or lapse of time, or both, would constitute an Event of Default.
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"EBITDA" shall mean, for any fiscal period of the Company, an
amount equal to the sum of Consolidated EBIT plus (i) depreciation and
amortization expenses to the extent deducted in determining such
Consolidated EBIT as determined on a consolidated basis in accordance with
GAAP, and (ii) the historical Consolidated EBITDA of any Person for such
period which accrued prior to the date such Person became a Subsidiary of
the Company or was merged into or consolidated with the Company or any of
its Subsidiaries or such Person's assets were acquired by the Company or any
of its Subsidiaries (and the underlying records of such Person shall be
audited to the extent the Company is required pursuant to Regulation S-X of
the SEC to present audited financial information for such Person in
documents filed by it with the SEC). If audited financial records are not
available for acquired companies, pro-forma financial statements (subject to
review and acceptance by the Required Lenders) will be substituted.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and
foreign statutes and codes or regulations, rules or ordinances issued,
promulgated, or approved thereunder, now or hereafter in effect (including,
without limitation, those with respect to asbestos or asbestos containing
material or exposure to asbestos or asbestos containing material), relating
to pollution or protection of the environment and relating to public health
and safety, relating to (i) emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial toxic or
hazardous constituents, substances or wastes, including without limitation,
any Hazardous Substance (as such term is defined under CERCLA), petroleum
including crude oil or any fraction thereof, any petroleum product or other
waste, chemicals or substances regulated by any Environmental Law into the
environment (including without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), or (ii) the manufacture,
processing, distribution, use, generation, treatment, storage, disposal,
transport or handling of any Hazardous Substance (as such term is defined
under CERCLA), petroleum including crude oil or any fraction thereof, any
petroleum product or other waste, chemicals or substances regulated by any
Environmental Law, and (iii) underground storage tanks and related piping,
and emissions, discharges and releases or threatened releases therefrom,
such Environmental Laws to include, without limitation (i) the Clean Air Act
(42 U.S.C. ' 7401 ET SEQ.), (ii) the Clean Water Act (33 U.S.C. ' 1251 ET
SEQ.), (iii) the Resource Conservation and Recovery Act (42 U.S.C. ' 6901 ET
SEQ.), (iv) the Toxic Substances Control Act (15 U.S.C. ' 2601 ET SEQ.) and
(v) CERCLA.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 and all rules and regulations promulgated pursuant thereto, as the
same may from time to time be supplemented or amended.
"ERISA AFFILIATE" shall mean any trade or business (whether
incorporated or unincorporated) which together with the Company is treated
as a single employer under Section 414(b), (c), (m) or (o) of the Code.
"EVENT OF DEFAULT" shall have the meaning set forth in Article
VIII.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and any successor statute thereto.
"EXECUTIVE OFFICER" shall mean each of the executive officers
of the Company and any Person hereafter holding the following office or
offices which, individually or collectively, are assigned substantially
similar duties: Chairman, Chief Executive Officer, President, Chief
Financial Officer, Executive Vice President, Chief Operating Officer, and
Vice President of Administration.
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"EXISTING CREDIT AGREEMENT" shall mean that certain $30
million Revolving Credit Agreement, dated as of December 22, 1995, by and
between the Company and NationsBank of Florida, N.A.
"FACILITIES" shall mean, collectively, the Commitments
described hereunder.
"FEDERAL FUNDS RATE" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of Atlanta, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by it.
"FEES" shall mean, collectively, the Agent Fee and the
Commitment Fee.
"FIXED CHARGE COVERAGE RATIO" shall mean, for any fiscal
period of the Company, the ratio of (a) (1) EBITDA for the fiscal period
ending on the last day of such period, PLUS (2) Rent Expense for the fiscal
period ending on the last day of such period, MINUS (3) Maintenance Capital
Expenditures for the fiscal period ending on the last day of such period, to
(b) Fixed Charges for the fiscal period ending on the last day of such
period.
"FIXED CHARGES" shall mean consolidated interest expense for
the period of determination (including both capitalization and
non-capitalized interest and the interest component of Capital Leases) plus
minimum rent expenses under operating leases for such period, calculated on
a consolidated basis in accordance with GAAP plus 4% of quarter end
outstanding Borrowings under this Agreement.
"GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession in the United States of America, which are
applicable to the circumstances as of the date of determination.
"GOVERNMENTAL APPROVAL" shall mean any order, permission,
authorization, consent, approval, license, franchise, permit or validation
of, exemption by, registration or filing with, or report or notice to, any
governmental agency or unit, or any public commission, board or authority.
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"GUARANTOR PLEDGE AGREEMENT" shall mean that certain Stock and
Notes Pledge Agreement (Guarantors), dated as of the date hereof, executed
by each Guarantor in favor of the Agent, as hereafter amended, restated,
supplemented or otherwise modified from time to time.
"GUARANTOR SECURITY AGREEMENT" shall mean that certain
Security Agreement (Guarantors), dated as of the date hereof, executed by
each Guarantor in favor of the Agent, as hereafter amended, restated,
supplemented or otherwise modified from time to time.
"GUARANTOR TRADEMARK SECURITY AGREEMENT" shall mean that
certain Trademark Security Agreement (Guarantors), dated as of the date
hereof, executed by each Guarantor in favor of the Agent, as hereafter
amended, restated, supplemented or otherwise modified from time to time.
"GUARANTORS" shall mean, collectively, each Subsidiary of the
Company that has executed a Guaranty Agreement as of the Closing Date,
together with all other Subsidiaries that hereafter execute a Guaranty
Agreement, and their respective successors and permitted assigns.
"GUARANTOR" shall mean any of the Guarantors.
"GUARANTY AGREEMENT" shall mean that certain Guaranty
Agreement, dated as of the date hereof, executed by each of the Guarantors
in favor of the Lenders and the Agent, substantially in the form of EXHIBIT
D attached hereto, as hereafter amended, restated, supplemented or otherwise
modified from time to time.
"GUARANTY DOCUMENTS" shall mean, collectively, the Guaranty
Agreement, and each other guaranty agreement, mortgage, deed of trust,
assignment of lease, security agreement, pledge agreement, or other security
or collateral document guaranteeing or securing the Obligations, as the same
may be amended, restated, or supplemented from time to time, and the
Contribution Agreement executed by each of the Guarantors, as the same may
be amended, restated or supplemented from time to time.
"GUARANTY OBLIGATIONS" shall mean the obligation of the
Guarantors to the Lenders and the Agent, as set forth in the Guaranty
Agreement.
"HARSCO ARRANGEMENT" shall mean the Company's currently
contemplated financing arrangement with Taylor-Wharton Gas Equipment
division of Harsco Corporation, a Delaware corporation ("HARSCO"), or any
other current or future subsidiaries of Harsco.
"HAZARDOUS SUBSTANCE" shall have the meaning assigned to that
term in CERCLA.
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"INDEBTEDNESS" shall mean (i) indebtedness for borrowed money
or for the deferred purchase price of property or services (other than trade
accounts payable on customary terms in the ordinary course of business),
(ii) financial obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) financial obligations as lessee under leases
which shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (iv) financial
obligations as the issuer of capital stock redeemable in whole or in part at
the option of any Person other than such issuer, at a fixed and determinable
date or upon the occurrence of an event or condition not solely within the
control of such issuer, (v) all obligations (contingent or otherwise) with
respect to interest rate and currency leasing agreements, (vi) reimbursement
obligations (contingent or otherwise) with respect to amounts under letters
of credit, bankers acceptances and similar instruments, (vii) financial
obligations under purchase money mortgages, (viii) financial obligations
under asset securitization vehicles, (ix) conditional sale contracts and
similar title retention instruments with respect to property acquired, and
(x) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
financial obligations of others of the kinds referred to in clauses (i)
through (ix) above, except to the extent such guaranties are limited to a
lesser amount.
"INTEREST EXPENSE" shall mean, for any fiscal period of the
Company, total interest expense (including, without limitation, interest
expense attributable to capitalized leases in accordance with GAAP) of the
Company and its Subsidiaries, on a consolidated basis, for such period.
"INTEREST PERIOD" shall mean (i) as to any LIBOR Advance, the
interest period selected by the Company pursuant to Section 2.12(a), and
(ii) as to any Base Rate Advance, the interest period requested by the
Company and agreed to by the participating Lenders pursuant to Section
2.12(b), and (iii) as to any Swing Rate Advance, the interest period
requested by the Company and agreed to by SunTrust pursuant to Section 2.03.
"INVESTMENT" shall mean, when used with respect to any Person,
any direct or indirect advance, loan or other extension of credit (other
than the creation of receivables in the ordinary course of business) or
capital contribution by such Person (by means of transfers of property to
others or payments for property or services for the account or use of
others, or otherwise) to any Person, or any direct or indirect purchase or
other acquisition by such Person of, or of a beneficial interest in, capital
stock, partnership interests, bonds, notes, debentures or other securities
issued by any other Person.
"LENDERS" shall have the meaning set forth in the first
paragraph of this Agreement.
"LENDING OFFICE" shall mean for each Lender the office such
Lender may designate in writing from time to time to the Company and the
Agent with respect to Base Rate Advances and LIBOR Advances.
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"LIBOR" shall mean, for any Interest Period, the offered rates
for deposits in U.S. dollars for a period comparable to the Interest Period
appearing on the Reuters Screen LIBOR Page as of 11:00 a.m., London time, on
the day that is two London banking days prior to the Interest Period. If at
least two such rates appear on the Reuters Screen LIBOR Page, the rate for
that Interest Period will be the arithmetic mean of such rates, and in
either case as such rates may be adjusted for any applicable reserve
requirements.
"LIBOR ADVANCE" shall mean any advance made to the Company by
the Lenders at an interest rate equal to LIBOR PLUS the Applicable Margin
for such advance.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien, assignment or charge of any kind or description and shall
include, without limitation, any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof including any lease or similar arrangement with a public authority
executed in connection with the issuance of industrial development revenue
bonds or pollution control revenue bonds, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code (or
comparable law) of any jurisdiction naming the owner of the asset to which
such lien applies as a debtor (other than a filing which does not evidence
an outstanding secured obligation, or a commitment to make advances or to
incur any other obligation of any kind).
"LOAN DOCUMENTS" shall mean this Agreement, each Exhibit and
Schedule to this Agreement, the Notes, the Swing Line Note, the Guaranty
Documents, the Security Documents, and each other document, instrument,
certificate and opinion executed and delivered in connection with the
foregoing, each as amended, restated, supplemented or otherwise modified
from time to time as provided in Section 10.02.
"MAINTENANCE CAPITAL EXPENDITURES" shall mean Capital
Expenditures other than Capital Expenditures made (i) in connection with any
business expansion of the Company and any of its Subsidiaries, (ii) in
connection with any Investment made by the Company after the Closing Date,
or (iii) in connection with any other acquisition or business expansion by
the Company and any of its Subsidiaries.
"MARGIN REGULATIONS" shall mean Regulation G, Regulation T,
Regulation U and Regulation X of the Board of Governors of the Federal
Reserve System, as the same may be in effect from time to time.
"MATERIALLY ADVERSE EFFECT" shall mean a materially adverse
change in the operations, business, property or assets of, or in the
condition (financial or otherwise) of, the Company and its Subsidiaries,
taken as a whole.
"MAXIMUM PERMISSIBLE RATE" shall mean, with respect to
interest payable on any amount, the rate of interest on such amount that, if
exceeded, could, under Applicable Law, result in (i) civil or criminal
penalties being imposed on any Lender or (ii) any Lender being unable to
enforce payment of (or if collected, to retain) all or part of such amount
or the interest payable thereon.
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"MINIMUM NET WORTH" shall have the meaning set forth in
Section 7.04 hereof.
"MORTGAGED PROPERTY" shall mean, collectively, all parcels of
real property owned or leased by the Company or any of its Subsidiaries
which is subject to a Mortgage or which is assigned under an Assignment of
Leases.
"MORTGAGES" shall mean, collectively, all of the mortgages,
deeds of trust or deeds to secure debt hereafter executed in favor of the
Agent by the Company or any Subsidiary, as the same may be hereafter
amended, restated, renewed, extended, supplemented or otherwise modified
from time to time.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA as to which the Company, any
Subsidiary or any ERISA Affiliate is obligated to make, has made, or will be
obligated to make contributions on behalf of participants who are or were
employed by any of them.
"NET WORTH" shall mean, at any date, the net worth of the
Consolidated Companies, determined in accordance with GAAP as determined on
such date.
"NOTE" shall mean a promissory note of the Company payable to
the order of any Lender in substantially the form of EXHIBIT A hereto,
evidencing the maximum aggregate principal indebtedness of the Company to
such Lender under such Lender's Commitment, either as originally executed or
as it may be from time to time supplemented, modified, amended, renewed or
extended. The term "Note" shall include any Swing Line Note, unless the
context otherwise requires.
"NOTICE OF BORROWING" shall have the meaning set forth in
Section 2.02(a) hereof.
"NOTICE OF INTEREST RATE CONVERSION" shall have the meaning
set forth in Section 2.02(b) hereof.
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"OBLIGATIONS" shall mean all amounts owing to the Agent or any
Lender pursuant to the terms of this Agreement or any other Loan Document,
including without limitation, all Advances (including all principal and
interest payments due thereunder), Fees, expenses, indemnification and
reimbursement payments, indebtedness, liabilities, and obligations of the
Company and its Subsidiaries, covenants and duties of the Company to the
Lenders and the Agent of every kind, nature and description, direct or
indirect, absolute or contingent, due or not due, in contract or tort,
liquidated or unliquidated, arising under this Agreement or under the other
Loan Documents, by operation of law or otherwise, now existing or hereafter
arising or whether or not for the payment of money or the performance or the
nonperformance of any act, including, but not limited to, all debts,
liabilities and obligations owing by the Company to others which the Lenders
may have obtained by assignment or otherwise, and all damages which the
Company may owe to the Lenders and the Agent by reason of any breach by the
Company of any representation, warranty, covenant, agreement or other
provision of this Agreement or of any other Loan Document.
"OTHER CLAIM" shall have the meaning set forth in Section 5.07
hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any successor thereto.
"PERSON" shall mean an individual, corporation, partnership,
trust, limited liability company or unincorporated organization, a
government or any agency or political subdivision thereof.
"PLAN" shall mean any employee benefit plan, program,
arrangement, practice or contract, maintained by or on behalf of the Company
or an ERISA Affiliate, which provides benefits or compensation to or on
behalf of employees or former employees, whether formal or informal, whether
or not written, including but not limited to the following types of plans:
(i) EXECUTIVE ARRANGEMENTS - any bonus, incentive
compensation, stock option, deferred compensation, commission,
severance, "golden parachute", "rabbi trust", or other
executive compensation plan, program, contract, arrangement or
practice;
(ii) ERISA PLANS - any "employee benefit plan" as
defined in ERISA, including, but not limited to, any defined
benefit pension plan, profit sharing plan, money purchase
pension plan, savings or thrift plan, stock bonus plan,
employee stock ownership plan, Multiemployer Plan, or any
plan, fund, program, arrangement or practice providing for
medical (including post-retirement medical), hospitalization,
accident, sickness, disability, or life insurance benefits;
(iii) OTHER EMPLOYEE FRINGE BENEFITS - any stock
purchase, vacation, scholarship, day care, prepaid legal
services, severance pay or other fringe benefit plan, program,
arrangement, contract or practice.
"PRO RATA SHARE" shall mean, for any Lender, with respect to
the Facilities (whether one or more), the proportion expressed as a
percentage equal to (1) the sum of such Lender's portion of the Committed
Amounts of such Facilities (including, without duplication, any portion of
the Committed Amounts of such Facilities in which such Lender has purchased
a participation and excluding, without duplication, any portion of the
Committed Amounts of such Facilities in which such Lender has sold a
participation), divided by (2) the sum of the Committed Amounts of such
Facilities.
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"REGULATION U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from time to time, and
any regulation successor thereto.
"RENT EXPENSE" shall mean all expenses for the rental of all
property, real or personal, by the Company and any of its Subsidiaries,
determined in accordance with GAAP.
"REQUIRED LENDERS" shall mean Lenders whose combined Pro Rata
Shares as of the Closing Date of the Facilities are at least sixty-six and
two-thirds percent (66 2/3%) of the Committed Amounts of such Facilities.
"SECURITY DOCUMENTS" shall mean, collectively, the Mortgage,
the Assignment of Leases, the Company Pledge Agreement, the Company Security
Agreement, the Company Trademark Security Agreement, the Guarantor Pledge
Agreement, the Guarantor Security Agreement, the Guarantor Trademark
Security Agreement, all UCC financing statements and fixture filings naming
the Company or any of its Subsidiaries as debtor and the Agent as secured
party, all stock certificates evidencing shares of stock pledged to the
Agent, together with undated stock powers or other appropriate instruments
of transfer executed in blank, and all filings in the U.S. Patent and
Trademark Office which are required to be made under the Loan Documents.
"SENIOR DEBT COVERAGE RATIO" shall mean, for any fiscal period
of the Company, the ratio of (a) Senior Funded Debt as of the last day of
such fiscal period to (b) Annualized EBITDA.
"SENIOR DEBT LEVERAGE RATIO" shall mean, for any fiscal period
of the Company, the ratio of (a) Senior Funded Debt as of the last day of
such fiscal period to (b) Total Capitalization as of the last day of such
fiscal period.
"SENIOR FUNDED DEBT" shall mean all indebtedness for money
borrowed, purchase money mortgages, capitalized leases, outstandings under
asset securitization vehicles, conditional sales contracts and similar title
retention debt instruments, including any current maturities of such
indebtedness, which by its terms matures more than one year from the date of
any calculation thereof and/or which is renewable or extendable at the
option of the obligor to a date beyond one year from such date to include
any debt outstanding under the Harsco Arrangement, on such terms as shall be
acceptable to the Lenders.
"SENIOR SUBORDINATED DEBT OFFERING" shall mean the offering of
senior Subordinated Debt, as described in that certain Senior Subordinated
Note Purchase Agreement, dated as of October 31, 1997, between the Company
and the Guarantors and the Investors listed therein.
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"SUBORDINATED DEBT" shall mean all Indebtedness of the Company
subordinated to all obligations of the Company arising under this Agreement,
the Notes, and the Swing Line Note, on terms and conditions satisfactory in
all material respects to the Agent and the Required Lenders, including
without limitation, with respect to interest rates, payment terms,
maturities, amortization schedules, covenants, defaults, remedies, and
subordination provisions, as evidenced by the written approval of the Agent
and Required Lenders.
"SUBSIDIARY" of any Person shall mean any corporation,
partnership or other Person of which a majority of all the outstanding
capital stock (including director's qualifying shares) or other securities
or ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions is, at
the time as of which any such determination is being made, directly or
indirectly owned by such Person, or by one or more of the Subsidiaries of
such Person, and which corporation, partnership or other Person is
consolidated with such Person for financial reporting purposes. Unless
otherwise specified, "Subsidiaries" and "Subsidiary" shall mean the
Subsidiaries and a Subsidiary, respectively, of the Company.
"SUPPLEMENTAL DOCUMENTS" shall mean the supplements to the
following documents: the Guaranty Agreement, the Contribution Agreement, the
Guarantor Security Agreement, the Guarantor Pledge Agreement and the
Guarantor Trademark Security Agreement, as such supplements are more
specifically described and shown in each respective document.
"SWING LINE" shall have the meaning assigned to such term in
Section 2.03(a).
"SWING LINE ADVANCE" shall mean a Borrowing pursuant to
Section 2.03 consisting of a Swing Line Loan made by SunTrust to the Company
on the same date and interest rate basis.
"SWING LINE BORROWING" shall mean a Borrowing consisting or to
consist of a Swing Line Advance.
"SWING LINE BORROWING NOTICE" shall mean the notice given by
the Company to SunTrust requesting a Swing Line Advance as provided in
Section 2.03(b).
"SWING LINE LOANS" shall mean, collectively, the loans made to
the Company by SunTrust pursuant to Section 2.03.
"SWING LINE NOTE" shall mean the promissory note evidencing
the Swing Line Loans substantially in the form of EXHIBIT B and duly
completed in accordance with the terms hereof.
"SWING RATE" shall mean the rate of interest specified by
SunTrust to the Company as being applicable to a Swing Line Loan requested
by the Company pursuant to Section 2.03(b).
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"SWING RATE ADVANCE" shall mean an Advance made or outstanding
as a Swing Line Loan bearing interest based on the Swing Rate as provided in
Section 2.11(c).
"SWING RATE QUOTE" shall mean an offer by SunTrust to make a
Swing Line Loan to the Company at the Swing Rate specified therein for the
interest period to be applicable to the Swing Line Loan as specified
therein, pursuant to Section 2.03(b).
"TAX" shall mean, with respect to any person or entity, any
federal, state or foreign tax, assessment, customs duties, or other
governmental charge, levy or assessment (including any withholding tax) upon
such person or entity or upon such person's or entity's assets, revenues,
income or profits, other than income and franchise taxes imposed upon any
Lender by the jurisdictions (or any political subdivision thereof) in which
such Lender has its principal office or office from which its Advances are
made, or in which such Lender is incorporated.
"TOTAL CAPITALIZATION" shall mean the sum of shareholders'
equity PLUS Subordinated Debt PLUS Senior Funded Debt.
"UNITED STATES" or "U.S." means the United States of America,
its fifty (50) States and the District of Columbia.
"U.S. DOLLAR" "DOLLAR" and "$" shall mean lawful money of the
United States of America.
SECTION 1.02. CALCULATIONS; ACCOUNTING TERMS. Calculations of
all financial data herein shall be on a consolidated basis for the Company and
all Subsidiaries; and all accounting terms used herein shall, unless otherwise
expressly indicated, be in reference to the Company and its Subsidiaries, if
any, on a consolidated basis, which may be accounted for in accordance with the
equity investment method (to the extent such method is in accordance with GAAP),
and shall have the meanings ascribed thereto under and be interpreted in
accordance with GAAP. All calculations and determinations under Article VII
shall be made in accordance with accounting principles consistent with those
followed in the preparation of the annual or interim financial statements, as
applicable, referred to in Section 5.02.
SECTION 1.03. OTHER DEFINITIONAL PROVISIONS.
(a) Except as otherwise specified herein, all references
herein (A) to any Person, other than the Company or any Subsidiary, shall be
deemed to include such Person's successors, transferees and assignees, (B) to
the Company or any Subsidiary, shall be deemed to include such Person's
successors, (C) to any Applicable Law specifically defined or referred to herein
shall be deemed references to such Applicable Law as the same may be amended or
supplemented from time to time, and (D) to any contract defined or referred to
herein shall be deemed references to such contract (and, in the case of any
instrument, any other instrument issued in substitution therefor) as the terms
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thereof may have been or may be amended, supplemented, waived or otherwise
modified from time to time.
(b) When used in this Agreement, the words "herein", "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and "Section", "Subsection",
"Schedule" and "Exhibit" shall refer to Sections and Subsections of, and
Schedules and Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
(d) All terms defined in this Agreement shall have the defined
meanings when used in any Note or Swing Line Note or, except as otherwise
expressly stated therein, any certificate, opinion or other Loan Document.
SECTION 1.04. CAPTIONS. Article and Section captions in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
ARTICLE II
AMOUNT AND TERMS OF LOANS
SECTION 2.01. COMMITMENTS AND NOTES. Subject to and upon the
terms and conditions set forth in this Agreement, each of the Lenders severally
establishes until October 31, 2000, unless otherwise extended pursuant to
Section 2.12 below (October 31, 2000, or such later date as the Commitments have
been extended pursuant to Section 2.13, is hereinafter referred to as the
"COMMITMENT TERMINATION DATE") a revolving credit facility in favor of the
Company in aggregate principal at any one time outstanding not to exceed the sum
set forth opposite such Lender's name below, as the same may be reduced from
time to time pursuant to the terms hereof:
SunTrust Bank, South Florida, $50,000,000 100%
National Association
TOTAL: $50,000,000 100%
===
Within the limits of the Commitments, the Company may borrow, repay and reborrow
under the terms of this Agreement; PROVIDED, HOWEVER, that (i) the aggregate
principal amount of each Borrowing shall not be less than $1,000,000 and shall
be in integral multiples of $500,000, (ii) all of the Company's representations
and warranties are true and correct on and as of the date of each Borrowing,
(iii) the Company may neither borrow nor reborrow should there exist a Default
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or an Event of Default, or such would result from the Borrowing, and (iv) the
aggregate outstanding amount of Advances after giving effect to each Borrowing
shall not exceed the Committed Amount of the Commitments. At no time shall the
number of Borrowings outstanding under this Article II exceed six; PROVIDED
that, for the purpose of determining the number of Borrowings outstanding, all
Borrowings consisting of Base Rate Advances under these Facilities shall be
considered as one Borrowing. Borrowings under the Commitments shall be made
through simultaneous Advances by the Lenders, and the amount of each such
Borrowing shall be prorated among such Lenders based on the percentages set
forth above. All Advances by each Lender shall be evidenced by a single Note
payable to such Lender in the form of EXHIBIT A attached hereto with appropriate
insertions. Each Note shall be dated the date hereof, shall be payable to the
order of the respective Lender in a principal amount equal to the amount set
forth opposite such Lender's name above, shall bear interest as provided for in
this Agreement and shall mature on the Commitment Termination Date or sooner
should the principal and accrued interest thereon be declared immediately due
and payable as provided for hereinafter. No Lender shall have any obligation to
advance funds in excess of an amount equal to the percentage set forth opposite
such Lender's name above multiplied by the Committed Amount of the Commitments.
SECTION 2.02. METHOD OF BORROWING UNDER THE COMMITMENTS. (a)
The Company shall give the Agent written or telephonic notice (promptly
confirmed in writing) of any requested Borrowing under the Commitments,
substantially in the form of EXHIBIT C attached hereto (a "NOTICE OF
BORROWING"), specifying (i) the amount of the Borrowing, and (ii) the date the
proposed Borrowing is to be made (which shall be a Business Day). Each Notice of
Borrowing shall be given to the Agent (x) in the case of Base Rate Advances, not
later than 11:00 a.m. (Ft. Lauderdale, Florida time) the same Business Day of
such requested Borrowing or (y) in the case of LIBOR Advances, at least three
Business Days before the date such requested Borrowing is to be made (which
shall be a Business Day). The Agent shall be entitled to rely on any telephonic
Notice of Borrowing which it believes in good faith to have been given by an
Executive Officer of the Company, and any Advances made by the Lenders based on
such telephonic notice shall, when deposited by the Agent to the Company's
Account No. 0128320009032 at SunTrust, be Advances for all purposes hereunder.
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(b) Whenever the Company desires to convert all or a portion
of an outstanding Borrowing consisting of Base Rate Advances into one or more
Borrowings consisting of LIBOR Advances, or to continue a Borrowing consisting
of LIBOR Advances for a new Interest Period, it shall give the Agent written
notice or telephonic notice (promptly confirmed in writing) at least three
Business Days before the date of such conversion, specifying each such Borrowing
to be converted into or continued as LIBOR Advances. Such notice (a "NOTICE OF
INTEREST RATE CONVERSION") shall be given prior to 11:00 a.m. (Ft. Lauderdale,
Florida time) on the date specified. Each such Notice of Interest Rate
Conversion shall be irrevocable and shall specify the aggregate principal amount
of the Advances to be converted or continued, the date of such conversion or
continuation and the Interest Period applicable thereto. If, upon the expiration
of any Interest Period in respect of any Borrowing, the Company shall have
failed to deliver the Notice of Interest Rate Conversion, the Company shall be
deemed to have elected to convert or continue such Borrowing to a Borrowing
consisting of Base Rate Advances. So long as any Default or Event of Default
shall have occurred and be continuing, no Borrowing may be converted into or
continued as (upon expiration of the current Interest Period) LIBOR Advances
unless the Agent and each of the Lenders shall have otherwise consented in
writing. No conversion of any Borrowing of LIBOR Advances shall be permitted
except on the last day of the Interest Period in respect thereof.
(c) Upon receipt of a Notice of Borrowing or a Notice of
Interest Rate Conversion from the Company, the Agent shall notify the Lenders by
telephone, which notice shall be promptly confirmed in writing (including by
telecopier) by the Agent to such Lenders, of such Notice of Borrowing or Notice
of Interest Rate Conversion and of each such Lender's PRO RATA portion of the
requested Borrowing or Interest Rate Conversion. Not later than 1:00 p.m. (Ft.
Lauderdale, Florida time) on the date specified for the Borrowing or Interest
Rate Conversion in the Notice of Borrowing or Notice of Interest Rate Conversion
and in the notice to such Lender provided by the Agent, each Lender shall
promptly make its portion of the Borrowing available to the Agent in immediately
available funds, and the Agent shall make available to the Company the amount so
received by the Agent from the Lenders not later than 3:00 p.m. (Ft. Lauderdale,
Florida time) on such date. In the event any Lender shall fail to make any
Advance available to the Agent in immediately available funds by 1:00 p.m. (Ft.
Lauderdale, Florida time) on the date specified, and provided no Default or
Event of Default shall have occurred and be continuing, the Agent may advance
such Lender's portion of the Borrowing on behalf of such Lender, in which event
such Lender shall promptly reimburse the Agent for the amount thereof plus (i)
if the amount of such Lender's Advance is reimbursed to the Agent on or prior to
the calendar day next succeeding the date of the Borrowing, interest on such
amount at the rate equal to the Federal Funds Rate, or (ii) if the amount of
such Lender's Advance is reimbursed to the Agent after the calendar day next
succeeding the day of the Borrowing, interest on such amount at the Base Rate;
PROVIDED, HOWEVER, that any such reimbursement by the Company to the Agent shall
not relieve such Lender who fails to make any Advance as provided above from
liability to the Company for such failure. The amount of interest payable as a
result of any Lender's failure to make any Advance available shall be calculated
on the basis of a year of 360 days and paid for the actual number of days such
failure has continued (including the date of payment). If the Company fails to
reimburse the Agent as provided in this Section 2.02(c), then the Agent shall
have the right to deduct any amounts owed to it hereunder from Advances it makes
to the Company in subsequent Borrowings made by the Company.
SECTION 2.03. SWING LINE SUBFACILITY. (a) Notwithstanding
anything contained herein to the contrary, SunTrust hereby establishes a
subfacility within its Commitment of up to an aggregate of $2,000,000 (the
"SWING LINE") to accommodate the short term borrowing needs of the Company.
Sections 3.01 and 3.02 shall apply equally to Borrowings made through the Swing
Line and Borrowings or Interest Rate Conversions requested or made through
Section 2.02. The aggregate amount of all Borrowings under the Swing Line
Facility shall not at any time exceed $2,000,000, and to the extent any
Borrowing under the Swing Line Facility would cause such a result after giving
effect thereto, the Company shall be required to request such Borrowing under
Section 2.02(a) hereof. Any Borrowing made by the Company under the Swing Line
shall be for a period not to exceed 30 days.
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(b) Whenever the Company desires to make a Borrowing under the
Swing Line, it shall give SunTrust prior written or telephonic notice (promptly
confirmed in writing) of any requested Borrowing under the Swing Line (each a
"SWING LINE BORROWING NOTICE") prior to 11:00 a.m. (Ft. Lauderdale, Florida
time) on the date of such Borrowing. Each Swing Line Borrowing Notice shall
specify the aggregate principal amount of the Swing Line Borrowing, the date of
such Swing Line Borrowing (which shall be a Business Day) and the interest
period to be applicable thereto. SunTrust shall make available to the Company
the amount of the Borrowing requested in the Swing Line Borrowing Notice not
later than 3:00 p.m. (Ft. Lauderdale, Florida time) on such date, PROVIDED that
(i) no Default or Event of Default shall have occurred and be continuing and
(ii) the aggregated principle amount of the Swing Line Borrowings, including the
requested Borrowing under such Swing Line Borrowing Notice, shall be no greater
than $2,000,000.
(c) The Company's obligation to pay the principal of, and
interest on, the Swing Line Loans shall be evidenced by the records of SunTrust
and by the Swing Line Note payable to SunTrust (or its assignee) completed in
conformity with this Agreement.
(d) The outstanding principal amount under each Swing Line
Loan shall be due and payable in full on the Commitment Termination Date.
(e) Each Borrowing under the Swing Line shall deemed to be
made under SunTrust's Commitment to the extent of any Availability thereunder on
the date such Borrowing is made.
SECTION 2.04. PREPAYMENT OF BORROWINGS UNDER THE COMMITMENTS.
The Company shall have the right to prepay Borrowings under the Commitments, in
whole at any time or in part from time to time, without premium or penalty (but,
in the case of LIBOR Advances, subject to the funding indemnification provisions
of Section 2.16), PROVIDED that (i) the Company gives the Agent prior written
notice of such prepayment, specifying the date such prepayment will occur (which
shall be a Business Day), (x) in the case of any Base Rate Advance, at least one
Business Day in advance of such date or (y) in the case of any LIBOR Advance
during an Interest Period, at least three Business Days in advance of such date,
(ii) each partial prepayment shall be in an amount of at least $500,000 and
integral multiples of $100,000, (iii) prepayments shall be applied to repay
Borrowings under the Commitments in the order set forth in Section 2.07 hereof,
and (iv) such prepayments include interest accrued, on the principal amount
prepaid, to the prepayment date.
SECTION 2.05. MANDATORY PREPAYMENTS.
(a) The Company shall make a mandatory prepayment from 100
percent of the after-tax net proceeds received by the Company from any sale or
other disposition by the Company of any of its assets, PROVIDED, HOWEVER, that
such prepayment provision shall not apply to the sales of inventory by the
Company in the ordinary course of business or assets disposed of as part of the
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Company's standard acquisition procedures (such assets to include high-pressure
tanks, motorized vehicles, including cars and trucks, and lines of business
other than carbon dioxide that may be obtained by the Company as part of the
group of assets of any corporation or other business entity the Company may
acquire), and certain other sales to be agreed upon in writing by the Company
and the Required Lenders.
(b) The Company shall make a mandatory prepayment from 100
percent of net proceeds of any offering of debt; PROVIDED, HOWEVER, that this
provision shall not include (i) proceeds from the Senior Subordinated Debt
Offering, (ii) proceeds from the Harsco Arrangement, and (iii) any purchase
money obligations paid to the Company.
SECTION 2.06. VOLUNTARY REDUCTION OF COMMITMENTS. Upon at
least five (5) Business Days' prior written notice (or telephonic notice
promptly confirmed in writing) to the Agent, which notice shall specify (1) the
amount by which such Commitments are to be terminated and (2) the date such
termination is to occur, the Company shall have the right, without premium or
penalty, to terminate the Commitments, in whole or in part, provided that (a)
any partial termination pursuant to this Section 2.06 shall be in an amount of
at least $5,000,000 and integral multiples of $5,000,000 and (b) any such
termination shall apply to reduce proportionately and permanently the
Commitments. If the aggregate principal amount of Advances exceeds the amount of
the Commitments as so reduced, the Company shall immediately repay Borrowings
under such Commitments by an amount equal to such excess, together with accrued
but unpaid interest on such excess.
SECTION 2.07. ALLOCATION OF PAYMENTS.
(a) All principal and interest payments and prepayments made
with respect to Advances and payments in respect of Commitment Fees shall be
allocated among all outstanding Commitments and Advances to which such payments
relate, proportionately based on the Lenders' Pro Rata Shares of the
Commitments.
(b) All payments made to the Agent by the Company shall be
applied in the following order: (a) FIRST, to the reimbursement of any fees
which are due and payable, and expenses incurred by and then due and payable to,
the Agent, in accordance with the terms of this Agreement, in connection with
the administration of the Commitments and otherwise (to the extent any such fees
are payable by the Company pursuant to the terms of this Agreement); (b) SECOND,
to the payment of any accrued and unpaid interest and Fees which are due and
payable, PRO RATA to the Lenders based upon their respective Pro Rata Shares of
the Commitments; and (c) FINALLY, to the payment of outstanding Advances.
SECTION 2.08. TERMINATION OF COMMITMENTS. The unpaid principal
balance and all accrued and unpaid interest on the Notes and the Swing Line Note
will be due and payable upon the first of the following dates or events to
occur: (i) acceleration of the maturity of any Note or the Swing Line Note in
accordance with the remedies contained in Section 8.02 of this Agreement; or
(ii) upon the expiration of the Commitments on the Commitment Termination Date.
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SECTION 2.09. USE OF PROCEEDS. The proceeds of each Borrowing
under the Commitments will be used by the Company solely to refinance
outstanding debt, to finance acquisitions, to make capital expenditures, and to
provide for the working capital and general corporate needs of the Company.
SECTION 2.10. FEES.
(a) On the Closing Date, the Company shall pay to SunTrust
Capital Markets, Inc. the fees described in the Commitment Letter, which fees
shall be fully earned and nonrefundable when paid.
(b) On the Closing Date and on each anniversary thereof, if
the Commitments are extended pursuant to Section 2.12, the Company shall pay to
the Agent the Agent Fee, which fee shall be fully earned and nonrefundable when
paid.
(c) The Company shall pay to the Agent, for the account of and
distribution of the respective Pro Rata Share to each Lender (subject to the
last sentence hereof), a commitment fee (the "COMMITMENT FEE") for the period
commencing on the Closing Date to and including the Commitment Termination Date,
computed at a rate equal to the Applicable Commitment Fee Percentage multiplied
by the average daily unused portion of the Commitments of the Lenders, such fee
being payable quarterly in arrears on the last day of each calendar quarter,
commencing on December 31, 1997, and on the Commitment Termination Date. The
Commitment Fee will be calculated on the basis of a 360-day year for the actual
number of days elapsed.
(d) The Company hereby authorizes the Agent to withdraw an
amount equal to the fees which are due and payable under clauses (a), (b) or (c)
above from any of its accounts with the Agent if not paid on the due date for
such fees. The Agent shall give the Company notice of any such withdrawals,
PROVIDED, HOWEVER, that failure by the Agent to give the Company notice shall
not prevent the Agent from making any such withdrawals under this Section.
SECTION 2.11. INTEREST.
(a) For Borrowings other than those made under the Swing Line,
the Company shall be entitled to select between the following two options to
establish the rate of interest at which the unpaid principal amount of the Notes
shall accrue:
(i) Base Rate Advances B interest shall accrue at the
Base Rate plus the Applicable Margin; or
(ii) LIBOR Advances B interest shall accrue at LIBOR
plus the Applicable Margin.
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(b) Interest on the Notes for Borrowings other than those made
under the Swing Line shall be calculated on the basis of a 360-day year and
shall be payable to the Lenders as follows:
(i) Base Rate Advances -- on the last day of every
quarter in arrears; and
(ii) LIBOR Advances -- at the expiration of each
Interest Period and, with respect to advances made for an Interest
Period longer than three months, also on the last day of each
three-month period prior to the expiration of the Interest Period.
(c) For Borrowings made under the Swing Line, the rate of
interest at which the unpaid principal shall accrue on the Swing Line Note shall
be equal to the Base Rate on the applicable day of the Swing Line Borrowing
Notice.
SECTION 2.12. INTEREST PERIODS.
(a) In connection with the making or continuation of, or
conversion into, each Borrowing of LIBOR Advances, the Company shall select an
Interest Period to be applicable to such LIBOR Advance, which Interest Period
shall be either a 1, 2, 3 or 6 month period.
(b) In connection with the making of each Base Rate Advance,
the Company and the Lenders shall agree on an Interest Period acceptable to both
sides.
(c) Notwithstanding paragraphs (a) or (b) above:
(i) The initial Interest Period for any Borrowing of
LIBOR Advances shall commence on the date of such Borrowing (including
the date of any conversion from a Borrowing consisting of Base Rate
Advances) and each Interest Period occurring thereafter in respect of
a continuation of such Borrowing shall commence on the day on which
the immediately preceding Interest Period expires;
(ii) If any Interest Period would otherwise expire on a
day which is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day, PROVIDED that if any Interest Period
in respect of LIBOR Advances would otherwise expire on a day that is
not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire
on the next preceding Business Day;
(iii) Any Interest Period in respect of LIBOR Advances
which begins on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period shall,
subject to part (iv) below, expire on the last Business Day of such
calendar month; and
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(iv) No Interest Period with respect to the Advances
shall extend beyond the Commitment Termination Date.
SECTION 2.13. EXTENSION OF COMMITMENTS. No earlier than 120
days but no later than 90 days prior to the then applicable Commitment
Termination Date, the Company may request that the Commitment Termination Date
be extended by the Lenders for an additional 364-day or longer period. The
Lenders may agree or not agree to such extension in the exercise of their sole
discretion; PROVIDED, HOWEVER, that the Agent shall inform the Company no later
than 60 days prior to the then applicable Commitment Termination Date of the
Lenders' decision as to whether to extend the Commitment Termination Date.
Notwithstanding anything herein to the contrary, the Commitment Termination Date
may only be extended, in the aggregate, for up to an additional two-year period
pursuant to this Section 2.13. If the Lenders agree, in their sole discretion,
to extend the Commitment Termination Date, then the applicable Commitment
Termination Date shall automatically be so extended upon written notice thereof
being delivered by the Lenders to the Company and completion by the Company and
its Subsidiaries of any conditions to such extension required by the Lenders.
SECTION 2.14. INCREASED COSTS.
(a) If, by reason of (x) after the date hereof, the
introduction of or any change (including, without limitation, any change by way
of imposition or increase of reserve requirements) in or in the interpretation
of any law or regulation, or (y) the compliance with any guideline or request
from any central bank or other governmental authority or quasi-governmental
authority exercising control over banks or financial institutions generally
(whether or not having the force of law):
(i) any Lender (or its applicable Lending Office) shall
be subject to any tax, duty or other charge with respect to its LIBOR
Advances or its obligation to make LIBOR Advances, or the basis of
taxation of payments to any Lender of the principal of or interest on
its LIBOR Advances or its obligation to make LIBOR Advances shall have
changed (except for changes in the tax on the overall net income of,
or any franchise tax on, such Lender or its applicable Lending Office
imposed by the jurisdiction in which such Lender's principal executive
office or applicable Lending Office is located); or
(ii) any reserve (including, without limitation, any
imposed by the Board of Governors of the Federal Reserve System),
special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender's
applicable Lending Office shall be imposed or deemed applicable or any
other condition affecting its LIBOR Advances or its obligation to make
LIBOR Advances shall be imposed on any Lender or its applicable
Lending Office or the London interbank market;
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and as a result thereof there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining LIBOR Advances (except to
the extent already included in the determination of LIBOR for LIBOR Advances),
or there shall be a reduction in the amount received or receivable by such
Lender or its applicable Lending Office, then the Company shall from time to
time, upon written notice from and demand by such Lender on the Company (with a
copy of such notice and demand to the Agent), pay to the Agent for the account
of such Lender within five Business Days after the date of such notice and
demand, additional amounts sufficient to indemnify such Lender against such
increased cost. A certificate as to the amount of such increased cost, submitted
to the Company and the Agent by such Lender in good faith and accompanied by a
statement prepared by such Lender describing in reasonable detail the basis for
and calculation of such increased cost, shall, except for manifest error, be
final, conclusive and binding for all purposes. In the event that the Company
shall pay the increased costs accrued through the date of payment as required
under this Section 2.14(a), PLUS any funding losses as described in Section
2.16, then the Company shall have the right to convert the relevant LIBOR
Advance to a Base Rate Advance, as provided in Section 2.02, and the Agent and
each of the Lenders shall be deemed to have given their consent thereto, as
required thereunder.
(b) If any Lender shall advise the Agent that at any time,
because of the circumstances described in clauses (x) or (y) in Subsection
2.14(a) or any other circumstances beyond such Lender's reasonable control
arising after the date of this Agreement affecting such Lender or the London
interbank market or the United States secondary certificate of deposit market or
such Lender's position in such markets, LIBOR, as determined by the Agent, will
not adequately and fairly reflect the cost to such Lender of funding its LIBOR
Advances, then, and in any such event:
(i) the Agent shall forthwith give notice (by telephone
confirmed in writing) to the Company and to the other Lenders of such
advice;
(ii)the Company's right to request and such Lender's
obligation to make or permit portions of the Loans to remain
outstanding past the last day of the then current Interest Periods as
LIBOR Advances shall be immediately suspended; and
(iii) such Lender shall make a Loan as part of the
requested Borrowing of LIBOR Advances, as the case may be, as a Base
Rate Advance, which such Base Rate Advance shall, for all other
purposes, be considered part of such Borrowing.
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SECTION 2.15. CAPITAL ADEQUACY. If, after the date of this
Agreement, any Lender shall have determined that the adoption of any applicable
law, rule or regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender with any request or
directive regarding capital adequacy not currently in effect or fully applicable
as of the Closing Date (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Lender's capital as a consequence of its
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then, from time to time, promptly upon demand by
such Lender (with a copy to the Agent), the Company shall pay such Lender such
additional amount or amounts as will compensate such Lender for such reduction.
A certificate of any Lender claiming compensation under this Section 2.14 and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive absent manifest error. In determining any such amount, such Lender
may use any reasonable averaging and attribution methods. Each Lender will
promptly notify the Company of any such adoption, change or compliance of which
it has knowledge which will entitle such Lender to compensation pursuant to this
Section, but the failure to give such notice shall not affect such Lender's
right to such compensation provided such Lender gives such notice within 90 days
after an officer of such Lender having responsibility for the administration of
this Agreement shall have received actual notice of such adoption, change or
compliance.
SECTION 2.16. FUNDING LOSSES. The Company shall compensate
each Lender, upon its written request to the Company (which request shall set
forth the basis for requesting such amounts in reasonable detail and which
request shall be made in good faith and, absent manifest error, shall be final,
conclusive and binding upon all of the parties hereto), for all losses, expenses
and liabilities (including, without limitation, any interest paid by such Lender
to lenders of funds borrowed by it to make or carry its LIBOR Advances, in
either case to the extent not recoverable by such Lender in connection with a
re-employment of such funds and including loss of anticipated profits, which the
Lender may sustain): (i) if for any reason (other than a default by such Lender)
a borrowing of, or conversion to or continuation of, LIBOR Advances to the
Company does not occur on the date specified therefor in a Notice of Borrowing
or Notice of Interest Rate Conversion (whether or not withdrawn), (ii) if any
repayment (including mandatory prepayments and any conversions) of any LIBOR
Advances by the Company occurs on a date which is not the last day of an
Interest Period applicable thereto, or (iii) if, for any reason, the Company
defaults in its obligation to repay its LIBOR Advances when required by the
terms of this Agreement.
SECTION 2.17. MAKING OF PAYMENTS.
(a) The Fees and all payments of principal of, or interest on,
the Notes and the Swing Line Note shall be made in immediately available funds
free and clear of any defenses, set-offs, counterclaims or withholdings or
deductions for taxes to the Agent at its principal office in Ft. Lauderdale,
Florida, for the accounts of the respective Lenders. All such payments shall be
made not later than 1:00 p.m. (Ft. Lauderdale, Florida time) and funds received
after that hour shall be deemed to have been received by the Agent on the next
following Business Day. Payments to the Agent shall, as to the Company,
constitute payment to the applicable Lenders hereunder, other than Swing Line
Loans.
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(b) Subject to Subsection 2.12(c)(ii), whenever any payment to
be made hereunder or under any Note or the Swing Line Note shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the applicable rate during such extension.
(c) On the Business Day that a payment is received or deemed
to have been received hereunder, the Agent shall remit in immediately available
funds to each Lender its share, based on the percentages set forth in Section
2.01, of all payments received by the Agent on the Notes.
SECTION 2.18. DEFAULT RATE OF INTEREST. Upon the occurrence
and during the continuance of an Event of Default set forth in Section 8.01, to
the extent permitted by law, all unpaid amounts hereunder shall, on such date
and thereafter, accrue the then applicable interest rate plus an additional two
percent (2.0%) per annum until payment in full, PROVIDED that, for any LIBOR
Advance, at the end of the applicable Interest Period, interest shall accrue at
the Base Rate plus two percent (2.0%) per annum. Interest accruing pursuant to
this Section 2.17 will be due and payable upon demand.
SECTION 2.19. PRORATION OF PAYMENTS. If any Lender shall
obtain any payment or other recovery (whether voluntary, involuntary, through
exercise of any right of set-off or otherwise) after the occurrence and during
the continuance of an Event of Default on account of the principal of or
interest on any Note or any fees in respect of this Agreement in excess of its
PRO RATA share of payments and other recoveries obtained by all the Lenders on
account of the principal of and interest on the Notes then held by them or any
fees due to them in respect of this Agreement, such Lender shall notify the
Agent thereof and forthwith purchase from the other Lenders such participation
in the Notes held by them or in such fees owed to them as shall be necessary to
cause such purchasing Lender to share the excess payment or other recovery
ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
Lender, the purchase from such Lender shall be rescinded and the purchase price
restored by each selling Lender to the extent of such recovery, but without
interest, unless the purchasing Lender is required to pay interest on the amount
so recovered, in which case each selling Lender shall pay its pro rata share of
such interest. After the occurrence and during the continuance of an Event of
Default, disproportionate payments of interest shall be shared by the purchase
of separate participations in unpaid interest obligations, disproportionate
payments of fees shall be shared by the purchase of separate participations in
unpaid fee obligations, and disproportionate payments of principal shall be
shared by the purchase of separate participations in unpaid principal
obligations. The Company agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.18 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Company in the amount of such participation. Each Lender
shall give the Agent notice within five (5) days of any payments or other
recoveries described above which it obtains.
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SECTION 2.20. LENDERS' OBLIGATIONS SEVERAL. The obligation of
each Lender to make any Advance is several, and not joint or joint and several,
and is not conditioned upon the performance by all other Lenders of their
obligations to make Advances.
SECTION 2.21. CALCULATION OF INTEREST. Interest payable on the
Notes, including interest payable as provided in Section 2.17, shall be
calculated on the basis of a year of 360 days and paid for the actual number of
days elapsed.
SECTION 2.22. PAYMENTS FREE OF TAXES.
(a) All payments made by the Company under this Agreement, the
Notes and the Swing Line Note shall be made free and clear of, and without
deduction for, any Tax. To the extent that the Company is obligated by
Applicable Law to make any deduction or withholding on account of any Tax from
any amount payable to any Lender under this Agreement, the Notes or the Swing
Line Note, the Company shall (1) make such deduction or withholding and pay the
same to the relevant governmental authority and (2) pay such additional amount
to such Lender as is necessary to result in that Lender's receiving a net
after-tax (or after-assessment or after-charge) amount equal to the amount to
which such Lender would have been entitled under this Agreement, the Notes or
the Swing Line Note absent such deduction or withholding.
(b) Each Lender that is organized under the laws of any
jurisdiction other than the United States of America or any State thereof
(including the District of Columbia) agrees to furnish to the Company and the
Agent, on the Closing Date and otherwise prior to the time it becomes a Lender
hereunder, two copies of either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service Form 1001 or any successor forms thereto (wherein such
Lender claims entitlement to complete exemption from or reduced rate of U.S.
Federal withholding tax on interest paid by the Company hereunder) and to
provide to the Company and the Agent a new Form 4224 or Form 1001 or any
successor forms thereto if any previously delivered form is found to be
incomplete or incorrect in any material respect or upon the obsolescence of any
previously delivered form.
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SECTION 2.23. INTEREST RATE NOT ASCERTAINABLE, ETC. In the
event that the Agent, in the case of LIBOR, shall have determined (which
determination shall be made in good faith and, absent manifest error, shall be
final, conclusive and binding upon all parties) that on any date for determining
LIBOR for any Interest Period, by reason of any changes arising after the date
of this Agreement affecting the London interbank market or the Agent's position
in such market, adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the definition of LIBOR
then, and in any such event, the Agent shall forthwith give notice (by telephone
confirmed in writing) to the Company and to the Lenders of such determination
and a summary of the basis for such determination. Until the Agent notifies the
Company that the circumstances giving rise to the suspension described herein no
longer exist, the obligations of the Lenders to make or permit portions of the
Advances to remain outstanding past the last day of the then current Interest
Periods as LIBOR Advances shall be suspended, and such affected Advances shall
bear the same interest as Base Rate Advances.
SECTION 2.24. ILLEGALITY.
(a) In the event that any Lender shall have determined (which
determination shall be made in good faith and, absent manifest error, shall be
final, conclusive and binding upon all parties) at any time that the making or
continuance of any LIBOR Advance has become unlawful by compliance by such
Lender in good faith with any applicable law, governmental rule, regulation,
guideline or order (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful), then, in any such event, the
Lender shall give prompt notice (by telephone confirmed in writing) to the
Company and to the Agent of such determination and a summary of the basis for
such determination (which notice the Agent shall promptly transmit to the other
Lenders).
(b) Upon the giving of the notice to the Company referred to
in subsection (a) above, (i) the Company's right to request and such Lender's
obligation to make LIBOR Advances shall be immediately suspended, and such
Lender shall make an Advance as part of the requested Borrowing of LIBOR
Advances as a Base Rate Advance, and (ii) if the affected LIBOR Advance or
Advances are then outstanding, the Company shall immediately, or if permitted by
applicable law, no later than the date permitted thereby, upon at least one
Business Day's written notice to the Agent and the affected Lender, convert each
such Advance into an Advance or Advances to a Base Rate Advance with an Interest
Period ending on the date on which the Interest Period applicable to the
affected LIBOR Advances expires, PROVIDED that if more than one Lender is
affected at any time, then all affected Lenders must be treated the same
pursuant to this Subsection 2.24(b).
SECTION 2.25. INCREASE OF COMMITMENTS. Notwithstanding
anything herein to the contrary, in the event that the Company, for any fiscal
quarter, Annualized EBITDA is greater than or equal to $15,000,000, then the
Company hereby shall automatically request from the Lenders that the Commitments
be increased to $100,000,000. Any such increase in the Commitments shall be made
in the sole discretion of the Lenders, with any additional increase in the
Commitments to be allocated pro rata among the existing Lenders. Any such
increase (i) shall remain in place until the Commitment Termination Date,
subject to any reduction provided for under the terms of this Agreement, and
(ii) notwithstanding anything herein to the contrary, shall be senior to any
other subordinated Indebtedness of the Company, including, but not limited to,
the Senior Subordinated Debt Offering. If it is not possible for the existing
Lenders to accommodate any such increase in the Commitments, then new Lenders
may be added so long as these new Lenders are reasonably acceptable to the Agent
and the Company.
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ARTICLE III
CONDITIONS TO BORROWINGS
The obligation of each Lender to make an Advance to the
Company hereunder is subject to the satisfaction of the following conditions:
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL ADVANCES.
At the time of the making by each Lender of its initial Advance hereunder,
unless otherwise waived or consented to by the Required Lenders,
(1) all obligations of the Company to the Agent or any Lender
incurred prior thereto (including, without limitation, the Company's
obligation to reimburse the fees and disbursements of counsel to the
Agent and the Lenders in accordance with this Agreement), together
with the fees described in the Commitment Letter and the Agent Fee,
shall have been paid in full;
(2) the Agent shall have received the following, each dated as of
the Closing Date, in form and substance satisfactory to the Lenders
and (except for the Notes and the Swing Line Note) in sufficient
copies for each Lender:
(a) A duly executed original of this Agreement.
(b) A duly completed and executed original of a
Note payable to the order of each Lender in the
principal amount of such Lender's Commitment.
(c) A duly completed and executed original of the
Swing Line Note payable to the order of SunTrust in
the principal amount of $2,000,000.
(d) A duly executed original of the Guaranty
Agreement and the Contribution Agreement.
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(5) A duly executed original of the Company
Security Agreement and the Guarantor Security
Agreement, together with such UCC financing statements
and UCC amendments recorded in such jurisdictions as
the Required Lenders deem necessary or desirable to
perfect the security interests granted thereunder and
under the Company Pledge Agreement, the Guarantor
Pledge Agreement, the Company Trademark Security
Agreement, and the Guarantor Trademark Security
Agreement.
(6) Certified Requests for Information or Copies
(Form UCC-11) or equivalent reports, listing all
effective financing statements which name the Company
or any of its Subsidiaries as debtor, together with
copies of such other financing statements (none of
which shall cover the Collateral purported to be
covered by the Company Security Agreement, the
Guarantor Security Agreement, the Company Pledge
Agreement, the Guarantor Pledge Agreement, the Company
Trademark Security Agreement or the Guarantor
Trademark Security Agreement), other than financing
statements in favor of the Agent.
(7) Completion of and receipt of lien searches in
all relevant jurisdictions revealing no liens or any
assets of the Company except for liens permitted by
the Loan Documents and liens to be terminated on the
Closing Date under the Company's Existing Credit
Agreement.
(8) A duly executed original of the Company
Pledge Agreement and the Guarantor Pledge Agreement,
together with stock certificates evidencing the shares
of stock of all Subsidiaries of the Company pledged to
the Agent thereunder and an undated stock power for
each such stock certificate, executed in blank by the
pledgor of such stock.
(9) A duly executed original of the Company
Trademark Security Agreement and the Guarantor
Trademark Security Agreement, together with such
filings in the United States Patent and Trademark
Office as the Required Lenders deem necessary or
desirable to perfect the security interests granted
under the Company Trademark Security Agreement and the
Guarantor Trademark Security Agreement.
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(10) Duly executed originals of any Mortgages and
Assignments of Leases to be recorded in the real
estate records of the jurisdiction in which the
Mortgaged Property related thereto is located,
together with such fixture filings and amendments to
existing fixture filings recorded in such
jurisdictions as the Required Lenders deem necessary
or desirable to perfect the security interests granted
thereunder, and endorsements to the existing title
insurance policies for such Mortgage or Assignment of
Leases showing that the Agent has a valid first
priority Lien with respect to such Mortgaged Property
subject to no encumbrances other than such Mortgage or
such Assignment of Leases, and Liens permitted
pursuant to Section 6.01 hereof.
(11) Evidence satisfactory to the Required Lenders
that all other actions necessary or desirable to
perfect and protect the security interests created by
the Security Documents have been taken.
(12) Certificates of insurance issued by the
Company's insurers, describing in reasonable detail
the insurance maintained by the Company, together with
appropriate evidence showing that the Agent has been
named as loss payee or additional insured, as its
interest may appear, on all insurance policies
insuring property of the Company and its Subsidiaries.
(13) Certificates signed by the Chief Executive
Officer or the Chief Financial Officer of each of the
Company and the Guarantors as to the solvency of such
Company or Guarantor.
(14) Repayment by the Company of all outstanding
indebtedness under the Company's Existing Credit
Agreement and termination of the commitments
thereunder.
(15) Payment of all fees required to be paid on or
prior to the Closing Date.
(16) A duly executed original of the CLOSING
CERTIFICATE, in the form attached hereto as
EXHIBIT F.
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(17) Copies of the organizational papers of each
of the Company and the Subsidiaries, certified as true
and correct by the Secretary of State of the State in
which the Company or such Subsidiary is incorporated,
and certificates from the Secretaries of State of the
States in which the Company or such Subsidiary is
incorporated and of each state in which the Company or
such Subsidiary is legally required to qualify to
transact business as a foreign corporation, certifying
the Company's or Subsidiaries' good standing as a
corporation in such States.
(18) Copies of the bylaws of each of the Company
and the Guarantors of resolutions of the Board of
Directors of each of the Company and the Guarantors
approving this Agreement, the Notes, the Swing Line
Note, the Borrowings hereunder, the Security Documents
and all other Loan Documents to which the Company or
such Guarantor is a party and of all documents
evidencing other necessary corporate action and
governmental approvals, if any, with respect to this
Agreement, the Notes, the Swing Line Note, the
Security Documents and all other Loan Documents to
which the Company or such Guarantor is a party, in
each case certified as true and correct by the
Secretary or an Assistant Secretary of the Company or
such Guarantor.
(19) A favorable written opinion of Olshan
Grundman Frome & Rosenzweig LLP, General Counsel for
the Company and the Guarantors, substantially in the
form of EXHIBIT G attached hereto, and covering such
additional matters relating to the transactions
contemplated hereby as the Required Lenders may
reasonably request, addressed to the Agent and the
Lenders.
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(20) A favorable written opinion of Holland &
Knight LLP, counsel for the Company and the
Guarantors, substantially in the form of EXHIBIT H
attached hereto, and covering such additional matters
relating to the transactions contemplated hereby as
the Required Lenders may reasonably request, addressed
to the Agent and the Lenders.
(21) Certified copies of all consents, approvals,
authorizations, registrations or filings required to
be made or obtained by the Company or the Guarantors
in connection with the transactions contemplated
hereby and by the other Loan Documents.
(3) all corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all Loan
Documents and other documents incident thereto or delivered in
connection therewith shall be satisfactory in form and substance to
each Lender.
SECTION 3.02. CONDITIONS PRECEDENT TO EACH ADVANCE. At
the time of the making by the Lenders of each Advance hereunder (including the
initial Advances), (a) the following statements shall be true:
(i) The representations and warranties contained in
Article IV hereof are true and correct in all material respects on
and as of the date of such Borrowing as though made on and as of
such date, except insofar as such representations and warranties
speak only as of a prior date or reflect transactions and events
after the Closing Date, as permitted by the Loan Documents;
(ii) No Default or Event of Default exists or would
result from such Borrowing or from the application of the proceeds
therefrom;
(iii) Since the date of the most recent consolidated
financial statements of the Company described in Section 4.14 or
delivered to the Lenders pursuant to Section 5.02, there shall have
been no change which has had or could reasonably be expected to have
a Materially Adverse Effect;
(iv) There shall be no action or proceeding instituted
or pending before any court or other governmental authority or, to
the knowledge of the Company, threatened (i) which reasonably could
be expected to have a Materially Adverse Effect, or (ii) seeking to
prohibit or restrict the ownership or operation of any portion of
the business or assets of the Company or any of its Subsidiaries, or
to compel the Company or any of its Subsidiaries to dispose of or
hold separate all or any portion of its businesses or assets, where
such portion or portions of such business(es) or assets, as the case
may be, constitute a material portion of the total businesses or
assets of the Company or its Subsidiaries; and
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(v) The Advances to be made and the use of proceeds
thereof shall not contravene, violate or conflict with, or involve
the Agent or any Lender in a violation of, any Applicable Law.
(b) each Notice of Borrowing given by the Company in accordance with
Section 2.02(a) hereof and the acceptance by the Company of the proceeds of any
Borrowing shall constitute a representation and warranty by the Company, made as
of the time of the making of such Borrowing that the conditions specified in
Section 3.02(a) have been fulfilled as of such time unless a notice to the
contrary specifically captioned "Disclosure Statement" is received by each of
the Lenders from the Company prior to 5:00 p.m. (Ft. Lauderdale, Florida time)
on the Business Day immediately preceding the date of the making of such
Borrowing. To the extent that the Lenders agree to make such Borrowing after
receipt of a Disclosure Statement in accordance with the preceding sentence, the
representations and warranties pursuant to the preceding sentence will be deemed
made as modified by the contents of such Disclosure Statement and repeated, as
so modified, as at the time of the making of such Borrowing. Any such
modification shall be effective only for the occasion on which the Lenders elect
to make an Advance on such Borrowing, and unless expressly agreed by the
Required Lenders in writing to the contrary in accordance with Section 10.02,
shall not be deemed a waiver or modification of any condition to the making of
any future Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company and the Subsidiaries represent and warrant
as follows:
SECTION 4.01. CORPORATE STATUS OF COMPANY; STATUS OF
SUBSIDIARIES. The Company and each Subsidiary that is a corporation are duly
organized, validly existing and in good standing under the laws of the
jurisdictions of their respective incorporation and have the corporate power and
authority to own their respective property and assets and to transact the
businesses in which they respectively are engaged or presently propose to engage
and are duly qualified and in good standing as foreign corporations in all
states where failure to be so qualified and in good standing could have a
Materially Adverse Effect. Each Subsidiary that is a partnership is duly
constituted, existing and in good standing under the laws of the jurisdiction of
its constitution and has all requisite power, authority and legal right to own
its property and assets and to transact the businesses in which it is engaged or
presently proposes to engage and is duly qualified and in good standing as a
foreign partnership wherever failure to be so qualified and in good standing
could have a Materially Adverse Effect. The Company and each of its Subsidiaries
have the power to own their respective properties and to carry on their
respective businesses as now being conducted. The Company is adequately
capitalized for the purpose of conducting its business, was not formed solely
for the purpose of acting as agent for, or as an instrumentality of, any
Subsidiary.
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SECTION 4.02. CORPORATE POWER AND AUTHORITY. Each of
the Company and the Guarantors has the corporate power and has taken all
necessary corporate action (including, without limitation, any consent of
stockholders required by law or by its certificate of incorporation or bylaws)
to authorize it, to execute, deliver and carry out the terms and provisions of
and to incur its obligations under this Agreement, the Notes, the Swing Line
Note, the Security Documents and the other Loan Documents to which it is a
party. This Agreement, the Notes, the Swing Line Note, the Security Documents
and the other Loan Documents have been duly authorized, executed and delivered
by the Company and the Guarantors party thereto.
SECTION 4.03. COMPLIANCE WITH OTHER INSTRUMENTS. The
execution, delivery and performance by the Company and any Guarantors party
thereto, as the case may be, of this Agreement, the Notes, the Swing Line Note,
the Security Documents and the other Loan Documents to which it is a party, (a)
will not contravene any provision of Applicable Law, rule, regulation, judgment,
order or ruling, (b) will not conflict with, be inconsistent with, or result in
any breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any Lien
upon any of the property or assets of the Company or any of its Subsidiaries
pursuant to the terms of any indenture, mortgage, deed to secure debt, deed of
trust, or any other material agreement or instrument to which the Company or any
of its Subsidiaries is a signatory or by which it is bound or to which it may be
subject, (c) will not violate any provision of the certificate of incorporation
(or equivalent thereof) or bylaws (or equivalent thereof) of the Company or any
corporate Subsidiary of the Company or the certificate of partnership or other
document governing the constitution or conduct of affairs of any Subsidiary of
the Company that is not a corporation, (d) will not require any Governmental
Approval and (e) will not result in the creation of any Lien upon the assets or
properties of the Company and its Subsidiaries except as contemplated by the
Security Documents. Neither the Company nor any of its Subsidiaries is a party
to, or otherwise subject to any provision contained in, any instrument
evidencing Indebtedness of the Company or any of its Subsidiaries, any agreement
relating thereto or any other contract or agreement (including its charter)
which limits the amount of, or otherwise imposes restrictions on the incurring
of, Indebtedness of the type to be evidenced by the Notes and the Swing Line
Note, other than the Senior Subordinated Debt Offering.
SECTION 4.04. ENFORCEABLE OBLIGATIONS. This Agreement,
the Notes, the Swing Line Note, the Security Documents and the other Loan
Documents constitute the legal, valid and binding obligation of the Company and
the Guarantors party thereto, enforceable in accordance with their terms, except
as the enforceability thereof may be limited by Bankruptcy Law and by general
principles of equity.
SECTION 4.05. GOVERNMENTAL AUTHORIZATIONS. The Company
and its Subsidiaries are in good standing with respect to all governmental
authorizations, consents, approvals, orders, licenses and other actions required
by any governmental or non-governmental authority or Person, except where the
failure to maintain such good standing will not have a Materially Adverse Effect
on the Company and its Subsidiaries.
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SECTION 4.06. INTELLECTUAL PROPERTY. Each of the
Company and its Subsidiaries owns or has the right to use all patents,
trademarks, service marks, trade names, copyrights, licenses and other rights,
free from burdensome restrictions, which are material for the operation of its
business as presently conducted. Nothing has come to the attention of the
Company, any of its Subsidiaries or any of their respective directors and
officers to the effect that (i) any product, process, method, substance, part or
other material presently contemplated to be sold by or employed by Company or
any of its Subsidiaries in connection with its business may infringe any patent,
trademark, service mark, trade name, copyright, license or other right owned by
any other Person, (ii) there is pending or threatened any claim or litigation
against or affecting the Company or any of its Subsidiaries contesting its right
to sell or use any such product, process, method, substance, part or other
material or (iii) there is, or there is pending or proposed, any patent,
invention, device, application or principle or any statute, law, rule,
regulation, standard or code which would prevent, inhibit or render obsolete the
production or sale of any products of, or substantially reduce the projected
revenues of, or otherwise have a Materially Adverse Effect on the Company or any
of its Subsidiaries.
SECTION 4.07. OUTSTANDING INDEBTEDNESS. Neither the
Company nor any of its Subsidiaries, on a consolidated basis, has outstanding
any Indebtedness, except as described on SCHEDULE 4.07 hereto. There exists no
default under the provisions of any instrument evidencing or securing any
Indebtedness of the Company or any of its Subsidiaries or of any agreement
otherwise relating thereto which has had or would reasonably be expected to have
a Materially Adverse Effect.
SECTION 4.08. INSURANCE COVERAGE. Each property of the
Company or any of its Subsidiaries is insured within terms reasonably acceptable
to the Lenders for the benefit of the Company or a Subsidiary of the Company in
amounts deemed adequate by the Company's management in its reasonable business
judgment and not materially less than those amounts customary in the industry in
which the Company and its Subsidiaries operate against risks usually insured
against by Persons operating businesses similar to those of the Company or its
Subsidiaries in the localities where such properties are located, and the Agent
has been named loss payee or additional insured, as its interest may appear, on
all such policies. Attached as SCHEDULE 4.08 hereto are certificates evidencing
such insurance.
SECTION 4.09. TITLE TO PROPERTIES. Each of the Company
and its Subsidiaries has (i) good and marketable fee simple title to its
respective real properties (other than real properties it leases from others),
including such real properties reflected in the financial statements referred to
in Section 4.14, subject to no Lien of any kind except Liens permitted by
Section 6.01, and (ii) good title to all of its other respective properties and
assets (other than properties and assets which it leases from others), including
the other properties and assets reflected in the financial statements referred
to in Section 4.14, subject to no Lien of any kind except Liens permitted by
Section 6.01. Each of the Company and its Subsidiaries enjoys peaceful and
undisturbed possession in all material leases necessary for the operation of its
respective properties and assets, none of which contains any unusual or
burdensome provisions that would adversely affect or impair the operation of
such properties and assets, and all such leases are valid and subsisting and in
full force and effect.
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SECTION 4.10. NO BURDENSOME RESTRICTIONS. Neither the
Company nor any of its Subsidiaries is a party to any contract or agreement that
would result in any burdensome restrictions that might reasonably be expected to
have a Materially Adverse Effect on the Company or any of its Subsidiaries,
including, but not limited to, any collective bargaining agreements.
SECTION 4.11. NO MATERIAL VIOLATION OF LAW. Neither the
Company nor any of its Subsidiaries has any notice of any violation of any law,
statute, order, regulation or judgment entered against it by any court that may
reasonably be expected to have a Materially Adverse Effect on the Company.
SECTION 4.12. NO DEFAULT UNDER OTHER AGREEMENTS.
Neither the Company nor any of its Subsidiaries is in default under any material
agreement to which it is a party.
SECTION 4.13. NO EQUITY INVESTMENTS. Neither the
Company nor any of its Subsidiaries possesses investments in any equity or other
long-term investments in any person, except permitted investments, including any
wholly-owned Subsidiaries of the Company and the Subsidiaries.
SECTION 4.14. FINANCIAL STATEMENTS. The audited
consolidated financial statements of the Company dated June 30, 1997, and the
related consolidated statements of income (including supporting footnote
disclosures), with opinion of Cooper, Selvin & Strassberg LLP, the unaudited
consolidated quarterly financial statements of the Company dated August 31,
1997, and the related consolidated statements of income (including supporting
footnote disclosures), and the unaudited consolidated monthly financial
statements of the Company dated August 31, 1997, all heretofore furnished to the
Lenders, are all true and correct in all material respects and present fairly
the consolidated financial condition at the date of said financial statements
and the results of operations for the fiscal period then ending of the Company.
The Company as of such date did not have any significant liabilities, contingent
or otherwise, including liabilities for Taxes or any unusual forward or
long-term commitments which were not disclosed by or reserved against in the
financial statements referred to above or in the notes thereto, and at the
present time there are no material unrealized or anticipated losses from any
unfavorable commitments of the Company or any of its Subsidiaries. All such
financial statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved. Since August 31, 1997, there
has been no material adverse change in the operations, business, property or
assets of, or in the condition (financial or otherwise) of, the Company.
SECTION 4.15. LITIGATION. Except as disclosed on
SCHEDULE 4.15 attached hereto, there are no actions, suits, investigations or
proceedings pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries or any of their properties or rights by or before any court,
arbitrator or administrative or governmental body that would have a Materially
Adverse Effect on the Company or any of its Subsidiaries.
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SECTION 4.16. TAXES. Each of the Company and its
Subsidiaries has filed or caused to be filed all declarations, reports and tax
returns including, in the case of the Company and each Subsidiary located in the
United States, all federal and state income tax returns which it is required by
law to file, and has paid all Taxes which are shown as being due and payable on
such returns or on any assessments made against it or any of its properties. The
accruals and reserves on the books of the Company and its Subsidiaries in
respect of Taxes are adequate in all material respects for all periods. Neither
the Company nor any of its Subsidiaries has any knowledge of any unpaid
adjustment, assessment or any penalties or interest of significance, or any
basis therefor, by any taxing authority for any period, except those being
contested in good faith and by appropriate proceedings which effectively stay
the enforcement of any Lien and the attachment of a penalty.
SECTION 4.17. MARGIN REGULATIONS. No part of the
proceeds of any of the Advances will be used for any purpose which violates, or
which would be inconsistent or not in compliance with, the provisions of the
applicable Margin Regulations.
SECTION 4.18. ERISA. Except as disclosed on SCHEDULE
4.18 attached hereto:
(a) IDENTIFICATION OF PLANS. (i) Neither the Company nor
any ERISA Affiliate maintains or contributes to, or has maintained
or contributed to, any Plan that is an ERISA Plan, and (ii) neither
the Company nor any of its Subsidiaries maintains or contributes to,
or has maintained or contributed to, any Plan that is an Executive
Arrangement;
(b) COMPLIANCE. Each Plan has at all times been
maintained, by its terms and in operation, in accordance with all
Applicable Laws, except such noncompliance (when taken as a whole)
that will not have a Materially Adverse Effect;
(c) LIABILITIES. Neither the Company nor any of its
Subsidiaries is currently nor has in the last 6 years been obligated
to make contributions (directly or indirectly) to a Multiemployer
Plan, nor is it currently nor will it become subject to any
liability (including withdrawal liability), tax or penalty
whatsoever to any Person whomsoever with respect to any Plan
including, but not limited to, any tax, penalty or liability arising
under Title I or Title IV or ERISA or Chapter 43 of the Code, except
such liabilities (when taken as a whole) as will not have a
Materially Adverse Effect; and
(d) FUNDING. The Company and each ERISA Affiliate has
made full and timely payment of all amounts (i) required to be
contributed under the terms of each Plan and Applicable Law and (ii)
required to be paid as expenses of each Plan. No Plan has an "amount
of unfunded benefit liabilities" (as defined in Section 4001(a)(18)
of ERISA).
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SECTION 4.19. COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) The Company and its Subsidiaries are not in
violation of, and do not presently have outstanding any liability under, have
not been notified that they are or may be liable under and do not have knowledge
of any liability or potential liability (including any liability relating to
matters set forth in Part A. of SCHEDULE 4.19) except as set forth in Part A. of
SCHEDULE 4.19, under any applicable Environmental Laws which violation,
liability or potential liability could reasonably be expected to have a
Materially Adverse Effect.
(b) Except as set forth in Part B. of SCHEDULE 4.19,
neither the Company nor any of its Subsidiaries has received a written request
for information under any Environmental Laws stating or suggesting that the
Company or any of its Subsidiaries has or may have liability thereunder or
written notice that any such entity has been identified as a potentially
responsible party under any Environmental Laws, or any comparable state law, or
any public health or safety or welfare law, nor has any such entity received any
written notification that any Hazardous Substance that it or any of its
respective predecessors in interest has generated, stored, treated, handled,
transported, or disposed of, has been released or is threatened to be released
at any site at which any Person intends to conduct or is conducting a remedial
investigation or other action pursuant to any Environmental Laws.
(c) Except as set forth in Part C. of SCHEDULE 4.19,
each of the Company and its Subsidiaries has obtained all material permits,
licenses or other authorizations required for the conduct of their respective
operations under all applicable Environmental and Asbestos Laws and each such
authorization is in full force and effect.
(d) Except as set forth in Part D. of SCHEDULE 4.19,
each of Company and its Subsidiaries complies in all material respects with all
laws and regulations relating to equal employment opportunity and employee
safety in all jurisdictions in which it is presently doing business, and Company
will use its reasonable best efforts to comply, and to cause each of its
Subsidiaries to comply, with all such laws and regulations which may be legally
imposed in the future in jurisdictions in which Company or any of its
Subsidiaries may then be doing business.
SECTION 4.20. POSSESSION OF MATERIAL PATENTS,
TRADEMARKS, ETC. Each of the Company and its Subsidiaries possesses all patents,
trademarks, licenses, and other intellectual property rights that are necessary
in any material respect for the ownership, maintenance and operation of its
properties and assets and they are possessed free from any burdensome
restrictions. To the Company's knowledge, there are no infringements of such
patents, trademarks, licenses, and other intellectual property rights that could
have a Materially Adverse Effect on the Company or any of its Subsidiaries.
SECTION 4.21. SUBSIDIARIES. SCHEDULE 4.21 attached
hereto correctly sets forth the name of each Subsidiary of the Company, the
jurisdiction of such Subsidiary's incorporation or organization and the
ownership of all issued and outstanding capital stock of such Subsidiary. All
the outstanding shares of the capital stock of each such Subsidiary have been
validly issued and are fully paid and nonassessable and all such outstanding
shares, except as noted on such SCHEDULE 4.21, are owned of record and
beneficially by the Company or a wholly-owned Subsidiary of the Company free of
any Lien or claim.
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SECTION 4.22. DISCLOSURE. Neither this Agreement, any
Loan Document nor any other document, certificate or statement furnished to the
Lenders or the Agent by or on behalf of the Company or any Guarantor in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading, if, in either case, such fact is material to an
understanding of the financial condition, business, prospects or property of the
Company, or the ability of the Company to fulfill its obligations under any Loan
Documents to which it is a party.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note or the Swing Line Note shall remain
unpaid or any Lender shall have any Commitment hereunder, unless the
Required Lenders shall otherwise consent in writing:
SECTION 5.01. USE OF PROCEEDS. The proceeds of all
Borrowings will be used by the Company as provided in Section 2.09. None of the
proceeds of any Borrowing shall be used, directly or indirectly, to purchase or
carry, or to reduce or retire or refinance any credit incurred to purchase or
carry, any "margin security" or "margin stock" (within the meaning of the
regulations of the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any such
"margin security" or "margin stock" or for any other purpose that might deem
this transaction as a "purpose credit" (within the meaning of the regulations of
the Board of Governors of the Federal Reserve System). If requested by any
Lender, the Company will furnish to such Lender statements in conformity with
the requirements of Federal Reserve Form U-1 referred to in Regulation U.
SECTION 5.02. REPORTING COVENANTS.
(a) The Company will furnish to each of the Lenders:
(i) as soon as available and in any event no later than
90 days after the end of each fiscal year of the Company, an audited
consolidated balance sheet of the Company and its Subsidiaries as of
the close of such fiscal year, and the related audited consolidated
statements of income and cash flow of the Company and its
Subsidiaries for such fiscal year, all in reasonable detail and with
(1) an unqualified opinion of Cooper, Selvin & Strassberg LLP, or
such other independent certified public accountant of recognized
standing selected by the Company and satisfactory to the Required
Lenders, and (2) a certificate (with supporting details) from the
Chief Financial Officer of the Company stating whether a Default or
Event of Default exists;
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(ii) as soon as available and in any event within 45
days after the end of each fiscal quarter of the Company, its
quarterly unaudited financial statements, together with a
certificate in the form of EXHIBIT I hereto (the "COMPLIANCE
CERTIFICATE") by the Chief Financial Officer of the Company (with
supporting details) stating that the financials were prepared in
accordance with GAAP (subject to customary year-end audit
adjustments) and that the covenants described in Article VII have
been met;
(iii) as soon as available and in any event within 45
days after the end of each month, the monthly unaudited financial
statements of the Company; and
(iv) at least 15 days prior to the closing of any
acquisition permitted under Section 6.07(b), the adjusted pro forma
balance sheet and income statements of the Company, reflecting the
financial conditional of the Company and its Subsidiaries after such
acquisition, all in accordance with GAAP.
In each case, such financial statements shall include balance
sheets, income statements, and statements of cash flows for the Company,
provided, HOWEVER, that the monthly financial statements provided by the Company
to the Lenders shall not include a statement of cash flows.
(b) The Company will furnish to each of the Lenders, with reasonable
promptness, notice of certain other events, including the occurrence or
existence of any Default or Event of Default, any citation for a material
violation of environmental laws or regulations, important matters relating to
funding of employee benefit plans, or such other information as any Lender or
the Agent may reasonably request.
SECTION 5.03. MAINTENANCE OF PROPERTIES. The Company
shall, and shall cause each of its Subsidiaries to, maintain, preserve, protect
and keep, or cause to be maintained, preserved, protected and kept, its
properties and every part thereof in good repair, working order and condition,
and from time to time will make or cause to be made all needful and proper
repairs, renewals, replacements, extensions, additions, betterments, and
improvements thereto, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times other than those which
the failure to maintain would in the aggregate, have no Materially Adverse
Effect; PROVIDED, HOWEVER, that the Company and each Subsidiary shall not be
under any obligation to repair or replace any such properties which have become
obsolete or have become unsuitable or inadequate for the purpose for which they
are used.
SECTION 5.04. MAINTENANCE OF INSURANCE. The Company
shall, and shall cause each of its Subsidiaries to, (i) maintain liability and
worker's compensation insurance with financially sound and reputable insurers
(or maintain a legally sufficient, fully funded, program of self insurance
against worker's compensation liabilities), and also maintain adequate insurance
on its properties against such hazards and in at least such amounts as is
customary in the business, and (ii) name the Agent as loss payee or additional
insured, as its interest may appear, on each of such insurance policies. At the
request of any Lender, the Company will forthwith deliver an officer's
certificate specifying the material details of such insurance in effect.
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SECTION 5.05. MAINTENANCE OF BOOKS; INSPECTION OF
PROPERTY AND RECORDS. The Company shall, and shall cause each of its
Subsidiaries to, keep proper books of record and account containing complete and
accurate entries in all material respects of all of their respective financial
and business transactions and prepare or cause to be prepared its annual
statements and reports in accordance with GAAP. The Company shall, and shall
cause each of its Subsidiaries to, permit any person designated by any Lender to
visit and inspect any of its properties, corporate books and financial records,
to make copies and take extracts therefrom, and to discuss its accounts,
affairs, and finances with the principal officers of the Company and such
Subsidiary during reasonable business hours, all at such times as the Lenders
may reasonably request; PROVIDED, HOWEVER, that any time following the
occurrence and continuance of an Event of Default, no prior notice to the
Company and such Subsidiary shall be required. The Company shall, and shall
cause each of its Subsidiaries to, prepare or cause to be prepared its interim
statements and reports in accordance with GAAP, subject to usual and customary
year end audit and adjustments and footnote disclosures.
SECTION 5.06. EXISTENCE AND STATUS. The Company shall,
and shall cause each of its Subsidiaries that is a corporation to, maintain its
corporate existence, its material rights, franchises and licenses (for the
scheduled duration thereof), its patents, trademarks, tradenames, service marks
and other intellectual property rights necessary or desirable in the normal
conduct of its business, its good standing in its state of incorporation and its
qualification and good standing as a foreign corporation in all jurisdictions
where its ownership of property or its business activities cause such
qualification to be required and the failure to do so could have a Materially
Adverse Effect. The Company shall cause each Subsidiary that is not a
corporation to maintain its present form of existence, its material rights,
franchises and licenses (for the scheduled duration thereof), its patents,
trademarks, tradenames, service marks and other intellectual property rights
necessary or desirable in the normal conduct of its business, its good standing
in the jurisdiction of its constitution and its qualification and good standing
as a foreign entity in all jurisdictions where its ownership of property or its
business activities cause such qualification to be required and the failure to
do so could have a Materially Adverse Effect.
SECTION 5.07. TAXES AND CLAIMS. The Company shall, and
shall cause each of its Subsidiaries to, pay and discharge (i) all Taxes prior
to the date on which penalties attach thereto, and (ii) all claims (including,
without limitation, claims for labor, materials, supplies or services)
(collectively "OTHER CLAIMS") which, if unpaid, might become a Lien upon any of
its property; PROVIDED, HOWEVER, that the Company and its Subsidiaries shall not
be required to pay and discharge any such Tax or Other Claim so long as the
legality or amount thereof shall be promptly contested in good faith and by
appropriate proceedings which effectively stay the enforcement of any Lien and
the attachment of a penalty and the Company or such Subsidiary, as the case may
be, shall have set aside appropriate reserves therefor in accordance with GAAP.
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SECTION 5.08. COMPLIANCE WITH LAWS, ETC. The Company
shall, and shall cause each of its Subsidiaries to, comply with all Applicable
Law (including, without limitation, the Environmental Laws and Employee Benefit
Laws) and Contractual Obligations applicable to or binding on any of them where
the failure to comply with such Applicable Law and Contractual Obligations would
reasonably be expected to have a Materially Adverse Effect.
SECTION 5.09. ERISA. The Company shall, and shall cause
each of its Subsidiaries to, deliver to each of the Lenders:
(i) Promptly after the discovery of the occurrence
thereof with respect to any Plan, or any trust established
thereunder, notice of (A) a "reportable event" described in Section
4043 of ERISA and the regulations issued from time to time
thereunder (other than a "reportable event" not subject to the
provisions for 30-day notice to the PBGC under such regulations), or
(B) any other event which could subject the Company or any ERISA
Affiliate to any material tax, penalty or liability under Title I or
Title IV of ERISA or Chapter 43 of the Code;
(ii) At the same time and in the same manner as such
notice must be provided to the PBGC, or to a Plan participant,
beneficiary or alternative payee, any notice required under Section
101(d), 302(f)(4), 303(e), 307(e), 4041(b)(1)(A) or 4041(c)(1)(A) of
ERISA or Section 412(f) of the Code with respect to any Plan; and
(iii) Upon the request of any Lender, (A) true and
complete copies of any and all documents, government reports and
determination or opinion letters (if any) for any Plan, or (B) a
current statement of withdrawal liability for each Multiemployer
Plan.
SECTION 5.10. LITIGATION. The Company shall give prompt
written notice to each of the Lenders of (a) any judgment entered by a court,
tribunal, administrative agency or arbitration panel in which the amount of
liability is $250,000 or more in excess of insurance coverage, or in which the
aggregate amount of liability is $500,000 or more in excess of insurance
coverage, and (b) any disputes which may exist between the Company or any of its
Subsidiaries and any governmental or regulatory body, in which the amount in
controversy is $250,000 or more and which may materially and adversely affect
the normal business operations of the Company or any of its Subsidiaries or any
of their respective properties and assets. The Company shall provide each of the
Lenders, on a quarterly basis, concurrently with the delivery of the Compliance
Certificate as provided under Section 5.02(a)(ii), a report which shall set
forth each action, proceeding or claim, of which the Company or any of its
Subsidiaries has notice, which is commenced or asserted against the Company, and
in which the amount claimed or the potential liability is $250,000 or more.
SECTION 5.11. NOTICE OF EVENTS OF DEFAULT. The Company
shall deliver to each of the Lenders within five (5) days after any Executive
Officer obtains any knowledge of any condition, event or act which creates or
causes a Default or an Event of Default, a certificate signed by an officer of
the Company specifying the nature thereof, the period of existence thereof and
what action the Company or such Subsidiary proposes to take with respect
thereto.
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SECTION 5.12. STOCKHOLDER REPORTS, ETC.
Contemporaneously with the sending or filing thereof, the Company will provide
to each of the Lenders copies of all proxy statements, financial statements, and
reports which the Company sends to its stockholders, and copies of all regular,
periodic, and special reports, and all statements which the Company files with
the Securities and Exchange Commission or any governmental authority which may
be substituted therefor, or with any national securities exchange.
SECTION 5.13. FUTURE GUARANTORS.
(a) Subject to any prohibitions or limitations as to
power or authority imposed by law applicable to any such Subsidiary, the Company
shall cause (1) each Person incorporated or otherwise organized in the United
States that hereafter becomes a Subsidiary (an "ADDITIONAL GUARANTOR") to become
a Guarantor under the Guaranty Agreement and to create a security interest in
favor of the Lenders in all of its assets, including, to the extent owned by
such Guarantor, 100% of the stock of other Subsidiaries, to the Agent upon the
creation of such Additional Guarantor by executing and delivering to the Agent
the Supplemental Documents; and (2) each Person that owns the stock of the
Additional Guarantor to pledge and deliver such stock to the Agent, together
with a supplement to the Company Pledge Agreement or Guarantor Pledge Agreement,
as the case may be, and with stock powers or other appropriate instruments of
transfer executed by such Person in blank.
(b) The Additional Guarantor shall also deliver to the Agent and the
Lenders, simultaneously with the Supplemental Documents, (1) Certified Requests
for Information or Copies (Form UCC-11) or equivalent reports, showing that
there are no effective financing statements which name the Additional Guarantor
as debtor and (2) an opinion rendered by legal counsel to such Additional
Guarantor and the Person required to pledge the shares of stock of the
Additional Guarantor under the Security Documents to the Agent, addressing the
types of matters set forth in EXHIBIT G and EXHIBIT H hereof and such other
matters as the Lenders may reasonably request, addressed to the Agent and the
Lenders.
SECTION 5.14. OWNERSHIP OF GUARANTORS. The Company and
its Subsidiaries that own Guarantors shall maintain their percentage ownership
of such Guarantors existing as of the date hereof and shall not decrease its
ownership percentage in each Additional Guarantor pursuant to Section 5.13 after
the date hereof, as such ownership exists at the time such Additional Guarantor
becomes a Guarantor hereunder.
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ARTICLE VI
NEGATIVE COVENANTS
So long as any Note or the Swing Line Note shall remain
unpaid or any Lender shall have any Commitment hereunder, without the written
consent of the Required Lenders (unless otherwise provided herein):
SECTION 6.01. LIMITATION ON LIENS AND SECURITY
INTERESTS. The Company shall not, and shall not permit any of its Subsidiaries
to, create, incur, assume or suffer to exist, any Lien or other encumbrance of
any kind on any of its properties or assets, real or personal, wherever located,
including assets hereafter acquired, except
(a) Liens existing on the date hereof and described on
SCHEDULE 6.01;
(b) Liens in favor of the Agent;
(c) Liens for Taxes not yet payable or being contested
in good faith and by appropriate proceedings;
(d) deposits or pledges to secure payments of workmen's
compensation, unemployment insurance, old age pension and other
social security obligations;
(e) mechanics', carriers', workmen's, repairmen's,
landlord's, or other Liens arising in the ordinary course of
business securing obligations which are not overdue for a period
longer than 60 days, or which are being contested in good faith by
appropriate proceedings;
(f) pledges or deposits to secure performance in
connection with bids, tenders, contracts (other than contracts for
the payment of money) or leases made in the ordinary course of the
business of the Company or any of its Subsidiaries;
(g) deposits to secure, or in lieu of, surety and appeal
bonds to which the Company or a Subsidiary of the Company is a
party;
(h) deposits in connection with the prosecution or
defense of any claim in any court or before any administrative
commission or agency;
(i) Liens arising out of judgments or awards with
respect to which the Company or a Subsidiary of the Company at the
time shall in good faith be diligently prosecuting an appeal or
proceedings for review and with respect to which it shall have
secured a stay of execution pending such appeal or proceedings for
review;
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(j) purchase money security interests, and leases in the
nature thereof, for equipment and machinery or mortgages for real
estate, in each case purchased in the ordinary course of business
and to be used in the conduct of its business, PROVIDED that any
such security interest or mortgage secures only the repayment of the
purchase price of such machinery, equipment or real estate and any
such lease obligations do not exceed the purchase price of such
machinery, equipment or real estate;
(k) Liens on fixtures in connection with existing
mortgages on real property or mortgages permitted hereunder;
(l) zoning restrictions, easements, licenses,
reservations and restrictions on the use of real property or minor
irregularities thereto that do not materially detract from the use
thereof or the assets of the Company;
(m) Liens incurred on pledges or deposits in the
ordinary course of business in connection with workers'
compensation, unemployment insurance, old age or Social Security
benefits; and
(n) the assets in which a security interest is granted
to Harsco pursuant to the Harsco Arrangement, PROVIDED that the
aggregate amount of such pledged assets is less than $20 million.
SECTION 6.02. COMPLIANCE WITH ERISA. The Company shall
not take or fail to take, or permit any of its Subsidiaries or ERISA Affiliates
to take or fail to take, any action with respect to a Plan including, but not
limited to, (i) establishing any Plan, (ii) amending any Plan, (iii) terminating
or withdrawing from any Plan, or (iv) incurring an "amount of unfunded benefit
liabilities", as defined in Section 4001(a)(18) of ERISA, or any withdrawal
liability under Title IV of ERISA, where such action or failure could have a
Materially Adverse Effect, result in a Lien on the property of the Company or
any of its Subsidiaries or require the Company or any of its Subsidiaries to
provide any security, except to the extent permitted pursuant to Section 6.01
hereof.
SECTION 6.03. SALE AND LEASEBACK. The Company shall
not, and shall not permit any of its Subsidiaries to, enter into any transaction
with any other entity whereby such other entity leases assets sold or otherwise
transferred to it by the Company or such Subsidiary.
SECTION 6.04. TRANSACTIONS WITH AFFILIATES. The Company
shall not, and shall not permit any of its Subsidiaries to:
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(a) Enter into any material transaction or series of
related transactions which in the aggregate would be material,
whether or not in the ordinary course of business, with any
affiliate of the Company or any of its Subsidiaries (but excluding
any affiliate which is the Company or any of its Subsidiaries),
other than on terms and conditions substantially as favorable to the
Company or such Subsidiary as would be obtained by the Company or
such Subsidiary at the time in a comparable arm's-length transaction
with a Person other than an affiliate.
(b) Convey or transfer to any other Person (including
the Company or any of its Subsidiaries) any real property,
buildings, or fixtures used in the manufacturing or production
operations of the Company or any of its Subsidiaries, or convey or
transfer to the Company or any of its Subsidiaries any other assets
(excluding conveyances or transfers in the ordinary course of
business) if at the time of such conveyance or transfer any Default
or Event of Default exists or would exist as a result of such
conveyance or transfer.
SECTION 6.05. GUARANTIES. The Company shall not, and
shall not permit any of its Subsidiaries to, create, incur, assume, guarantee,
suffer to exist or otherwise become liable on or with respect to, directly or
indirectly, any guaranties other than:
(i) endorsements of instruments for deposit
or collection in the ordinary course of business;
(ii) guarantees of Indebtedness owed by any
Consolidated Company to another Consolidated Company; or
(iii) guarantees made pursuant to the Harsco
Arrangement.
SECTION 6.06. LIMITATIONS ON PAYMENT RESTRICTIONS.
Except as provided under (i) the Senior Subordinated Debt Offering, and (ii) the
Harsco Arrangement, the Company shall not, and shall not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective, any consensual encumbrance or restriction on the ability of the
Company or any of its Subsidiaries to (i) pay dividends or make any other
distributions on stock of the Company or any of its Subsidiaries, (ii) pay any
indebtedness owed to the Company or any of its Subsidiaries, or (iii) transfer
any of its property or assets to the Company or any of its Subsidiaries except
any consensual encumbrance or restriction existing under the Loan Documents.
SECTION 6.07. MERGER; JOINT VENTURES; SALE OF ASSETS;
ACQUISITIONS. The Company shall not, and shall not permit any of its
Subsidiaries to:
(a) merge or consolidate with any other entity, except
the foregoing restrictions shall not be applicable to:
(i) mergers or consolidations of (x) any
Subsidiary with any other Subsidiary which is a
Guarantor or (y) any Subsidiary with the Company; or
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(ii) mergers or consolidations in which any
Person engaged in business in which the Company is
engaged as of the Closing Date or substantially related
thereto merges or consolidates with the Company or any
of its Subsidiaries where the surviving corporation is
the Company or such Subsidiary;
(b) purchase, lease or otherwise acquire for cash, stock
or other consideration, the stock of any Person or all or any
substantial portion of the assets of any Person where such stock,
assets or other consideration have an aggregate fair market value of
more than $7,500,000, PROVIDED, HOWEVER, that so long as no Event of
Default has occurred (or will be caused by such acquisition), the
Company or any of its Subsidiaries may request that the Lenders
consent to such acquisition for consideration greater than
$7,500,000 in any one transaction. Consistent with such request, the
Company shall provide the Lenders with an information package to
include (but not limited to) providing the following:
(i) historical financial statements showing
the impact of the acquisition on the Company's
historical operating performance and existing balance
sheet;
(ii) projections detailing the expected
performance of the combined company going forward; and
(iii) a detailed listing of the assets
proposed to be purchased in the transaction;
(c) enter into a partnership or joint venture with any
other entity; PROVIDED, HOWEVER, that so long as no Event of Default
has occurred, the Company or any of its Subsidiaries may request
that the Required Lenders consent to its entering into a partnership
or joint venture for the purposes of carrying on its business; or
(d) sell, lease, transfer or otherwise dispose of any
assets, except that this Section 6.07 shall not prohibit any
disposition of (i) any asset if on the date such asset is sold, the
Asset Value of all asset sales occurring after the Closing Date,
taking into account the Asset Value of the proposed asset sale,
would not exceed on an aggregate basis five percent (5%) of the
Consolidated Net Worth of the Company and its Subsidiaries on the
Closing Date and such sale is in the ordinary course of business,
(ii) any obsolete or retired property not used or useful in its
business (such assets to include high-pressure tanks, motorized
vehicles, including cars and trucks, and lines of business other
than carbon dioxide that may be obtained by the Company as part of
the group of assets of any corporation or other business entity the
Company may acquire) or (iii) certain other sales to be agreed upon
in writing by the Company and the Required Lenders.
SECTION 6.08. DIVIDENDS; LOANS, ADVANCES.
(a) In any fiscal year of the Company, the Company shall
not pay or declare any dividends on any of its capital stock.
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(b) The Company shall not, and shall not permit any of
its Subsidiaries to, make, permit or hold any loans or advances (not including
accounts receivable) to any Person, other than:
(i) Investments in Subsidiaries existing on
the Closing Date;
(ii) direct obligations of the United States
or any agency thereof, or obligations guaranteed by the
United States or any agency thereof, in each case
supported by the full faith and credit of the United
States and maturing within one year from the date of
creation thereof;
(iii) commercial paper maturing within one
year from the date of creation thereof rated in the
highest grade by a nationally recognized credit rating
agency;
(iv) time deposits maturing within one year
from the date of creation thereof with, including
certificates of deposit issued by any Lender and any
office located in the United States of any bank or trust
company which is organized under the laws of the United
States or any state thereof and has total assets
aggregating at least $500,000,000, including without
limitation, any such deposits in Eurodollars issued by a
foreign branch of any such bank or trust company;
(iv) Investments made by Plans;
(v) advances made by the Company or any of
its Subsidiaries to its employees during the ordinary
course of business, and loans made by the Company to its
employees to allow such employees to purchase stock of
the Company (such loans to be evidenced by a promissory
note and pledged to the Agent pursuant to the terms of
the Security Documents); PROVIDED that the aggregate
total of such advances made by the Company to its
employees under this Subsection shall not exceed
$1,000,000 at any time; and
(vi) deposits made by the Company in
connection with acquisitions of other business
entities.
SECTION 6.09. NATURE OF BUSINESS. The Company shall
not, and shall not permit any of its Subsidiaries to, engage in any business or
businesses other than those engaged in by the Company or such Subsidiary on the
date hereof; PROVIDED, HOWEVER, that nothing herein contained shall prevent the
Company or any of its Subsidiaries (i) from expanding the location of its
business or businesses in the United States, (ii) from ceasing or omitting to
exercise any rights, licenses, permits, or franchises which in good faith in the
judgment of the Company or such Subsidiary can no longer be profitably
exercised, or (iii) from engaging in a business or businesses that are ancillary
to those engaged in by the Company or such Subsidiary on the date hereof.
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SECTION 6.10. SALE OF SUBSIDIARIES. The Company shall
not, and shall not permit any of its Subsidiaries to, sell or otherwise dispose
of any shares of capital stock of or other ownership interest in any Subsidiary
of the Company (except in connection with any acquisition, merger or
consolidation permitted by Section 6.07), or permit any Subsidiary of the
Company to issue any additional shares of its capital stock or other incidents
of ownership, except on a PRO RATA basis to all its stockholders, partners or
owners, as the case may be and provided that any such additional shares of
capital stock or other incidents of ownership issued to the Company, any
Guarantor or Additional Guarantor are pledged to the Agent.
SECTION 6.11. NEGATIVE PLEDGES. The Company shall not,
and shall not permit any of its Subsidiaries to, agree or covenant with any
Person to restrict in any way its ability to grant any Lien on its assets in
favor of the Lenders, except that this Section 6.11 shall not apply to (i) any
covenants contained in this Agreement or the Security Documents, and (ii)
covenants and agreements made in connection with Liens described in Section
6.01(j) but only if such covenant or agreement applies solely to the specific
machinery, equipment or real estate to which such Lien relates.
SECTION 6.12. CREATION OF SUBSIDIARIES. Neither the
Company nor any of its Subsidiaries shall create or acquire any other Subsidiary
or any other affiliate after the Closing Date.
SECTION 6.13. PREPAYMENTS UNDER OTHER AGREEMENTS. The
Company shall not, and shall not permit any of its Subsidiaries to, make any
prepayments under any Subordinated Debt document or repurchase any notes issued
in connection with any Subordinated Debt without the written consent of the
Lenders.
ARTICLE VII
FINANCIAL COVENANTS
So long as any Note or the Swing Line Note shall remain
unpaid or any Lender shall have any Commitment hereunder, without the
consent of the Required Lenders:
SECTION 7.01. SENIOR DEBT COVERAGE RATIO. The Company
shall not permit the Senior Debt Coverage Ratio as of the last day of each
fiscal quarter to be greater than 3.5 to 1.0.
SECTION 7.02. FIXED CHARGE COVERAGE RATIO. The Company
shall not permit the Fixed Charge Coverage Ratio as of the last day of any
fiscal quarter of the Company to be less than 1.25 to 1.0.
SECTION 7.03. SENIOR DEBT LEVERAGE RATIO. The Company
shall not permit the Senior Debt Leverage Ratio as of the last day of any fiscal
quarter to be greater than 0.60 to 1.0.
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SECTION 7.04. MINIMUM NET WORTH. The Company shall at
all times maintain its Net Worth greater than the Minimum Net Worth, equal to
(a) $50,000,000, increasing to $55,000,000 beginning on the fiscal quarter
ending on December 31, 1999, (b) PLUS fifty percent (50%) of the cumulative
Consolidated Net Income for each fiscal quarter beginning after the fiscal
quarter ending on September 30, 1997 (specifically not including any
Consolidated Net Loss for any fiscal quarter), PLUS (c) the cumulative net
proceeds of all equity offerings made by the Company for each fiscal quarter
beginning after the fiscal quarter ending on September 30, 1997, if any.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. EVENTS OF DEFAULT. Any one or more of the
following shall constitute an Event of Default hereunder:
(a) The Company shall fail to pay any principal amount
owing when due pursuant to this Agreement, the Notes or the Swing
Line Note; or
(b) The Company shall fail to pay any interest, fees, or
any other amounts owing pursuant to this Agreement, the Notes or the
Swing Line Note within three (3) Business Days of the due date
thereof; or
(c) The Company shall fail to perform or observe any
covenant or agreement contained in Section 5.02 or Section 6.02, if
remaining unremedied for a period of ten (10) days after (x) an
Executive Officer becomes aware of such failure or (y) the Agent or
any Lender gives notice to the Company as provided under Section
10.03; or
(d) The Company shall fail to perform or observe any
covenant or agreement contained in Section 5.11, Article VI (other
than Section 6.02) and Article VII; or
(e) The Company shall fail to perform or observe any
other covenant or agreement set forth in this Agreement, other than
those referred to in clauses (a), (b), (c) and (d) above, and (to
the extent such failure can be remedied) such failure of performance
shall not be remedied within thirty (30) days after the earlier of
the date on which (1) the Company obtains knowledge thereof and (2)
written notice thereof has been given by the Agent to the Company;
or
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(f) Any representation, warranty or statement made by or
on behalf of the Company or any Guarantor to the Agent or any Lender
in this Agreement, the Company Security Agreement, the Company
Pledge Agreement, the Company Trademark Security Agreement, the
Guarantor Security Agreement, the Guarantor Pledge Agreement, the
Guarantor Trademark Security Agreement, the Mortgage and the
Assignment of Leases shall be in any respect incorrect, false or
misleading as of the time at which such representation or warranty
was given, or any representation, warranty or statement made by or
on behalf of the Company or any Guarantor to the Agent or any Lender
in any other Loan Documents or in any financial statement, report or
certificate furnished pursuant to this Agreement shall be in any
material respect incorrect, false or misleading as of the time at
which such representation, warranty or statement was made; or
(g) The Company or any of its Subsidiaries fails to make
any payment as and when such payment is due upon any Indebtedness
having an aggregate unpaid principal balance in excess of $250,000,
other than Indebtedness owing or arising pursuant to this Agreement
and the Notes or the Swing Line Note, or any other default, event or
condition shall have occurred or exist with respect to any such
other Indebtedness, or under any agreement or instrument evidencing,
securing or related to such other Indebtedness, the effect of which
is to cause, or to permit the holder or owner of such Indebtedness
to cause, such Indebtedness or any portion thereof, to become due
prior to its stated maturity date or prior to its regularly
scheduled dates of payment; or
(h) The Company or any of its Subsidiaries makes an
assignment for the benefit of its creditors or files a voluntary
petition seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency or readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect; or
(i) Any involuntary petition is filed against the
Company or any of its Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, and such petition shall remain undismissed for
a period of sixty (60) days or the Company approves, consents or
acquiesces thereto; or
(j) The Company incurs any liability or is exposed to
any potential liability under any employee benefit plan that has or
would have a Materially Adverse Effect; or
(k) Final judgment for the payment of money in excess of
$250,000 (not fully covered by insurance) or otherwise having a
Materially Adverse Effect shall have been rendered against the
Company or any of its Subsidiaries and the same shall have remained
unpaid, unstayed on appeal, undischarged, or undismissed for a
period of sixty (60) days, or such longer period as may be permitted
by Applicable Law, during which execution may not be made, provided
no judgment Lien has attached or continues to attach to the assets
of the Company or such Subsidiary during such longer period; or
(l) The Company fails to close and have funded by
lenders at least $15,000,000 in Subordinated Debt, evidenced by
subordinated notes issued by the Company, substantially similar to
the Senior Subordinated Debt Offering, and in any event in form and
substance satisfactory to the Lenders, on or before November 17,
1997; or
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(m) An Event of Default occurs under any Subordinated
Debt document; or
(n) Any Change in Control occurs.
SECTION 8.02. REMEDIES ON DEFAULT.
(a) Upon (i) the occurrence and during the continuation
of an Event of Default (other than an Event of Default described in Section
8.01(h) or (i)) and (ii) the receipt of written instructions by the Agent from
any Lender, the Agent shall (x) terminate all obligations of the Lenders to the
Company, including, without limitation, the Commitments and all obligations to
make Advances under this Agreement, and (y) declare the Notes and the Swing Line
Note, including, without limitation, principal, accrued interest and costs of
collection (including, without limitation, reasonable attorneys' fees if
collected by or through an attorney at law or in bankruptcy, receivership or
other judicial proceedings) and all other Obligations immediately due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are expressly waived.
(b) Upon the occurrence of an Event of Default under
Section 8.01(h) or (i) all obligations of the Lenders to the Company, including,
without limitation, the Commitments, shall terminate automatically and the Notes
and the Swing Line Note, including, without limitation, principal, accrued
interest and costs of collection (including, without limitation, reasonable
attorneys' fees if collected by or through an attorney at law or in bankruptcy,
receivership or other judicial proceedings) and all other Obligations shall be
immediately due and payable, without presentment, demand, protest, or any other
notice of any kind, all of which are expressly waived.
(c) Upon the occurrence of an Event of Default and
acceleration of the Notes and the Swing Line Note as provided in (a) or (b)
above, each of the Lenders and the Agent, or any of them, may pursue any remedy
available under this Agreement, the Notes, the Swing Line Note, the Security
Documents or any other Loan Document, or available at law or in equity, all of
which shall be cumulative. The order and manner in which the rights and remedies
of the Lenders under the Loan Documents and otherwise may be exercised shall be
determined by the Required Lenders.
(d) Regardless of how each Lender may treat the
payments for the purpose of its own accounting, for the purpose of computing the
Company's obligations hereunder and under the Notes and the Swing Line Note, no
application of the payments will cure any Event of Default or prevent
acceleration, or continued acceleration, of amounts payable under the Loan
Documents or prevent the exercise, or continued exercise, of rights or remedies
of the Lenders hereunder or under applicable law.
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ARTICLE IX
THE AGENT
SECTION 9.01. APPOINTMENT AND AUTHORIZATION. Each
Lender hereby designates SunTrust as Agent to act as herein specified. Each
Lender hereby irrevocably authorizes, and each holder of any Note or by the
acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take
such action on its behalf under the provisions of this Agreement and the Notes
and any other instruments and agreements referred to herein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof and such
other powers as are reasonably incidental thereto. The Agent may perform any of
its duties hereunder by or through its agents or employees.
SECTION 9.02. NATURE OF DUTIES OF THE AGENT. The Agent
shall have no duties or responsibilities to the other Lenders except those
expressly set forth in this Agreement. Neither the Agent nor any of its
officers, directors, employees or agents shall be liable for any action taken or
omitted by it as such hereunder or in connection herewith, unless caused by its
or their gross negligence or willful misconduct. The Agent shall not have by
reason of this Agreement a fiduciary relationship in respect of any Lender; and
nothing in this Agreement, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of this
Agreement except as expressly set forth herein. The Agent agrees to give each
Lender prompt notice of the Agent's receipt from the Company of any notice under
this Agreement.
SECTION 9.03. LACK OF RELIANCE ON THE AGENT.
(a) Each Lender agrees that, independently and without
reliance upon the Agent, any other Lender, or the directors, officers, agents or
employees of the Agent or of any other Lender, each Lender, to the extent it
deems appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Company and its
Subsidiaries in connection with the taking or not taking of any action in
connection with this Agreement and the other Loan Documents, including the
decision to enter into this Agreement, and (ii) its own appraisal of the
creditworthiness of the Company and its Subsidiaries and, except as expressly
provided in this Agreement, the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before the making of any Advance or at any time or times thereafter.
(b) The Agent shall not be responsible to any Lender
for any recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, priority or sufficiency of this Agreement or any
other Loan Documents or the financial condition of the Company or its
Subsidiaries or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Loan Documents, or the financial condition of the Company
or its Subsidiaries, or the existence or possible existence of any Default or
Event of Default.
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SECTION 9.04. CERTAIN RIGHTS OF THE AGENT.
(a) If the Agent shall request instructions from the
Required Lenders with respect to any act or action (including the failure to
act) in connection with this Agreement or any other Loan Documents, the Agent
shall be entitled to refrain from such act or taking such action unless and
until the Agent shall have received instructions from the Required Lenders and
the Agent shall not incur liability to any Person by reason of so refraining.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders;
PROVIDED, HOWEVER, that the Agent shall not be required to act or not act in
accordance with any instructions of the Required Lenders if to do so would
expose the Agent to personal liability or would be contrary to any Loan Document
or to Applicable Law.
(b) The Agent may assume that no Event of Default has
occurred and is continuing, unless the Agent has received notice from the
Company stating the nature of the Event of Default, or has received notice from
a Lender stating the nature of the Event of Default and that such Lender
considers the Event of Default to have occurred and to be continuing.
(c) If the Agent has notice, or has received notice,
that an Event of Default has occurred and is continuing, the Agent shall give
notice thereof to the Lenders and shall act or not act upon the instructions of
the Required Lenders, PROVIDED that the Agent shall not be required to act or
not act if to do so would expose the Agent to personal liability or would be
contrary to any Loan Document or to Applicable Law, and PROVIDED FURTHER, that
if the Required Lenders fail, for five days after the receipt of notice from the
Agent, to instruct the Agent, then the Agent, in its discretion, may act or not
act as it deems advisable for the protection of the interests of the Lenders and
shall be fully protected in so acting.
SECTION 9.05. LIABILITY OF THE AGENT. Neither the Agent
nor any of its directors, officers, agents or employees shall be liable for any
action taken or not taken by them under or in connection with the Loan
Documents, EXCEPT for their own gross negligence or willful misconduct. Without
limitation on the foregoing, the Agent and its directors, officers, agents, and
employees:
(a) may treat the payee of any Note as the holder
thereof until the Agent receives notice of the assignment or
transfer thereof in form satisfactory to the Agent, signed by the
payee, and may treat each Lender as the owner of that Lender's
interest in the obligations due to such Lender for all purposes of
this Agreement and the other Loan Documents until the Agent receives
notice of the assignment or transfer thereof, in form satisfactory
to the Agent, signed by such Lender;
(b) may consult with outside legal counsel (including
King & Spalding), in-house legal counsel, independent public
accountants, in-house accountants and other professionals, or other
experts selected by it with reasonable care, or with legal counsel,
independent public accountants, or other experts for the Company,
and shall not be liable for any action taken or not taken by it or
them in good faith in accordance with the advice of such legal
counsel, independent public accountants, or experts;
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(c) will not be responsible to any Lender for any
statement, warranty, or representation made in any of the Loan
Documents or in any notice, certificate, report, request, or other
statement (written or oral) in connection with any of the Loan
Documents;
(d) except to the extent expressly set forth in the Loan
Documents, will have no duty to ascertain or inquire as to the
performance or observance by the Company or any of its Subsidiaries
or any other Person of any of the terms, conditions, or covenants of
any of the Loan Documents or to inspect the property, books, or
records of the Company or any of its Subsidiaries or other Person;
(e) will not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness,
effectiveness, sufficiency, or value of any Loan Document, any other
instrument or writing furnished pursuant thereto or in connection
therewith;
(f) will not incur any liability by acting or not acting
in reliance upon any Loan Document, notice, consent, certificate,
document, statement, telex, telecopier message or other instrument
or writing believed by it or them to be genuine and to have been
signed, sent or made by the proper Person; and
(g) will not incur any liability for any arithmetical
error in computing any amount payable to or receivable from any
Lender hereunder, including, without limitation, payment of
principal and interest on the Notes, Advances and other amounts;
PROVIDED that promptly upon discovery of such an error in
computation, the Agent, the Lender and (to the extent applicable)
the Company shall make such adjustments as are necessary to correct
such error and to restore the parties to the position that they
would have occupied had the error not occurred.
SECTION 9.06. INDEMNIFICATION. Each Lender shall,
ratably in accordance with the respective outstanding principal amount of its
Advances, indemnify and hold the Agent and its directors, officers, agents and
employees harmless against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever (including, without limitation, attorneys' fees
and disbursements) that may be imposed on, incurred by, or asserted against it
or them in any way relating to or arising out of the Loan Documents (other than
losses incurred by reason of the failure by the Company to pay the obligations
due to the Lenders hereunder or under the Notes) or any action taken or not
taken by it as Agent thereunder, EXCEPT for the gross negligence or willful
misconduct of the Agent. Without limitation of the foregoing, each Lender shall
reimburse the Agent upon demand for that Lender's ratable share of any cost or
expense incurred by the Agent in connection with the negotiation, preparation,
execution, delivery, administration, amendment, waiver, refinancing,
restructuring, reorganization (including a bankruptcy reorganization) or
enforcement of the Loan Documents, to the extent that the Company is required to
pay that cost or expense but fails to do so upon demand.
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SECTION 9.07. AGENT AND AFFILIATES. SunTrust (and each
successor Agent) has the same rights and powers under the Loan Documents as any
other Lender and may exercise the same as though it were not the Agent; and the
term "the Lenders" or "Lender" includes SunTrust in its individual capacity.
SunTrust (and each successor Agent) and its Affiliates may accept deposits from,
lend money to, and generally engage in any kind of banking, trust or other
business with the Company and any Affiliate of the Company, as if it were not
the Agent and without any duty to account therefor to the Lenders. SunTrust (and
each successor Agent) need not account to any other Lender for any monies
received by it for reimbursement of its costs, expenses and fees as the Agent
hereunder, or for any monies received by it in its capacity as a Lender
hereunder, except as otherwise provided herein. This Agreement shall not be
deemed to constitute a joint venture or partnership among the Lenders.
SECTION 9.08. SUCCESSOR AGENT. The Agent may resign as
such at any time by written notice to the Company and the Lenders, to be
effective upon a successor's acceptance of appointment as Agent. In such event,
the Required Lenders shall appoint a successor Agent or Agents who must be from
among the Lenders; PROVIDED that the Agent shall be entitled to appoint a
successor Agent from among the Lenders, subject to acceptance of appointment by
that successor Agent if the Required Lenders have not appointed a successor
Agent within thirty (30) calendar days after the date the Agent gave notice of
resignation or was removed; and PROVIDED FURTHER that if no such successor Agent
is appointed from among the Lenders, an Agent who is not a Lender may be
appointed, which shall be a bank organized under the laws of the United States
of America or any State thereof, or any affiliate of such bank, having a
combined capital and surplus of at least $500,000,000. Upon a successor's
acceptance of appointment as Agent the successor will thereupon succeed to and
become vested with all the rights, powers, privileges, and duties of the Agent
under the Loan Documents, and the resigning Agent will thereupon be discharged
from its duties and obligations thereafter arising under the Loan Documents.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. SURVIVAL. All covenants, agreements,
warranties and representations made herein, in the other Loan Documents, or in
any certificates or other documents delivered in connection with this Agreement
by or on behalf of the Company or any Guarantor shall survive the advances of
money made by the Lenders to the Company hereunder and the delivery of this
Agreement and the other Loan Documents, and all such covenants, agreements,
warranties and representations shall be binding upon and inure to the benefit of
the Company, the Guarantors, the Lenders, the Agent, and their respective
successors and assigns, whether or not so expressed, PROVIDED, HOWEVER, that the
Company may not assign or transfer any of its rights under this Agreement
without the prior written consent of each of the Lenders.
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SECTION 10.02. AMENDMENTS; CONSENTS. No amendment,
modification, supplement, termination, or waiver of any provision of this
Agreement or any other Loan Document, and no consent to any departure by the
Company, any Guarantor or any Subsidiary of the Company therefrom, may in any
event be effective unless in writing signed by the Required Lenders, and then
only in the specific instance and for the specific purpose given; PROVIDED,
HOWEVER, that without the approval in writing of all Lenders, no amendment,
modification, supplement, termination, waiver, or consent may be effective:
(a) to amend or modify the principal of, the rate of
interest payable on, or any fees with respect to, any Lender's Note,
the Fees or the amount of any Lender's Commitment;
(b) to postpone any date fixed for any payment of
principal of, or any installment of interest on, any Lender's Notes
or the Fees, or to extend the term of any Lender's Commitment;
(c) to amend or modify the definitions of "Commitment"
or "Required Lenders" or the provisions of Section 10.07 or of this
Section 10.02;
(d) to release any of the Collateral pledged to the
Agent for the benefit of, INTER ALIA, the Agent or the Lenders
pursuant to the Security Documents to secure the Obligations, if any
Obligations are outstanding or any Commitment has not been
terminated;
(e) to consent to the existence of any other lien,
security interest or encumbrance on the Collateral except as
otherwise permitted herein;
(f) to subordinate any of the Obligations or the
Commitments to any other indebtedness of the Company or any of its
Subsidiaries; and
(g) to release any Guarantor or to consent to the
termination or modification of any Guaranty Agreement.
Any amendment, modification, supplement, termination, waiver or consent effected
in accordance with this Section 10.02 shall apply equally to, and shall be
binding upon, all Lenders and the Agent.
SECTION 10.03. NOTICES. All notices, consents, demands
and other communications provided for hereunder, unless otherwise provided,
shall be in writing and mailed, sent by facsimile transmission or delivered to
the parties hereto addressed as follows or at such other address as shall be
designated by any party in a written notice to the other party hereto:
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If to the Company:
NuCo2 Inc.
2800 SE Market Place
Stuart, Florida 34997
Attn: Ms. Joann Sabatino
Chief Financial Officer
Telecopier No.: (561) 221-1690
Confirmation No.: (561) 221-1754
with a copy to:
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attn: Steven Wolosky, Esq.
Telecopier No.: (212) 755-1467
Confirmation No.: (212) 753-7200
If to the Agent:
SunTrust Bank, South Florida, National Association
501 E. Las Olas Blvd.
Ft. Lauderdale, Florida 33301
Attn: Corporate Banking Department
Telecopier No.: (954) 765-7301
Confirmation No.: (954) 765-7152
with a copy to:
King & Spalding
191 Peachtree St.
Atlanta, Georgia 30303
Attn: G. Lemuel Hewes, Esq.
Telecopier No.: 404-572-5149
Confirmation No.: 404-572-4862
If to a Lender:
The address, telecopier and confirmation numbers set
forth opposite its name on the signature pages hereof.
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All notices that are sent by facsimile transmission or
are hand delivered shall be deemed to be delivered upon receipt. All notices
which are mailed shall be mailed first class certified mail--return receipt
requested, postage prepaid, and shall be deemed delivered upon actual receipt or
three days after being deposited in the mail, whichever shall occur first.
The parties hereto agree that their signatures by
facsimile shall be effective and binding upon them as though executed in ink on
paper, and that the parties shall exchange original ink signatures promptly
following any such delivery by facsimile.
SECTION 10.04. SEVERABILITY; TIME OF ESSENCE. Every
provision of this Agreement and the other Loan Documents are intended to be
severable. If any term or provision of this Agreement or the Loan Documents, or
any other document delivered in connection herewith shall be unenforceable in
any respect, the enforceability of the remaining provisions shall not thereby be
affected. Time is of the essence of this Agreement and the other Loan Documents.
SECTION 10.05. GOVERNING LAW; SUBMISSION TO
JURISDICTION.
(a) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL
OTHER DOCUMENTS CONTEMPLATED HEREBY, AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF FLORIDA
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF FLORIDA OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF FLORIDA, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY
JURY, AND THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO 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 IN SUCH RESPECTIVE JURISDICTIONS.
(c) Nothing herein shall affect the right of the
Lenders and the Agent to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against the Company in any
other jurisdiction.
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SECTION 10.06. PAYMENT OF COSTS. The Company shall pay
all reasonable costs, expenses, taxes and fees incurred by the Agent in
connection with the negotiation, preparation, execution and delivery of this
Agreement, the term sheet and the Commitment Letter relating to this Agreement,
the Security Documents and all other Loan Documents, including, without
limitation, all of the reasonable professional fees and expenses of King &
Spalding, special counsel to the Agent, as set forth in the Commitment Letter.
SECTION 10.07. INDEMNITY. The Company agrees to
protect, indemnify and save harmless the Agent and each Lender, and all
directors, officers, employees and agents of the Agent and each Lender, from and
against any and all (i) claims, demands and causes of action of any nature
whatsoever brought by any person or entity not a party to this Agreement and
arising from or related or incident to this Agreement or any other Loan
Document, (ii) costs and expenses incident to the defense of such claims,
demands and causes of action, including, without limitation, reasonable
attorneys' fees, and (iii) liabilities, judgments, settlements, penalties and
assessments arising from such claims, demands and causes of action, PROVIDED
such claims, costs and liabilities are not the result of the gross negligence or
willful misconduct of such Agent or such Lender. The indemnity contained in this
Section shall survive the termination of this Agreement.
SECTION 10.08. BENEFIT OF THE AGREEMENT.
(a) This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, PROVIDED that the Company may not assign or transfer any of
its interest hereunder without the prior written consent of the Lenders, and no
such assignment or transfer of any such obligations shall relieve the Company of
its obligations hereunder unless each Lender shall have consented to such
release in a writing specifically referring to the obligation from which the
Company is to be released.
(b) Any Lender may make, carry or transfer Advances at,
to or for the account of, any of its branch offices or the office of an
Affiliate of such Lender. Any Lender may at any time assign all or any portion
of its rights in this Agreement and the Notes issued to it to a Federal Reserve
Bank; PROVIDED that no such assignment shall release the Lender from any of its
obligations hereunder.
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(c) Each Lender may assign or delegate all or a portion
of its interests, rights and obligations under this Agreement and the other Loan
Documents (including all or a portion of any of its Commitments and the Advances
at the time owing to it and the Notes held by it) to another financial or
lending institution or entity; PROVIDED, HOWEVER, that (i) the Agent and the
Company must give their prior written consent to such assignment (which consent,
in the case of the Company, shall not be unreasonably withheld) unless such
assignment is to an Affiliate of the assigning Lender or, in the case of the
Company, unless an Event of Default has occurred and is continuing, (ii) such
assignment or delegation is complete or is in minimum increments of $5,000,000,
and (iii) the parties to each such assignment shall execute and deliver to the
Agent an Assignment Agreement, and, together with a Note or Notes subject to
such assignment and, unless such assignment is to an Affiliate of such Lender, a
processing and recordation fee of $3,000. The Company shall not be responsible
for such processing and recordation fee or any costs or expenses incurred by any
Lender (other than the Agent) in connection with such assignment. From and after
the effective date specified in each Assignment Agreement, which effective date
shall be at least five (5) Business Days after the execution thereof, the
assignee thereunder shall be a party hereto and to the extent of the interest
assigned by such Assignment Agreement, have the rights and obligations of a
Lender under this Agreement. Within five (5) Business Days after receipt of the
notice and the Assignment Agreement, the Company, at its own expense, shall
execute and deliver to the Agent, in exchange for the surrendered Note or Notes,
a new Note or Notes to the order of such assignee in a principal amount equal to
the applicable Commitments assumed by it pursuant to such Assignment and
Acceptance and new Note or Notes to the assigning Lender in the amount of its
retained Commitment or Commitments. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the date of the surrendered Note or
Notes which they replace, and shall otherwise be in substantially the form
attached hereto.
(d) Each Lender may from time to time sell or otherwise
grant participations in all or a portion of its rights and obligations under
this Agreement and the other Loan Documents (including all or a portion of its
Commitments and the Advances owing to it and the Notes held by it) to another
financial or lending institution or entity, whereupon the holder of any such
participation, if the participation agreement so provides, shall be entitled to
all of the rights of a Lender hereunder; PROVIDED, HOWEVER, that (i) the Agent
must give its prior written consent to such participation unless such
participation is to an Affiliate of such Lender, (ii) such selling Lender's
obligations under this Agreement shall remain unchanged, (iii) such selling
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, and (iv) the Company, the Agent and other
Lenders shall continue to deal solely and directly with each Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents, and such Lender shall retain the sole right to enforce
the obligations of the Company relating to the Advances and to approve any
amendment, modification or waiver of any provisions of this Agreement or the
other Loan Documents. Any Lender selling a participation hereunder shall provide
prompt written notice to the Company of the name of such participant.
SECTION 10.09. SUBORDINATION OF INDEBTEDNESS. Any
Indebtedness of any Guarantor now or hereafter owed to the Company is hereby
subordinated in right of payment to the payment by such Guarantor of its
Guaranty Obligations such that if a default in the payment of the Obligations
shall have occurred and be continuing, any such Indebtedness of such Guarantor
owed to the Company, if collected or received by the Company, shall be held in
trust by the Company for the holders of the Obligations and be paid over to the
Lenders and the Agent for application of such Guarantor's Guaranty Obligations.
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<PAGE>
SECTION 10.10. MAXIMUM INTEREST RATE. Nothing contained
in this Agreement or any Note or Swing Line Note shall require the Company to
pay interest at a rate exceeding the Maximum Permissible Rate. If interest
payable to any Lender for any period would exceed the Maximum Permissible Rate,
such interest shall be reduced automatically to the maximum amount that will not
exceed the Maximum Permissible Rate, and interest payable to any Lender for any
subsequent period, to the extent less than the Maximum Permissible Rate, shall,
to that extent, be increased by the aggregate amount of all such reductions.
SECTION 10.11. ENTIRE AGREEMENT. This Agreement and the
other Loan Documents executed and delivered contemporaneously herewith, together
with the exhibits and schedules attached hereto and thereto, constitute the
entire understanding of the parties with respect to the subject matter hereof,
and any other prior or contemporaneous agreements, whether written or oral, with
respect thereto, including, without limitation, the Commitment Letter, which is
expressly superseded hereby; PROVIDED, HOWEVER, that the indemnities of the
Company in favor of the Lenders and SunTrust Capital Markets, Inc. contained in
the Commitment Letter shall survive the execution and delivery of this
Agreement. The execution of this Agreement and the other Loan Documents by the
Company was not based upon any facts or materials provided by the Agent or any
Lender, nor was the Company or any Guarantor induced to execute this Agreement
or any other Loan Document by any representation, statement or analysis made by
the Agent or any Lender.
SECTION 10.12. SET-OFF. Upon the occurrence and during
the continuance of any Event of Default, each Lender, and each of its branches
and offices, is hereby authorized by the Company, at any time and from time to
time, without notice to the Company (i) to set off against, and to appropriate
and apply to the payment of the Obligations (in each case whether matured or
unmatured) any and all amounts owing by such Lender, or any such office or
branch, to the Company (whether payable in Dollars or any other currency,
whether matured or unmatured, and, in the case of deposits, whether general or
special, time or demand and however evidenced) and (ii) pending any such action,
to the extent necessary, to hold such amounts as collateral to secure such
Obligations and Guaranty Obligations and to return as unpaid for insufficient
funds any and all checks and other items drawn against any deposits so held as
such Lender in its sole discretion may elect. Each Lender shall give the Company
notice of its intention to exercise its rights under this Section 10.12;
PROVIDED, HOWEVER, that failure by such Lender to give the Company notice shall
not prevent such Lender from exercising its rights as provided in this Section.
The Company, to the fullest extent it may effectively do so under Applicable
Law, agrees that any holder of a participation in any Advance may exercise
rights of set-off and counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Company in the amount of such participation.
SECTION 10.13. COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and all of which, taken together, shall constitute one and the same
instrument.
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<PAGE>
SECTION 10.14. REPLACEMENT NOTES. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note or Swing Line Note, and in the case of any such loss,
theft or destruction, upon delivery of any indemnity agreement reasonably
satisfactory to the Company or, in the case of any such mutilation, upon
surrender and cancellation of such Note or Swing Line Note, the Company shall
execute and deliver, in lieu thereof, a replacement note identical in form and
substance to such Note or Swing Line Note and dated as of the date of such Note
or Swing Line Note, and upon such execution and delivery of the replacement note
all references in this Agreement and in all other Loan Documents to the Note or
Swing Line Note shall be deemed to refer to such replacement note.
SECTION 10.15. RELEASE. In consideration of the Agent's
and the Lenders' agreement to enter into this Agreement and to establish the
Commitments hereunder, the Company hereby (a) releases, acquits and forever
discharges the Agent and the Lenders, their respective agents, employees,
officers, directors, servants, representatives, attorneys, affiliates,
successors and assigns (collectively, the "RELEASED PARTIES") from any and all
liabilities, claims, suits, debts, liens, losses, causes of action, demands,
rights, damages, costs and expenses of any kind, character or nature whatsoever,
known or unknown, fixed or contingent, that the Company may have or claim to
have against the Agent and the Lenders which might arise out of or be connected
with any act of commission or omission of the Agent or the Lenders existing or
occurring on or prior to the date of this Agreement, including, without
limitation, any claims, liabilities or obligations relating to or arising out of
or in connection with the Loan Documents (including, without limitation, arising
out of or in connection with the initiation, negotiation, closing or
administration of the transactions contemplated thereby or related thereto),
from the beginning of time until the execution and delivery of this Agreement
(the "RELEASED CLAIMS") and (b) agrees forever to refrain from commencing,
instituting or prosecuting any lawsuit, action or other proceeding against the
Released Parties with respect to any and all Released Claims.
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<PAGE>
[SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
WITNESS the hand and seal of the parties hereto through
their duly authorized officers, as of the date first above written.
NUCO2 INC.,
A FLORIDA CORPORATION
Address:
c/o NuCo2 Inc. By: /S/ EDWARD M. SELLIAN
---------------------------------
2800 S.E. Market Place Name: Edward M. Sellian
Stuart, Florida 34997 Title: President
Attest: /S/ JOANN SABATINO
-----------------------------
Name: Joann Sabatino
Title: Chief Financial Officer
<PAGE>
SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION, INDIVIDUALLY
AND AS AGENT
By: /S/ RUSSELL E. BURNETTE
---------------------------------
Name: Russell E. Burnette
Title: Vice President
EXHIBIT 10.10
WAIVER AND AMENDMENT NO. 1 TO
REVOLVING CREDIT AGREEMENT
THIS WAIVER AND AMENDMENT NO. 1 TO REVOLVING CREDIT
AGREEMENT (this "Amendment"), dated as of August 25, 1998, by and among NUCO2
INC., a Florida corporation (the "Company"), SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION, a national banking association ("SunTrust"), and any other
banks or other lending institutions that are or will become parties to the
Credit Agreement, defined below (collectively, the "Lenders"), and SUNTRUST
BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION, as agent (in such capacity, the
"Agent").
W I T N E S S E T H:
WHEREAS, the Company, the Lenders and the Agent are
parties to that certain Revolving Credit Agreement, dated as of October 31, 1997
(the "Credit Agreement"; defined terms used herein without definition shall have
the meaning ascribed to such terms in the Credit Agreement);
WHEREAS, the Company has requested, and the Lenders
have agreed, to (i) waive compliance with certain financial and other covenants
set forth in the Credit Agreement and (ii) amend certain requirements with
respect to future fiscal periods with respect to certain of such financial
covenants, all as more particularly set forth below; and
WHEREAS, the parties wish to amend the Credit Agreement
to reflect this agreement;
NOW, THEREFORE, for and in consideration of the mutual
covenants contained herein and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Subject to
the satisfaction of the conditions precedent set forth in SECTION 3 hereof, and
effective as of the Effective Date (as hereinafter defined), the Credit
Agreement is hereby amended as follows:
1. Section 7.02 of the Credit Agreement is hereby
amended by deleting such section in its entirety and substituting therefor the
following:
"SECTION 7.02. FIXED CHARGE COVERAGE RATIO. The Company
shall not permit the Fixed Charge Coverage Ratio as of the last day
of each fiscal quarter of the Company shown below to be less than
the corresponding ratio shown below:
<PAGE>
QUARTER ENDED RATIO
June 30, 1998 0.80 to 1.00
September 30, 1998 0.80 to 1.00
December 31, 1998 0.85 to 1.00
March 31, 1999 0.95 to 1.00
June 30, 1999 1.05 to 1.00
September 30, 1999, and thereafter 1.25 to 1.00
SECTION 2. WAIVER. The Company has informed the Agent
and the Required Lenders that the Company may not have been and may not in the
future be in compliance with certain provisions of the Credit Agreement.
Therefore, the Required Lenders hereby waive any Default or Event of Default
caused by any such failure of the Company to comply with the following provision
of the Credit Agreement for the fiscal period indicated below:
2. Section 7.02 (Fixed Charge Coverage Ratio) for the
Company's fiscal quarter ending on March 31, 1998.
SECTION 3. CONDITIONS OF EFFECTIVENESS. This Amendment
shall become effective as of March 31, 1998 (the "EFFECTIVE DATE") on the first
day when this Amendment shall have been executed by the Company and the Required
Lenders and delivered to the Agent.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. The Company, without limiting the representations and warranties
provided in the Credit Agreement, represents and warrants to the Lenders and the
Agent as follows:
3. The execution, delivery and performance by the
Company of this Amendment are within the Company's corporate powers, have been
duly authorized by all necessary corporate action (including any necessary
shareholder action) and do not and will not (a) violate any provision of any
law, rule or regulation, any judgment, order or ruling of any court or
governmental agency, the articles of incorporation or by-laws of the Company or
any indenture, agreement or other instrument to which the Company is a party or
by which the Company or any of its properties is bound or (b) be in conflict
with, result in a breach of, or constitute with notice or lapse of time or both
a default under any such indenture, agreement or other instrument.
4. This Amendment constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
2
<PAGE>
5. No Default or Event of Default has occurred and is
continuing as of the Effective Date or the date hereof (after giving effect to
the waivers set forth herein).
SECTION 5. SURVIVAL. Each of the foregoing
representations and warranties and each of the representations and warranties
made in the Credit Agreement shall be made at and as of the Effective Date. Each
of the foregoing representations and warranties shall constitute a
representation and warranty of the Company under the Credit Agreement, and it
shall be an Event of Default if any such representation and warranty shall prove
to have been incorrect or false in any material respect at the time when made.
Each of the representations and warranties made under the Credit Agreement
(including those made herein) shall survive and not be waived by the execution
and delivery of this Amendment or any investigation by the Lenders or the Agent.
SECTION 6. NO WAIVER, ETC. The Company hereby agrees
that except as expressly set forth in Section 2 above, nothing herein shall
constitute a waiver by the Lenders of any Default or Event of Default, whether
known or unknown, which may exist under the Credit Agreement. The Company hereby
further agrees that no action, inaction or agreement by the Lenders, including
without limitation, any indulgence, waiver, consent or agreement altering the
provisions of the Credit Agreement which may have occurred with respect to the
non-payment of any obligation during the term of the Credit Agreement or any
portion thereof, or any other matter relating to the Credit Agreement, shall
require or imply any future indulgence, waiver, or agreement by the Lenders. In
addition, the Company acknowledges and agrees that it has no knowledge of any
defenses, counterclaims, offsets or objections in its favor against any Lender
with regard to any of the obligations due under the terms of the Credit
Agreement as of the date of this Amendment.
SECTION 7. AFFIRMATION OF COVENANTS. The Company hereby
affirms and restates as of the date hereof all covenants set forth in the Credit
Agreement, as amended hereby, and such covenants are incorporated by reference
herein as if set forth herein directly.
SECTION 8. RATIFICATION OF CREDIT AGREEMENT. Except as
expressly amended herein, all terms, covenants and conditions of the Credit
Agreement and the other Loan Documents shall remain in full force and effect,
and the parties hereto do expressly ratify and confirm the Credit Agreement as
amended herein. All future references to the Credit Agreement shall be deemed to
refer to the Credit Agreement as amended hereby.
SECTION 9. BINDING NATURE. This Amendment shall be
binding upon and inure to the benefit of the parties hereto, their respective
heirs, successors, successors-in-titles, and assigns.
3
<PAGE>
SECTION 10. COSTS, EXPENSES AND TAXES. The Company
agrees to pay on demand all reasonable costs and expenses of the Agent in
connection with the preparation, execution and delivery of this Amendment and
the other instruments and documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Agent with respect thereto and with respect to advising the Agent as to
its rights and responsibilities hereunder and thereunder. In addition, the
Company shall pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Amendment and the
other instruments and documents to be delivered hereunder, and agrees to save
the Agent and each Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes.
SECTION 11. GOVERNING LAW. This Amendment shall be
governed by, and construed in accordance with, the laws of the State of Florida.
SECTION 12. ENTIRE UNDERSTANDING. This Amendment sets
forth the entire understanding of the parties with respect to the matters set
forth herein, and shall supersede any prior negotiations or agreements, whether
written or oral, with respect thereto.
SECTION 13. COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts and may be delivered by telecopier. Each counterpart so
executed and delivered shall be deemed an original and all of which taken
together shall constitute but one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment through their authorized officers as of the date first above
written.
NUCO2 INC., A FLORIDA CORPORATION
By: /S/ ROBERT RANIERI
----------------------
Name: Robert Ranieri
Title: C.O.O.
5
<PAGE>
SUNTRUST BANK, SOUTH FLORIDA,
NATIONAL ASSOCIATION,
INDIVIDUALLY AND AS AGENT
FOR THE LENDERS
By: /S/ RUSSELL E. BURNETTE
----------------------------------
Name: Russell E. Burnette
Title: Vice President
CREDITANSTALT CORPORATE FINANCE,
INC., LENDER
By: /S/ JOHN G. TAYLOR
----------------------------------
Name: John G. Taylor
Title: Senior Associate
By: /S/ ROBERT M. BIRINGER
----------------------------------
Name: Robert M. Biringer
Title: EVP
NATIONAL CITY BANK OF KENTUCKY,
LENDER
By: /S/ TODD ETHINGTON
----------------------------------
Name: Todd Ethington
Title:Vice President
6
EXHIBIT 10.11
****************************************************************
NUCO2 INC.
and
SUBSIDIARY GUARANTORS
--------------------------------------------
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
Dated as of October 31, 1997
--------------------------------------------
$25,000,000
12% SENIOR SUBORDINATED NOTES DUE 2004
************************************************************
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions and Accounting Matters
SECTION 1.1 Certain Defined Terms...........................................6
SECTION 1.2 Terms Generally................................................20
SECTION 1.3 Accounting Terms; GAAP.........................................20
ARTICLE II
Amount and Terms of Notes
SECTION 2.1 Commitments....................................................21
SECTION 2.2 Disbursement of Funds..........................................21
SECTION 2.3 Notes..........................................................21
SECTION 2.4 Interest.......................................................21
SECTION 2.5 Several Obligations; Remedies Independent......................22
ARTICLE III
Prepayments: Payments
SECTION 3.1 Optional Prepayments...........................................23
SECTION 3.2 Method and Place of Payment....................................24
ARTICLE IV
Representations of the Investors
SECTION 4.1 Purchase for Investment........................................25
SECTION 4.2 Accredited and Sophisticated Investor..........................25
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<PAGE>
ARTICLE V
Conditions Precedent
SECTION 5.1 Conditions Precedent to Notes..................................25
ARTICLE VI
Representations and Warranties
SECTION 6.1 Organization; Powers...........................................27
SECTION 6.2 Authorization: Enforceability..................................28
SECTION 6.3 Governmental Approvals: No Conflicts...........................28
SECTION 6.4 SEC Documents: Financial Condition:
No Material Adverse Change......................29
SECTION 6.5 Properties.....................................................29
SECTION 6.6 Litigation and Environmental Matters...........................30
SECTION 6.7 Compliance with Laws and Agreements............................30
SECTION 6.8 Investment and Holding Company Status..........................30
SECTION 6.9 Taxes..........................................................30
SECTION 6.10 ERISA.........................................................31
SECTION 6.11 Disclosure....................................................31
SECTION 6.12 Debt Agreements...............................................31
SECTION 6.13 Capitalization................................................32
SECTION 6.14 Subsidiaries and Investments..................................32
SECTION 6.15 No Burdensome Restrictions....................................33
SECTION 6.16 Private Offering by the Company...............................33
ARTICLE VII
Affirmative Covenants
SECTION 7.1 Financial Statements and Other Information.....................32
SECTION 7.2 Notices of Material Events.....................................35
SECTION 7.3 Existence: Conduct of Business.................................36
SECTION 7.4 Payment of Obligations.........................................36
SECTION 7.5 Maintenance of Properties: Insurance...........................36
SECTION 7.6 Books and Records: Inspection Rights...........................36
SECTION 7.7 Compliance with Laws...........................................37
SECTION 7.8 Use of Proceeds................................................37
SECTION 7.9 Certain Obligations Affecting
Subsidiaries...................................................37
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<PAGE>
ARTICLE VIII
Negative Covenants
SECTION 8.1 Indebtedness...................................................37
SECTION 8.2 Liens..........................................................38
SECTION 8.3 Fundamental Changes............................................39
SECTION 8.4 Investments: Hedging Agreements................................40
SECTION 8.5 Restricted Payments............................................41
SECTION 8.6 Sale and Leasebacks............................................42
SECTION 8.7 Transactions with Affiliates...................................42
SECTION 8.8 Restrictive Agreements.........................................42
SECTION 8.9 Financial Covenants............................................43
SECTION 8.10 Modifications of Certain Documents............................44
SECTION 8.11 Nature of Business............................................44
SECTION 8.12 Sale of Subsidiaries..........................................44
ARTICLE IX
Events of Default
SECTION 9.1 Events of Default: Remedies....................................45
ARTICLE X
Subsidiary Guarantee
SECTION 10.1 The Guarantee.................................................47
SECTION 10.2 Obligations Unconditional.....................................47
SECTION 10.3 Reinstatement.................................................48
SECTION 10.4 Subrogation...................................................49
SECTION 10.5 Remedies......................................................49
SECTION 10.6 Instrument for the Payment of Money...........................49
SECTION 10.7 Continuing Guarantee..........................................49
SECTION 10.8 Rights of Contribution........................................49
SECTION 10.9 General Limitation on Guarantee
Obligations...................................................50
SECTION 10.10 Subordination of Guarantees...................................51
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<PAGE>
ARTICLE XI
Subordination
SECTION 11.1 Agreement to Subordinate......................................51
SECTION 11.2 Bankruptcy, Liquidation, Dissolution,
Etc...........................................................51
SECTION 11.3 No Payment in Certain Circumstances...........................53
SECTION 11.4 Payments Otherwise Permitted..................................54
SECTION 11.5 Subrogation...................................................54
SECTION 11.6 Provisions Solely to Define
Relative Rights...............................................55
SECTION 11.7 No Waiver of Subordination Provisions.........................55
SECTION 11.8 Notice to Investors...........................................56
SECTION 11.9 Reliance......................................................56
SECTION 11.10 Reinstatement.................................................57
SECTION 11.11 Subsidiary Guarantees.........................................57
SECTION 11.12 Limitations on Remedies.......................................57
SECTION 11.13 Notices.......................................................57
ARTICLE XII
Miscellaneous
SECTION 12.1 Notices.......................................................58
SECTION 12.2 Waivers; Amendments...........................................58
SECTION 12.3 Expenses; Indemnity; Damage Waiver............................59
SECTION 12.4 Successors and Assigns........................................61
SECTION 12.5 Survival......................................................62
SECTION 12.6 Counterparts; Integration;
Effectiveness.................................................63
SECTION 12.7 Severability..................................................63
SECTION 12.8 Governing Law; Jurisdiction;
Consent to Service of Process.................................63
SECTION 12.9 Waiver of Jury Trial..........................................64
SECTION 12.10 Headings......................................................64
SECTION 12.11 Confidentiality...............................................64
SCHEDULE 6.06(a) - Litigation
SCHEDULE 6.06(b) - Environmental Matters
SCHEDULE 6.10 - ERISA
SCHEDULE 6.12 - Material Agreements
SCHEDULE 6.13 - Capitalization
SCHEDULE 6.14(a) - Subsidiaries
SCHEDULE 6.14(b) - Investments
-6-
<PAGE>
SCHEDULE 8.01 - Indebtedness
SCHEDULE 8.02 - Liens
SCHEDULE 8.08 - Restrictive Agreements
EXHIBIT A - Form of Senior Subordinated Note
EXHIBIT B - Form of Opinion of Counsel to the Obligors
EXHIBIT C - Form of Opinion of Special New York Counsel to Chase Capital
-7-
<PAGE>
SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT (this
"AGREEMENT"), dated as of October 31, 1997, between:
NUCO2 INC., a corporation duly organized and validly existing
under the laws of the State of Florida (the "COMPANY");
each of the Subsidiaries of the Company appearing under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereto and/or
which pursuant to Section 7.09 shall hereafter become a Subsidiary
Guarantor (each a "SUBSIDIARY GUARANTOR" and, collectively, the
"SUBSIDIARY GUARANTORS"; and, together with the Company, the
"OBLIGORS"); and
each of the Investors of the Notes (as defined below)
appearing under the caption "INVESTORS" on the signature pages hereto
and each assignee of the rights and obligations of an Investor pursuant
to Section 12.04 (each, an "INVESTOR", and collectively, the
"INVESTORS").
The Company has requested that the Investors acquire the Notes
in an aggregate principal amount of $25,000,000 to refinance certain existing
indebtedness of the Company, to finance future acquisitions, to make capital
expenditures and for working capital and general corporate purposes of the
Company and its Subsidiaries. To induce the Investors to purchase the Notes, the
Obligors and the Investors propose to enter into this Agreement pursuant to
which the Investors will purchase the Notes issued by the Company and the
Subsidiary Guarantors will guarantee the payment in full of the Notes and all
other amounts payable under this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
SECTION 1.1 CERTAIN DEFINED TERMS. In addition to the other
terms defined herein, as used herein, the following terms shall have the
following meanings:
"AFFILIATE" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries,
-8-
<PAGE>
Controls or is Controlled by or is under common Control with the Person
specified; PROVIDED that none of the initial Investors (or any of their
Affiliates) shall be deemed to be an Affiliate of the Company.
"ANNUALIZED EBITDA" means, as at any date of determination
thereof, EBITDA for the fiscal quarter ending on or most recently ended prior to
such date, multiplied by four.
"ASSET VALUE" means, with respect to any property or asset of
the Company or any Subsidiary, as of any particular date, an amount equal to the
greater of (i) the then book value of such property or asset as established in
accordance with GAAP and (ii) the then fair market value of such property or
asset as determined in good faith by the board of directors of the Company or
any Subsidiary.
"BANKRUPTCY CODE" means the Federal Bankruptcy Code of 1978,
as amended from time to time or any successor statute thereto.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed.
"CAPITAL EXPENDITURES" means, for any paid, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Company or any of its
Subsidiaries to acquire or construct fixed assets, property, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such paled computed in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act (42 U.S.C. ss.9601 ET SEQ.).
"CHANGE IN CONTROL" means: (i) the acquisition of ownership,
directly or indirectly (in a single transaction or a sales of related
-9-
<PAGE>
transactions), beneficially or of record, by any Person or group (within the
meaning of Section 13(d) and Section 14(d)(2) of the Securities Exchange Act as
in effect on the date hereof) of shares representing more than 40% of the issued
and outstanding common stock of the Company entitled to vote for the members of
the board of directors of the Company; (ii) occupation of a majority of the
seats (other than vacant seats) on the board of directors of the Company by
Persons who were neither (x) nominated by the board of directors of the Company
nor (y) appointed by directors so nominated; or (iii) any Person or group (other
than the group in control of the Company on the date hereof) shall otherwise
directly or indirectly Control the Company.
"CHASE CAPITAL" means Chase Equity Associates L.P.
"CLOSING DATE" means October 31, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time and the rules and regulations promulgated thereunder.
"CONSOLIDATED EBIT" means, for any period, an amount equal to
the sum of (a) Consolidated Net Income (or loss) plus (b) to the extent deducted
in determining Consolidated Net Income (or loss), (i) provisions for taxes based
on income of the Company and its Subsidiaries determined on a consolidated basis
in accordance with GAAP, (ii) Interest Expense and (iii) extraordinary items
determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, net income
(or loss) of the Company and its Subsidiaries on a consolidated basis for such
period (taken as a single accounting period), in accordance with GAAP.
"CONSOLIDATED NET WORTH" means, as of the date of
determination, total shareholders' equity of the Company and its Subsidiaries on
a consolidated basis, determined in accordance with GAAP.
"CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
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"DEFAULT" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"DOLLARS" or "$" refers to lawful money of the United States
of America.
"EBITDA" means, for any period, the sum for the Company and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) of Consolidated EBIT (i) depreciation and amortization
expenses (to the extent deducted in determining Consolidated EBIT) for such
period; and (ii) the historical consolidated EBITDA for any Person for such
period which accrued prior to the date such Person became a Subsidiary or was
merged into or consolidated with the Company or any of its Subsidiaries or such
Person's assets ware acquired by the Company or any of its Subsidiaries (and the
underlying records of such Person shall be audited to the extent the Company is
required pursuant to Regulation S-X of the SEC to present audited financial
information for such Person in documents filed by it with the SEC). If audited
financial records are not available for acquired companies, pro-forma income
statements (subject to review and acceptance by the Required Investors) will be
substituted.
"ENVIRONMENTAL LAWS" means all Federal, state, local and
foreign statutes and codes or regulations, rules or ordinances issued,
promulgated, or approved thereunder, now or hereafter in effect (including,
without limitation, those with respect to asbestos or asbestos containing
material), relating to pollution or protection of the environment and relating
to public health and safety, relating to (i) emissions, discharges, releases or
threatened releases of Hazardous Materials, into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata), or (ii) the manufacture, processing, distribution, use
generation, treatment, storage, disposal, transport or handling of any Hazardous
Materials, and (iii) underground storage tanks and related piping, and
emissions, discharges and releases or threatened releases therefrom, such
Environmental Laws to include, without limitation, (i) the Clean Air Act (42
U.S.C. ss.7401 ET SEQ.), (ii) the Clean Water Act (33 U.S.C. ss.1251 ET SEQ.),
(iii) the Resource Conservation and Recovery Act (42 U.S.C. ss.6901 ET SEQ. (iv)
the Toxic Substances Control Act (15 U.S.C.
ss.2601 ET SEQ.) and (v) CERCLA, each as amended.
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"ENVIRONMENTAL LIABILITY" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Company or any Subsidiary
directly or indirectly resulting from or based upon (i) violation of any
Environmental Law, (ii) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (iii) exposure to any
Hazardous Materials, (iv) the release or threatened release of any Hazardous
Materials into the environment or (v) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.
"EQUITY RIGHTS" means, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shams of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Company, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA EVENT means: (i) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (ii)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (iii) the filing pursuant to Section 412(d) of the Code or Section
303(d) of ERISA of an application for a waiver of the minimum funding-standard
with respect to any Plan; (iv) the incurrence by the Company or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (v) the receipt by the Company or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee
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to administer any Plan; (vi) the incurrence by the Company or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal
from any Plan or Multiemployer Plan; or (vii) the receipt by the Company or any
ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the
Company or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.
"ERISA PLAN" means any employee pension benefit plan (other
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA, and in respect of which the
Company or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"EVENT OF DEFAULT" shall have the meaning assigned to such
term in Section 9.01.
"GAAP" means generally accepted accounting principles in the
United States of America.
"GOVERNMENTAL AUTHORITY" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory, monetary or administrative powers of a
governmental nature or functions of or pertaining to government.
"GUARANTEE" of or by any Person (the "GUARANTOR") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (ii) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (iii)
to maintain working capital, equity capital or any other financial
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statement condition or liquidity of the primary obliger so as to enable the
primary obligor to pay such Indebtedness or other obligation or (iv) as an
account party in respect of any letter of credit or letter of guaranty issued to
support such Indebtedness or obligation; PROVIDED that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business.
"HAZARDOUS MATERIALS" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.
"HEDGING AGREEMENT" means, for any Person, any interest rate
protection agreement, foreign currency exchange agreement, commodity price
protection agreement or other interest or currency exchange rate or commodity
price hedging arrangement.
"INDEBTEDNESS" of any Person means, without duplication: (i)
all obligations of such Person for borrowed money; (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments; (iii)
financial obligations as the issuer of capital stock redeemable in whole or in
part at the option of any Person other than such issuer, at a fixed and
determinable date or upon the occurrence of an event or condition not solely
within the control of such issuer; (iv) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person; (v) all financial obligations of such Person in respect
of the deferred purchase price of property or services (excluding current trade
accounts payable on customary tams and incurred in the ordinary course of
business); (vi) financial obligations under purchase money mortgages; (vii) all
Capital Lease Obligations of such Person; (viii) all reimbursement obligations,
contingent or otherwise, of such Person as an account party in respect of
letters of credit and letters of guaranty; (ix) all obligations, contingent or
otherwise, of such Person in respect of bankers' acceptances; (x) financial
obligations under asset securitization vehicles; and (xi) obligations under
direct or indirect Guarantees in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or financial obligations of others of
the kinds referred to in clauses (i) through (x) above, except to the extent
such Guarantees are limited to a lesser
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amount. The Indebtedness of any Person shall include, without duplication, the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor.
"INTEREST COVERAGE RATIO" means, as at any date, the ratio of
(i) EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date to (ii) Interest Expense for such period.
"INTEREST EXPENSE" means, without duplication, for any period,
for the Company and its Subsidiaries (determined on a consolidated basis in
accordance with GAAP) all interest expense in respect of Indebtedness for such
period (whether or not actually paid during such period and including, without
limitation, interest expense attributable to Capital Lease Obligations).
"INVESTOR'S REPRESENTATIVE" means (i) Chase Capital so long as
it shall be a holder of any of the Notes or (ii) otherwise, an Investor
designated by the Required Investors to act as the Investor's Representative
hereunder.
"INVESTMENT" means, for any Person: (i) the acquisition
(whether for cash, property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such sale); (ii) the making of any deposit with, or any advance, loan or
other extension of credit to, any other Person (including the purchase of
property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such Person), but excluding
any such advance, loan or extension of credit having a term not exceeding 90
days arising in connection with the sale of inventory or supplies by such Person
in the ordinary course of business; or (iii) the entering into of any Guarantee
of, or other contingent obligation with respect to, Indebtedness or other
liability of any other Person and (without duplication) any amount committed to
be advanced, lent or extended to such Person.
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"LIEN" means, with respect to any asset, (i) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, assignment, charge or
security interest in, on or of such asset, including without limitation any
agreement to give any of the foregoing, (ii) the interest of a vendor or a
lessor under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect
as any of the foregoing) relating to such asset, including any lease or similar
arrangement with a public authority executed in connection with the issuance of
industrial development revenue bonds or pollution control revenue bonds and
(iii) the filing of or the agreement to give any financing statement under the
Uniform Commercial Code (or comparable law) of any jurisdiction naming the owner
of the asset to which such lien applies as a debtor (other than a filing which
does not evidence an outstanding secured obligation, or a commitment to make
advances or to incur any other obligation of any kind).
"MARGIN STOCK" means "margin stock" within the meaning of
Regulations G, T, U and X.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(i) the business, assets, property, operations or condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or (ii) the
ability of any Obligor to perform any of its obligations under the Note
Documents.
"MINIMUM NET WORTH" has the meaning set forth in Section
8.09(c).
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA as to which the Company, any Subsidiary or any ERISA
Affiliate is obligated to make, has made, or will be obligated to make
contributions on behalf of participants who are or were employed by any of them.
"NET WORTH" means, at any date, the net worth of the Company
and its Subsidiaries on a consolidated basis, determined in accordance with
GAAP.
"NOTE DOCUMENTS" means, collectively, this Agreement, the
Notes, the Warrant Agreement and the Warrants.
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"NOTES" has the meaning assigned to such term in Section 2.01,
including any Notes issued in substitution for any Notes theretofore issued
pursuant to this Agreement.
"OBLIGORS" has the meaning assigned to such term in the
preamble of this
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
"PERMITTED ENCUMBRANCES" means:
(i) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 7.04;
(ii) carriers', warehousemen's, mechanics', workmen's,
materialmen's, repairmen's, statutory landlord's and other like Liens
imposed by law, arising in the ordinary course of business and securing
obligations that are not overdue by more than 60 days or are being
contested in compliance with Section 7.04;
(iii) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations and Liens
thereon;
(iv) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case
in the ordinary course of business;
(v) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Company or any
Subsidiary;
(vi) deposits in connection with the prosecution or defense of
any claim in any court or before any administrative commission or
agency; and
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(vii) Liens arising out of judgments or awards with respect to
which the Company or any Subsidiary the time shall in good faith be
diligently prosecuting an appeal or proceedings for review and with
respect to which the Company or any of its Subsidiaries shall have
secured a stay of execution pending such appeal or proceedings for
review.
"PERMITTED INVESTMENTS" means:
(i) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America),
in each case maturing within one year from the date of acquisition
thereof;
(ii) investments in commercial paper maturing within one year
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from S&P or from
Moody's; and
(iii) investments in certificates of deposit, banker's
acceptances and time deposits maturing within one year from the date of
acquisition thereof issued or guaranteed by or placed with, and money
market deposit accounts issued or offered by, any office located in the
United States of any commercial bank or trust company organized under
the laws of the United States of America or any State thereof which has
a combined capital and surplus and undivided profits of not less than
$500,000,000, including without limitation, any such deposits in
Eurodollars issued by a foreign branch of any such commercial bank or
trust company.
"PERSON" means any natural person, corporation, partnership,
limited liability company, trust, joint venture, association, company or other
organization, whether or not legal entity, and any Governmental Authority.
"PLAN" means any employee benefit plan, program, arrangement,
practice or contract, maintained by or on behalf of the Company or an ERISA
Affiliate, which provides benefits or compensation to or on behalf of employees
or former employees, whether formal or informal, whether or not written,
including, but not limited to, the following types of plans:
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(i) EXECUTIVE ARRANGEMENTS. Any bonus, incentive compensation,
stock option, deferred compensation, commission, severance, "golden
parachute", "rabbi trust", or other executive compensation plan,
program, contract arrangement or practice;
(ii) ERISA PLANS. Any "employee benefit plan" as defined in
ERISA, including, but not limited to, any defined benefit pension plan,
profit sharing plan, money purchase pension plan, savings or thrift
plan, stock bonus plan, employee stock ownership plan, Multiemployer
Plan, or any plan, fund, program, arrangement or practice providing for
medical (including post-retirement medical), hospitalization, accident,
sickness, disability, or life insurance benefits;
(iii) OTHER EMPLOYEE FRINGE BENEFITS. Any stock purchase,
vacation, scholarship, day care, prepaid legal services, severance pay
or fringe benefit plan, program, arrangement, contract or practice.
"QUALIFIED INVESTOR" means (i) any initial Investor of the
Notes and (ii) any bank, trust company, savings and loan association, pension
plan, investment company, insurance company, broker, dealer or any other
financial institution or entity, regardless of legal form.
"REGULATIONS G, T, U AND X" means, respectively, Regulations
G. T. U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"RELATED PARTIES" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, partners,
employees, agents and advisors of such Person and such Person's Affiliates.
"RELEASE" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without limitation,
the movement of Hazardous Materials through ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata.
"REQUIRED INVESTORS" means, at any time, Investors holding at
least 51% in aggregate principal amount of the Notes at the time
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outstanding (exclusive of Notes then owned by the Company or any of its
Affiliates).
"RESTRICTED PAVEMENT" means: (i) any dividend or other
distribution (whether in cash, securities or other property) with respect to any
shares of any class of capital stock of the Company or any of its Subsidiaries
other than dividends paid by a Subsidiary to the Company; (ii) any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares of capital stock of
the Company or any of its Subsidiaries or any option, warrant or other right to
acquire any such shares; (iii) any payment on account of the purchase,
redemption, conversion, exchange, retirement, acquisition, defeasance or sinking
fund payment with respect to any Indebtedness that is junior or subordinate to
the Notes; and (iv) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of capital stock of the Company or any of its Subsidiaries.
"S&P" means Standard ~ Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.
"SEC" means the Securities and Exchange Commission or any
successor
"SECURITIES ACT" means the Securities Act of 1933, as amended
and in effect
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended and in effect from time to time.
"SENIOR CREDIT AGREEMENT" means the Revolving Credit Agreement
dated as of October 31, 1997 between the Company, the lenders party thereto from
time to time and Suntrust Bank, South Florida, National Association, agent for
such lenders, as executed and delivered on the Closing Date, and any
refinancing, refunding, extension or renewal thereof (whether or not with any of
the lenders or the agent for such lenders then party to the Senior Credit
Agreement), in each case, at any time amended or modified in accordance with
Section 8.1 0(a).
"SENIOR CREDIT DOCUMENTS" means the Senior Credit Agreement
and all other documents and agreements originally executed and delivered
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thereunder, in each case, as the same shall, subject to Section 8.10(a), be
modified and supplemented and in effect from time to time.
"SENIOR DEBT" means the following obligations of the Company
and its
(i) with respect to the Company, all principal of the loans
outstanding under the Senior Credit Agreement, all interest thereon
(including any interest accruing after the date of any filing by the
Company of any petition in bankruptcy or the commencing of any
bankruptcy, insolvency or similar proceedings with respect to the
Company whether or not the same is allowed as a claim in any such
proceeding) and all other amounts outstanding thereunder, including all
expenses (including, without limitation, attorneys' fees), indemnities
and penalties and all commitment, facility and administrative, agency
or other similar fees payable by the Company from time to time under
the Senior Credit Documents, and including any obligations of the
Company in respect of Hedging Agreements owing to one or more of the
lenders under Senior Credit Agreement that are required by the terms of
the Senior Credit Agreement;
(ii) with respect to the Company, additional Indebtedness in
an aggregate principal amount up to but not exceeding $10,000,000 under
or in respect of (x) the Senior Credit Agreement and (y)any other
instrument evidencing such Indebtedness; PROVIDED that, in the case of
clause (y) only, such Indebtedness is specifically designated in such
other instrument as "Senior Debt" for purposes of this Agreement;
(iii) with respect to the Company, additional Indebtedness
under or in respect of (x) the Senior Credit Agreement and (y) any
other instrument evidencing such Indebtedness; PROVIDED that (i) in the
case of clause (y) only, such Indebtedness is specifically designated
in such other instrument as "Senior Debt" for purposes of this
Agreement and (ii) after giving effect to the Incurrence of such
Indebtedness (and the application of the proceeds thereof), the Senior
Debt Incurrence Ratio is less than or equal to 4.00 to 1.00;
(iv) with respect to any Subsidiary Guarantor, the Guarantee
of such Subsidiary Guarantor in respect of any Senior Debt of the
Company; and
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(v) with respect to the Company, any and all refinancings,
replacements or refundings of any of the amounts referred to in clauses
(i), (ii) and (iii) above; PROVIDED that the refinancing, replacement
or refunding of Senior Debt incurred under said clause (iii) shall
constitute Senior Debt only to the extent that, after giving effect to
such refinancing, replacement or refunding (and the application of the
proceeds hereof), the Senior Debt Incurrence Ratio is less than or
equal to 4.00 to 1.00;
PROVIDED that the aggregate principal amount of Senior Debt permitted under
clauses (i) and (ii) above (together with the amount of obligations in respect
of Hedging Agreements referred to in said clause (i)), and any refinancing,
replacement or refunding thereof permitted under clause (v) above (including the
maximum amount of the aggregate commitments of the lenders to extend any
revolving credit facility thereunder) shall not exceed at any time $60,000,000
MINUS the aggregate amount of (x) permanent reductions in revolving credit
commitments thereunder and (y) prepayments of any term loans made from time to
time in respect of the Senior Debt.
"SENIOR DEBT INCURRENCE RATIO" means, for any period, the
ratio of (i) Senior Funded Debt to (ii) Annualized EBITDA.
"SENIOR DEBT REPRESENTATIVE" means (i) initially, Suntrust
Bank, South Florida, National Association and (ii) thereafter, such other holder
of Senior Debt notified in writing to each Investor pursuant to Section 11.13.
"SENIOR FUNDED DEBT" means, for the Company and its
Subsidiaries, on a consolidated basis, indebtedness for borrowed money, purchase
money mortgages, capitalized leases, outstandings under asset securitization
vehicles, conditional sales contracts and similar title retention debt
instruments, including any current maturities of such indebtedness, MINUS cash
and cash equivalents and excluding Indebtedness hereunder and under the Notes.
"SUBSIDIARY" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity of which
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securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power or, in the case of a partnership,
more than 50% of the general partnership interests are, as of such date, owned,
controlled or held. Unless otherwise specified, "Subsidiary" and "Subsidiaries"
shall mean a Subsidiary and Subsidiaries, respectively, of the Company.
"TAX" means, with respect to any Person, any Federal, state or
foreign tax, assessment, customs duties or other governmental charge, levy or
assessment (including any withholding tax) upon such Person or upon such
Person's assets, revenues, income or profits.
"TOTAL NET FUNDED DEBT" means, for the Company and its
Subsidiaries on a consolidated basis, indebtedness for borrowed money, purchase
money mortgages, capitalized leases, outstandings under asset securitization
vehicles, conditional sales contracts and similar title retention debt
instruments, including any current maturities of such indebtedness, which by its
terms matures more than one year from the date of any calculation thereof and/or
which is renewable or extendable at the option of the obligor(s) thereof to a
date beyond one year from such date, MINUS cash and cash equivalents.
"TOTAL NET FUNDED DEBT COVERAGE RATIO" means, for any period,
the ratio of (i) Total Net Funded. Debt to (ii) Annualized EBITDA.
"TRANSACTIONS" means the execution, delivery and performance
by the Obligors of this Agreement, the issuance of the Notes and the w of the
proceeds thereof in accordance with the preamble of this Agreement, and the
execution, delivery and performance by the Company of the Warrant Agreement and
the issuance of the Warrants thereunder.
"WARRANT AGREEMENT" means the Warrant Agreement dated as of
the date hereof between the Company and the holders of the Warrants party
thereto pursuant to which the Warrants are issued, as amended and in effect from
time to time.
"WARRANTS" means each of the warrants issued to the holders of
the Warrants on the Closing Date pursuant to the Warrant Agreement, including
any warrants issued in replacement or substitution thereof.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer
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Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.2 TERMS GENERALLY. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.3 ACCOUNTING TERMS; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; PROVIDED
that, if the Company notifies the Investors that (be Company requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Required Investors notify the Company
that they request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such change in
G^AP or in the application thereof, then such provision shall be interpreted on
the basis of GAAP as in effect and applied immediately before such change shall
have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith. To enable the ready and consistent
determination of compliance with the covenants set forth in Article VIII, the
Company will not change the last day of its fiscal year from June 30 of each
year, or the last days of the first three
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fiscal quarters in each of its fiscal years from September 30, December 31, and
March 31 of each year, respectively.
ARTICLE II
AMOUNT AND TERMS OF NOTES
SECTION 2.1 COMMITMENTS. Subject to and upon the terms and
conditions set forth herein, each Investor severally agrees to purchase from the
Company, and the Company agrees to issue to such Investor, its 12% Senior
Subordinated Note (each a "Not_" and, collectively, the "Notes"), which Note (i)
shall be issued on the Closing Date and (ii) shall be purchased at par by such
Investor in an amount equal to the principal amount sod forth opposite its name
on the signature pages hereto.
SECTION 2.2 DISBURSEMENT OF FUNDS. Each Investor shall make
available all amounts to be funded by such Investor under this Agreement on the
Closing Date in immediately available funds to the account specified by the
Company.
SECTION 2.3 NOTES.
(a) The Company's obligation to pay the principal of and
interest on all the Notes issued by it shall be evidenced by a Note,
substantially in the form of Exhibit A, duly executed and delivered by the
Company with blanks appropriately completed in conformity herewith.
(b) Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of any Note, and (in case of loss,
theft or destruction) of indemnity satisfactory to it (the relevant Investor's
undertaking shall be satisfactory indemnity in case of loss, theft or
destruction of any Note owned by such Investor), and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of such Note, if mutilated, the Company will pay any unpaid
principal, interest and prepayment charge then or theretofore due and payable on
such Note and will deliver in lieu of such Note a new Note in the remaining
unpaid principal amount thereof and carrying the same rights to interest (unpaid
and to accrue).
(c) Except to the extent otherwise provided herein, each
payment of principal of Notes by the Company shall be made for account
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of the Investors pro rata in accordance with the respective unpaid principal
amounts of the Notes held by them and each payment of interest on Notes by the
Company shall be made for account of the Investors pro rata in accordance with
the amounts of interest on such Notes then due and payable to the respective
Investors.
SECTION 2.4 INTEREST.
(a) The unpaid principal amount of each Note shall bear
interest from the Closing Date until maturity (whether by acceleration or
otherwise) at the rate of 12% PER ANNUM.
(b) Any amount that is not paid when due hereunder (without
giving effect to grace periods, if any) shall bear interest from the date such
amount was due through the date of payment at a rate equal to 14% PER ANNUM.
Without limiting the foregoing (but without duplication), upon the occurrence
and during the continuance of any Event of Default, the principal amount of the
Notes, and all other amounts then owing hereunder, shall bear interest for each
day during the period from and including the occurrence of such Event of Default
to but excluding the date such Event of Default shall have been cured or waived
at a rate equal to 14% PER ANNUM.
(c) Interest shall accrue from and including the Closing Date
to but excluding the date of any payment thereof and shall be payable, in
immediately available funds, semiannually in arrears on the 30th day of each
April and 31st day of each October, commencing on April 30, 1998, and on any
prepayment (on the amount prepaid), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand.
(d) All computations of interest hereunder and under the Notes
shall be made on the basis of a 360-day year consisting of twelve 30-day months
and shall be payable for the actual number of days elapsed (including the first
day but excluding the date of payment thereof).
SECTION 2.5 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The
failure of any Investor to purchase the Note to be purchased by it on the
Closing Date shall not relieve any other Investor of its obligation to purchase
its Note on such date, but no Investor shall be responsible for the failure of
the other Investor to purchase its Note, and no Investor shall have any
obligation to any other Investor for the failure by such Investor to purchase
any Note required to be purchased by such
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Investor. The amounts payable by the Company at any time hereunder and under the
Notes to each Investor shall be a separate and independent debt and each
Investor shall be entitled to protect and enforce its rights arising out of this
Agreement and the Notes held by it, and it shall not be necessary for any other
Investor to consent to, or be joined as an additional party in, any proceedings
for such purposes.
ARTICLE III
PREPAYMENTS: PAYMENTS
SECTION 3.1 OPTIONAL PREPAYMENTS.
(a) The Company may, at its option, upon notice as provided
below, prepay all or, from time to time, part of the Notes at any time at the
following prices (expressed in percentages of principal amount) in each of the
years listed below, in each case, together with interest accrued and unpaid on
the Notes (or part thereof, as the case may be) to the prepayment date:
YEAR PRICE
From the Closing Date through 106%
October 31, 1998
From November 1, 1998 through 104%
October 31, 1999
From November 1, 1999 through 102%
October 31, 2000
From November 1, 2000 and 100%
thereafter
(b) The Company will give each holder of the Notes notice of
each optional prepayment under paragraph (a) of this Section 3.01 not less than
20 days prior to the date fixed for such prepayment, specifying such date, the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid the interest to
be prepaid to the prepayment date with respect to such principal amount being
prepaid and the premium (if any) due in connection with such prepayment.
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(c) In the case of each partial prepayment of the Notes, the
principal amount of the Notes to be prepaid shall be allocated among all of the
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for
prepayment. At the request of the Company, any Note which is to prepaid only in
part shall be surrendered to the Company by the holder thereof, and the Company
shall issue to such holder a new Note equal in principal amount to the unpaid
portion of the surrendered Note (after giving effect to such prepayment) and in
the form of Exhibit A.
(d) In the event of a Change in Control, any Investor shall
have the option to require the Company to repurchase the Notes held by such
Investor at a price equal to 101% of the principal amount of such Notes if such
Change in Control occurs prior to the third anniversary of the date hereof and
thereafter at a price equal to 100% of the principal amount of such Notes, in
each case, together with interest accrued and unpaid on the Notes (or part
thereof, as the case may be) to the payment date. Not less than 20 days prior to
the anticipated date of consummation of any transaction that would result in a
Change in Control, the Company will give each Investor written notice of such
pending transaction (with a copy to the Senior Debt Representative in the manner
set forth in Section 11.13). Any Investor may exercise its right to require the
Company to repurchase the Note(s) held by it in accordance with this Section
3.01(d) by delivering written notice of such exercise within 20 days after
receipt of the written notice from the Company of the pending transaction and
the Company shall repurchase all of the Notes of the Investors so exercising
such rights not later than the date of consummation of such Change in Control.
(e) In the case of each prepayment of Notes pursuant to this
Section 3.01, the principal amount of each Note to be prepaid shall mature and
become due and payable on the date fixed for such prepayment, together with
interest and premium (if any) on such principal amount accrued to such date.
From and after such date, unless the Company shall fail to pay such principal
amount when so due and payable, together with the interest thereon, interest on
such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and canceled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any Note.
(f) The Company will not and will not permit any of its
Affiliates to purchase, redeem, prepay or otherwise acquire, directly or
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indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement or otherwise on
terms identical to those offered to all the other Investors (whether or not such
terms have actually been accepted by all the Investors). The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
SECTION 3.2 METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
any Investor, not later than 1:00 p.m. (New York time) on the date when due, and
shall be made in immediately available funds in dollars to the account specified
therefor by such Investor. Any payments under this Agreement and the Notes which
are made by the Company later than 1:00 p.m. (New York time) shall be deemed to
have been made on the next succeeding Business Day. Anything in this Agreement
or the Notes to the contrary notwithstanding, any payment of principal of, or
premium or interest on any Note that is due on a date other than a Business Day
shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on such next
succeeding Business Day.
ARTICLE IV
REPRESENTATIONS OF THE INVESTORS
Each Investor severally represents to the Company as follows:
SECTION 4.1 PURCHASE FOR INVESTMENT. Such Investor is purchasing the
Notes to be purchased by it on the Closing Date for its own general account
and/or for one or more separate accounts maintained by it and not with a view to
any distribution of the Notes that would be in violation of the securities laws
of the United States of America or any State thereof, without prejudice,
however, to such Investor's right at all times to sell or otherwise dispose of
all or any part of the Notes under an exemption from such registration available
under the Securities Act (including, without limitation, Rules 144 and 144A
promulgated thereunder), and subject, nevertheless, to the disposition of its
property being at all times within its control and subject to the terms of
Section 12.04.
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SECTION 4.2 ACCREDITED AND SOPHISTICATED INVESTOR. Such
Investor (a) is an "accredited investor" as defined in Rule 501(a) of the
Securities Act, and (b) by reason of its business and financial experience, has
such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective
investment in the Notes, is able to bear the economic risk of such investment
and is able to afford a complete loss of such investment, and (c) has been
afforded the opportunity to make inquiries of management of the Company and has
made its own investigation whether or not to purchase Notes and in making its
decision has not relied in any way on the fact that any other Person has decided
to purchase Notes under this Agreement.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 CONDITIONS PRECEDENT TO NOTES. The obligations of
the Investors to purchase the Notes issued by the Company hereunder are subject,
at the time of the purchase of the Notes, to the satisfaction of the following
conditions:
(a) CORPORATE DOCUMENTS. Certified copies of the charter and
by-laws (or equivalent documents) of each Obligor and of all corporate authority
for each Obligor (including, without limitation, board of director resolutions
and evidence of the incumbency, including specimen signatures, of officers) with
respect to the execution, delivery and performance of such of the Note Documents
to which such Obligor is intended to be a party and each other document to be
delivered by such Obligor from time to time in connection herewith and the Notes
hereunder (each Investor may conclusively rely on such certificate until it
receives notice in writing from such Obligor to the contrary).
(b) OFFICER'S CERTIFICATE. A certificate of a senior officer
of the Company, dated the Closing Date, to the effect set forth in clauses (a)
and (b) of Section 5.02.
(c) OPINION OF COUNSEL TO THE OBLIGORS. An opinion, dated the
Closing Date, of Olshan Grundman Frome & Rosenzweig LLP, counsel to the
Obligors, and/or other counsel satisfactory to the Required Lenders
substantially in the form of Exhibit B (and each Obligor hereby instructs such
counsel to deliver such opinion to the Investors).
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(d) OPINION OF SPECIAL NEW YORK COUNSEL TO THE INVESTORS. An
opinion, dated the Closing Date, of Milbank, Tweed, Hadley & McCloy, special New
York counsel to Chase Capital, substantially in the forth of Exhibit C.
(e) NOTES. One or more Notes, duly completed and executed for
each Investor.
(f) WARRANT AGREEMENT. The Warrant Agreement, duly executed
and delivered by each of the parties thereto, and the Warrants required to be
issued under Section 2.02 of the Warrant Agreement as of the Closing Date duly
issued and delivered to each of the initial holders of the Warrants as provided
in the Warrant Agreement, and each of the other agreements and instruments
contemplated to be executed and/or delivered thereunder, in each case duly
executed and/or delivered.
(g) SENIOR CREDIT AGREEMENT. Evidence that the Senior Credit
Agreement providing for commitments to extend credit to the Company in an
aggregate principal amount of at least $50,000,000 and otherwise in form and
substance satisfactory to the Investors shall have been executed and delivered
by each of the parties thereto and shall be in effect, and that the initial
loans thereunder shall have been made to the Company (or contemporaneously with
the purchase of the Notes hereunder shall be made), and the Investors shall have
received copies of the Senior Credit Agreement and, upon the request of the
Investors, each of the other Senior Credit Documents delivered thereunder in
connection with the initial borrowing thereunder, in each case certified by a
senior officer of the Company.
(h) REPAYMENT OF EXISTING INDEBTEDNESS. Evidence that the
principal of and interest on, and all other amounts owing in respect of, the
Indebtedness (including, without limitation, any contingent or other amounts
payable in respect of letters of credit), if any, indicated on Schedule 8.01
that is to be repaid on the Closing Date shall have been (or shall be
simultaneously) paid in full, that any commitments to extend credit under the
agreements or instruments relating to such Indebtedness shall have been canceled
or terminated and that all Guarantees in respect of, and all Liens securing, any
such Indebtedness shall have been released (or arrangements satisfactory to the
Required Lenders for such release shall have been made).
(i) FINANCIAL STATEMENTS. The Investors shall have received
the financial statements referred to in Section 6.04.
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(j) OTHER DOCUMENTS. Such other documents as any Investor or
special New York counsel to the Investors may reasonably request.
The obligation of any Investor to purchase its Note hereunder is also subject to
the payment or delivery by the Company of such fees and other consideration as
the Company shall have agreed to pay or deliver to any Investor or an Affiliate
thereof in connection herewith, including, without limitation, the reasonable
fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel
to Chase Capital, in connection with the negotiation, preparation, execution and
delivery of the Note Documents and the issuance of the Notes hereunder and of
the Warrants under the Warrant Agreement (to the extent that statements for such
fees and expenses have been delivered to the Company).
SECTION 5.2 OTHER CONDITIONS PRECEDENT. The obligation of any
Investor to purchase its Note hereunder is subject to the further conditions
precedent that, both immediately prior to the purchase of such Note and also
after giving effect thereto and to the intended use thereof:
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Company in
Article VI shall be true and correct on and as of the Closing Date with the same
force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Investors that:
SECTION 6.1 ORGANIZATION; POWERS. Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its respective organization, has all requisite power
and authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required. The Company
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and its Subsidiaries are adequately capitalized for the purposes of conducting
their respective businesses, and the Company was not formed solely for the
purpose of acting as agent for, or as an instrumentality of, any Subsidiary.
SECTION 6.2 AUTHORIZATION: ENFORCEABILITY. The Transactions
are within each Obligor's corporate powers and have been duly authorized by all
necessary corporate and, if required, stockholder action. Each of this Agreement
and the Notes have been duly executed and delivered by each Obligor and
constitutes a legal, valid and binding obligation of each Obligor, enforceable
in accordance with its respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
SECTION 6.3 GOVERNMENTAL APPROVALS: NO CONFLICTS. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority by the Company
and its Subsidiaries, except such as have been obtained or made and are in full
force and effect, (b) will not violate any applicable law or regulation or the
charta, by-laws or other organizational documents of the Company or of any of
its Subsidiaries or any order of any Governmental Authority, (c) will not
violate or result in a default under any indenture, agreement or other material
instrument binding upon the Company or of any of its Subsidiaries or its assets,
or give rise to a right thereunder to require any payment to be made by the
Company or of any of its Subsidiaries, and (d) will not result in the creation
or imposition of any Lien on any asset of the Company or of any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to or
otherwise subject to any provision contained in, any instrument evidencing
Indebtedness of the Company and its Subsidiaries, any agreement relating thereto
or any other contract or agreement, other than the Senior Credit Agreement
(including the charter, by-laws or other organizational documents of the Company
and its Subsidiaries) which limits the amount of, or otherwise imposes
restrictions on the incurring of Indebtedness of the type to be evidenced by the
Notes.
SECTION 6.4 SEC DOCUMENTS: FINANCIAL CONDITION: NO MATERIAL
ADVERSE CHANGE.
(a) The Company has filed in a timely manner all documents
that the Company was required to file with the Commission under Sections
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13, 14(a) and 15(d) of the Securities Exchange Act, since its initial public
offering. As of their respective filing dates, all documents filed by the
Company with the SEC ("SEC Documents") complied in all material respects with
the requirements of the Securities Exchange Act or the Securities Act, as
applicable. None of the SEC Documents as of their respective dates contained any
untrue statement of a material fact or omitted to state material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The fiducial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto.
(b) The Company has heretofore furnished to the Investors its
audited consolidated balance sheet, statements of income (including supporting
footnote disclosures) and cash flows as of and for the fiscal year ended June
30, 1997, with the opinion of Cooper, Selvin & Strassberg LLP, independent
public accountants.
(c) The financial statements included in the SEC Documents and
the referred to in paragraph (b) above present fairly, in all material respects,
the financial position and results of operations and cash flows of the Company
and its consolidated Subsidiaries as of the respective dates and for the
respective periods in accordance with GAAP (subject, in the case of any
unaudited financial statements, to customary year-end adjustments).
(d) Since June 30, 1997, there has been no material adverse
change in the business, property or assets, operations or condition, financial
or otherwise, of the Company and its Subsidiaries, taken as a whole.
SECTION 6.5 PROPERTIES. (a) Each of the Company and its
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for (i) Permitted
Encumbrances and (ii) minor defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of the Company and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use
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thereof by the Company and its Subsidiaries, to the best of the Company's
knowledge, does not infringe upon the rights of any other Person, except for any
such infringements that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.
SECTION 6.6 LITIGATION AND ENVIRONMENTAL MATTERS. (a) There
are no actions, suits or proceedings by or before any arbitrator or Governmental
Authority now pending against or, to the knowledge of any Obliger, threatened
against or affecting the Company or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect, except as disclosed in
Schedule 6.06(a), or (ii) that involve this Agreement or the Transactions.
(b) Except as disclosed in Schedule 6.06(b) and except with
respect to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Company nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
SECTION 6.7 COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the
Company and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has
occurred and is continuing.
SECTION 6.8 INVESTMENT AND HOLDING COMPANY STATUS. Neither the
Company nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 6.9 TAXES. Each of the Company and its Subsidiaries
has timely filed or caused to be filed all tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes
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required to have been paid by it, except (a) Taxes that are being contested in
good faith by appropriate proceedings and for which the Company or such
Subsidiary, as applicable, has set aside on its books adequate reserves or (b)
to the extent that the failure to do so could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 6.10 ERISA. Except as disclosed in Schedule 6.10:
(a) IDENTIFICATION OF PLANS. (i) Neither the Company nor any
ERISA Affiliate maintains or contributes to, or has maintained or contributed
to, any Plan that is an ERISA Plan and (ii) neither the Company nor any of its
Subsidiaries maintains or contributes to, or has maintained or contributed to,
any Plan that is an "Executive Arrangement" (as that term is used in the
definition of "Plane);
(b) COMPLIANCE. Each Plan has at all times been maintained, by
its terms and in operation, in accordance with all applicable laws, except where
such noncompliance (when taken as a whole) would not have a Material Adverse
Effect;
(c) LIABILITIES. Neither the Company nor any of its
Subsidiaries is currently making, nor has in the last 6 years been obligated to
make, contributions (directly or indirectly) to a Multiemployer Plan, nor is it
currently nor will it become subject to any liability (including withdrawal
liability), tax or penalty whatsoever to any Person whomsoever with respect to
any Plan including, but not limited to, any tax, penalty or liability arising
under Title I or Title IV or ERISA or Chapter 43 of the Code, except where such
liabilities (when taken as a whole) would not have a Material Adverse Effect;
and
(d) FUNDING. The Company and each ERISA Affiliate has made
full and timely payment of all amounts (i) required to be contributed under the
terms of each Plan and applicable law and (ii) required to be paid as expenses
of each Plan. No Plan has an "amount of unfunded benefit liabilities" (as
defined in Section 4001(a)(18) of ERISA).
SECTION 6.11 DISCLOSURE. Neither this Agreement or any other
Note Document (including the Private Placement Memorandum, dated August 1997
delivered to the Investors by Montgomery Securities, relating to the
transactions contemplated hereby) nor any other document, certificate or
statement furnished to the Investors by or on behalf of the Company or any
Subsidiary in connection herewith or therewith
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contains any untrue statement of a fact or omits to state a fact necessary to
make the statements contained herein and therein not misleading, if, in either
case, such fact is material to an understanding of the financial condition,
business, prospects or property of the Company or any Subsidiary, or the ability
of any Obligor to fulfill its obligations under any Note Document to which it is
a party.
SECTION 6.12 DEBT AGREEMENTS.
(a) Schedule 6.12 is a complete and correct list of each
credit agreement, loan agreement, indenture, purchase agreement, Guarantee,
letter of credit or other arrangement providing for or otherwise relating to any
Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or Guarantee by, the Company or any of its Subsidiaries, outstanding
on the date hereof, and the aggregate principal or face amount outstanding or
that may become outstanding under each such arrangement is correctly described
in Schedule 6.12. There exists no default under the provisions of any instrument
evidencing or securing any Indebtedness of the Company and its Subsidiaries or
of any agreement otherwise relating thereto which has had or would reasonably be
expected to have a Material Adverse Effect.
(b) Schedule 8.02 is a complete and correct list of each Lien
securing Indebtedness of any Person outstanding on the date hereof and covering
any property of the Company or any of its Subsidiaries, and the aggregate
Indebtedness secured (or that may be secured) by each such Lien and the property
covered by each such Lien is correctly described in Schedule 8.02.
SECTION 6.13 CAPITALIZATION. The authorized capital stock of
the Company consists, on the date hereof, of an aggregate of 35,000,000 shares
consisting of (i) 30,000,000 shares of common stock, par value $0.001 per share,
of which 7,197,718 shares are duly and validly issued and outstanding, each of
which shares is fully paid and nonassessable and (ii) 5,000,000 shares of blank
check preferred stock, of which no shares are duly and validly issued and
outstanding. As of the date hereof, (x) except as disclosed in Schedule 6.13 and
except as provided in the Warrant Agreement, there are no outstanding Equity
Rights with respect to the Company and (y) there are no outstanding obligations
of the Company or any of its Subsidiaries to repurchase, redeem, or otherwise
acquire any shares of capital stock of the Company nor are
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there any outstanding obligations of the Company or any of its Subsidiaries to
make payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value of
the Company or any of its Subsidiaries.
SECTION 6.14 SUBSIDIARIES AND INVESTMENTS.
(a) Set forth in Schedule 6.14(a) is a complete and correct
list of all of the Subsidiaries of the Company as of the date hereof together
with, for each such Subsidiary, (i) the jurisdiction of organization of such
Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and
(iii) the nature of the ownership interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such ownership
interests. Except as disclosed in Schedule 6.14(a), (x) each of the Company and
its Subsidiaries owns, free and clear of Liens, and has the unencumbered right
to vote, all outstanding ownership interests in each Person shown to be held by
it in Schedule 6.14(a), (y) all of the issued and outstanding capital stock of
each such Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) there are no outstanding Equity Rights with respect to
such Person.
(b) Set forth in Schedule 6.14(b) is a complete and correct
list of all Investments (other than Permitted Investments) held by the Company
in any Person on the date hereof and, for each such Investment, (x) the identity
of the Person or Persons holding such Investment and (y) the nature of such
Investment. Except as disclosed in Schedule 6.14(b), the Company owns, free and
clear of all Liens, all such Investments.
SECTION 6.15 NO BURDENSOME RESTRICTIONS. Neither the Company
nor any of its Subsidiaries is party to any contract or agreement that would
result in any burdensome restrictions that might reasonably be expected have a
Material Adverse Effect, including, but not limited to, any collective
bargaining agreements.
SECTION 6.16 PRIVATE OFFERING BY THE COMPANY. Neither the
Company nor anyone acting on its behalf has offered the Notes or any similar
securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any person other
than the Investors and certain other institutional investors, each of which has
been offered the Notes at a
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private sale for investment, which offer or sale would not require registration
under the Securities Act. Neither the Company nor anyone acting on its behalf
has taken, or will take, any action that would subject the issuance or sale of
the Notes to the registration requirements of Section 5 of the Securities Act.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Company covenants and agrees with the Investors that, so
long as any Note is outstanding and until payment in full of all amounts payable
by the Company hereunder and thereunder, unless the Required Investors shall
otherwise consent pursuant to Section 12.02:
SECTION 7.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Company will furnish to each Investor:
(a) within 90 days after the end of each fiscal year of the
Company, its audited consolidated balance sheet and related statements of income
and cash flows as of the end of and for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, with the opinion
thereon by Cooper, Selvin ~ Strassberg LLP or such other independent public
accountants of recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of the Company and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Company, its consolidated balance
sheet and related statements of income and cash flows as of the end of and for
such fiscal quarter and the then elapsed portion of the fiscal year, setting
forth in each case in comparative form the figures for the corresponding period
or periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, together with a certificate from the chief financial
officer of the Company certifying that such financial statements present fairly
in all material respects the financial condition and results of operations of
the Company and its consolidated Subsidiaries on a consolidated basis in
accordance with
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GAAP consistently applied, subject to customary year-end audit adjustments and
the absence of footnotes;
(c) as soon as available and in any event within 45 days after
the end of each month, the consolidated balance sheet and related statement of
income of the Company for such month;
(d) concurrently with any delivery of financial statements
under clause (a) or (b)above, a certificate of the chief financial officer of
the Company (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Section 8.09 and (iii)
stating whether any material change in GAAP or in the application thereof which
would effect the financial statements in any material respect has occurred since
the date of the audited financial statements referred to in Section 6.04 and, if
any such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate;
(e) concurrently with any delivery of financial statements
under clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether any Default has occurred and is
continuing (which certificate may be limited to the extent required by
accounting rules or guidelines);
(f) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
the Company or any Subsidiary with the SEC or with any national securities
exchange, or distributed by the Company to its shareholders generally, as the
case may be;
(g) promptly upon receipt thereof, copies of all significant
reports submitted to the Company by independent public accountants in connection
with each annual, interim or special audit of the financial statements of the
Company made by such accountants, including the comment letter submitted by such
accountants to management in connection with their annual audit;
(h) promptly upon receipt thereof, copies of all notices given
or received by the Company with respect to noncompliance with any term or
condition related to any Senior Debt;
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(i) at least 15 days prior to the closing of any acquisition
permitted under Section 8.03(b), the adjusted pro forma consolidated balance
sheet and statement of income of the Company, reflecting the financial condition
of the Company and its Subsidiaries after giving effect to such acquisition, all
in accordance with GAAP;
(j) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Company or any Subsidiary that is in the Company's or its Subsidiary's
possession, as any Investor may reasonably request.
SECTION 7.2 NOTICES OF MATERIAL EVENTS. The Company will
furnish to each Investor prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting the Company or any Affiliate thereof in which the amount in
controversy is $1,000,000 or more or that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Company and its Subsidiaries in an aggregate amount
exceeding $500,000;
(d) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect; and
(e) a copy of any notice of default furnished by the Company
under the Senior Credit Agreement (or any agreement replacing the Senior Credit
Agreement in effect from time to time) simultaneously with the delivery thereof
to the lenders party thereto (or their agent).
Each notice delivered under this Section 7.02 shall be accompanied by a
statement of the chief financial officer or other executive officer of the
Company setting forth the details of the event or development requiring such
notice and any action taken or proposed to be taken with respect thereto.
SECTION 7.3 EXISTENCE: CONDUCT OF BUSINESS. The Company will,
and will cause each of its Subsidiaries to, do or cause to be done
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all things necessary to preserve, renew and keep in full force and effect its
legal existence and the rights, licenses, permits, privileges and franchises
material to the conduct of its business; PROVIDED that the foregoing shall not
prohibit (i) any merger, consolidation, liquidation or dissolution permitted
under Section 8.03 or (ii) any other action permitted under Section 8.11.
SECTION 7.4 PAYMENT OF OBLIGATIONS. The Company will, and will
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could reasonably be expected to result in a
Material Adverse Effect before the same shall become delinquent or in default,
except where (a) the validity or amount thereof is being contested in good faith
by appropriate proceedings, (b) the Company or such Subsidiary has set aside on
its books adequate reserves with respect thereto in accordance with GAAP and (c)
the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 7.5 MAINTENANCE OF PROPERTIES: INSURANCE. The Company
will, and will cause each of its Subsidiaries to, (a) keep and maintain all
property which is material to the conduct of its business in good working order
and condition, ordinary wear and tear excepted, except where such failure could
not reasonably be expected to result in a Material Adverse Effect, PROVIDED that
the Company and each Subsidiary shall not be under any obligation to repair or
replace any such property which has become obsolete or has become unsuitable or
inadequate for the purpose for which they are used, and (b) maintain, with
financially sound and reputable insurance companies, insurance in such amounts
and against such risks as are customarily maintained by companies engaged in the
same or similar businesses operating in the same or similar locations.
SECTION 7.6 BOOKS AND RECORDS: INSPECTION RIGHTS. The Company
will, and will cause each of its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Company will, and
will cause each of its Subsidiaries to, permit any representatives designated by
any Investor, upon reasonable prior notice, to visit and inspect its properties,
to examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants,
all at such reasonable times and during normal business hours and as often as
reasonably requested.
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SECTION 7.7 COMPLIANCE WITH LAWS. The Company will, and will
cause each of its Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its property, except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 7.8 USE OF PROCEEDS. The proceeds of the Notes will be
used only for the purposes specified in the second paragraph of this Agreement.
Neither the Company nor any of its Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying Margin
Stock, and no part of the proceeds of the Notes hereunder will be used to buy or
carry any Margin Stock.
SECTION 7.9 CERTAIN OBLIGATIONS AFFECTING SUBSIDIARIES.
(a) In the event that the Company or any of its Subsidiaries
shall form or acquire any new Subsidiary after the date hereof, the Company will
cause such Subsidiary to become a "Subsidiary Guarantor" (and, thereby an
"Obligor") hereunder pursuant to a written instrument in form and substance
satisfactory to the Required Investors and to deliver such proof of corporate
action, incumbency of officers, opinions of counsel and other documents as is
consistent with those delivered by each Obligor pursuant to Section 5.01 upon
the Closing Date as any Investor shall have requested.
(b) The Company will, and will cause each of its Subsidiaries
to, take such action from time to time as shall be necessary to ensure that each
of its Subsidiaries is a wholly-owned Subsidiary.
ARTICLE VIII
NEGATIVE COVENANTS
The Company covenants and agrees with the Investors that, so
long as any Note is outstanding and until payment in full of all amounts payable
by the Company hereunder or thereunder:
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SECTION 8.1 INDEBTEDNESS. The Company will not, and will not
permit any of its Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness created hereunder and under the Notes;
(b) Indebtedness (including, without limitation Capital Lease
Obligations) constituting Senior Debt, including, without limitation, Senior
Debt incurred pursuant to the Senior Debt Incurrence Ratio referred to in
clauses (iii) and (v) of the definition of "Senior Debt";
(c) Indebtedness existing on the date hereof and set forth in
Schedule 8.01, but not any extensions, renewals or replacements of any such
Indebtedness;
(d) Indebtedness of the Company to any Subsidiary and of any
Subsidiary to the Company or any other Subsidiary;
(e) Guarantees by the Company of Indebtedness of any
Subsidiary and by any Subsidiary of Indebtedness of the Company or any other
Subsidiary; and
(f) additional Indebtedness of the Company or any of its
Subsidiaries incurred after the Closing Date in an aggregate principal amount
not exceeding $2,000,000.
SECTION 8.2 LIENS. The Company will not, and will not permit
any of its Subsidiaries to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Company or any
Subsidiary existing on the date hereof and set forth in Schedule 8.02; PROVIDED
that (i) such Lien shall not apply to any other property or asset of the Company
or any Subsidiary and (ii) such Lien shall secure only those obligations which
it secures on the date hereof;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Company or any Subsidiary or existing on any property
or asset of any Person that becomes a Subsidiary after the date
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hereof prior to the time such Person becomes a Subsidiary; PROVIDED that (i)
such Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such
Lien shall not apply to any other property or assets of the Company or any
Subsidiary and (iii) such Lien shall secure only those obligations which it
secures on the date of such acquisition or the date such Person becomes a
Subsidiary, as the case may be;
(d) Liens on fixed or capital assets acquired, constructed or
improved by the Company or any Subsidiary; PROVIDED that (i) such security
interests secure Indebtedness permitted by Section 8.01(b), (ii) such security
interests and the Indebtedness secured thereby are incurred prior to or within
180 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed the cost of
acquiring, constructing or improving such fixed or capital assets and (iv) such
security interests shall not apply to any other property or assets of the
Company or any Subsidiary;
(e) Liens securing Senior Debt; and
(f) additional Liens securing Indebtedness or other
obligations of the Company and its Subsidiaries incurred after the Closing Date
in an aggregate amount not exceeding $2,000,000.
SECTION 8.3 FUNDAMENTAL CHANGES. The Company will not, and
will not permit any of its Subsidiaries to:
(a) merge or consolidate with any other entity, except that:
(i) any Subsidiary may merge into the Company in a transaction
in which the Company is the surviving corporation;
(ii) any Subsidiary may merge into any Subsidiary Guarantor;
PROVIDED that if any such transaction shall be between a Subsidiary
Guarantor and a Subsidiary not a Subsidiary Guarantor, and such
Subsidiary Guarantor is not the continuing or surviving corporation,
then the continuing or surviving corporation shall have assumed all of
the obligations of such Subsidiary Guarantor hereunder; and
(iii) any Person that is engaged in the business in which the
Company is engaged as of the Closing Date or substantially related
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thereto may merge into the Company or any Subsidiary in a transaction
in which the Company or a wholly-owned Subsidiary is the surviving
corporation; PROVIDED that, at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be continuing
and shall comply with Section 7.09;
(b) purchase, lease or otherwise acquire for cash, stock or
other consideration, the stock of any Person or all or any substantial portion
of the assets of any Person where such stock, assets or other consideration have
an aggregate fair market value of more than $15,000,000, PROVIDED that, so long
as no Event of Default has occurred (or will be caused by such acquisition), the
Company or any Subsidiary may request Mat the Required Investors consent to such
acquisition for consideration greater than $15,000,000 in any one transaction
(PROVIDED that, notwithstanding anything herein to the contrary, the decision
whether or not to so consent shall remain solely at the discretion of the
Investors). Consistent with such request, the Company shall provide the
Investors with an information package to include, but not limited to, the
following:
(i) historical financial statements showing the impact of the
acquisition on the Company's historical operating performance and
existing balance sheet;
(ii) projections detailing the expected performance of the
combined company going forward; and
(iii) a detailed listing of the assets proposed to be
purchased and liabilities, if any, proposed to be assumed in the
transaction;
(c) enter into a partnership or joint venture with any other
Person; PROVIDED that, so long as no Event of Default has occurred, the Company
or any Subsidiary may request that the Required Investors consent to its
entering into a partnership or joint venture for the purposes of carrying on its
business;
(d) sell, lease, transfer or other dispose of any assets,
except that (except as otherwise prohibited under Section 8.12) this Section
8.03(d) shall not prohibit any disposition of (i) any asset if on the date such
asset is sold, the Asset Value of all assets sales occurring after the Closing
Date, taking into account the Asset Value of the proposed asset sale, would not
exceed on an aggregate basis 10% of
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the Consolidated Net Worth of the Company on the Closing Date and such sale is
in the ordinary course of business, (ii) any obsolete or retired assets not used
or useful in its business (such assets to include high-pressure tanks, motorized
vehicles, including cars and trucks, and lines of business other than carbon
dioxide that may be obtained by the Company as part of the group of assets of
any corporation or other business entity which the Company may acquire) and
(iii) other sales of assets approved by the Required Investors.
SECTION 8.4 INVESTMENTS: HEDGING AGREEMENTS. (a) The Company
will not, and will not permit any of its Subsidiaries to, purchase, hold or
acquire (including pursuant to any merger with any Person that was not a
wholly-owned Subsidiary prior to such merger) any capital stock, evidences of
indebtedness or other securities (including any option, warrant or other right
to acquire any of the foregoing) of, make or permit to exist any loans or
advances to (not including accounts receivable), Guarantee any obligations of,
or make or permit to exist any Investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person, except:
(i) Permitted Investments;
(ii) Investments by the Company existing on the date hereof in
the capital stock of its Subsidiaries;
(iii) loans or advances made by the Company to any Subsidiary
and made by any Subsidiary to the Company or any other Subsidiary;
(iv) Guarantees constituting Indebtedness permitted by Section
8.01;
(v) Investments in Plans;
(vi) advances made by the Company or any of its Subsidiaries
to its employees in the ordinary course of business, and loans made by
the Company to its employees to allow such employees to purchase stock
of the Company; PROVIDED that the sum of (i) the aggregate total of
such advances made by the Company to its employees under this clause
(vi) Bad (ii) the aggregate amount paid by the Company with respect to
the repurchase or redemption of its capital stock under Section 8.05(c)
shall not exceed $2,000,000 at any one time outstanding;
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(vii) deposits made by the Company in connection with
acquisitions permitted under Section 8.03(b); and
(viii) Investments by the Company from the net proceeds of an
equity issuance after the Closing Date that are not used to prepay
Senior Debt (to the extent required by the terms thereof) or to pay
dividends or other distributions under Section 8.05(d).
(b) The Company will not, and will not permit any of its
Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements
entered into in the ordinary course of business to hedge or mitigate risks to
which the Company or any Subsidiary is exposed in the conduct of its business or
the management of its liabilities or as required by the Senior Credit Agreement.
SECTION 8.5 RESTRICTED PAYMENTS. The Company will not, and
will not permit any of its Subsidiaries to, declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, except (a) the Company may
declare and pay dividends with respect to its capital stock payable solely in
additional shares of its common stock, (b) the Company may make Restricted
Payments pursuant to and in accordance with stock option plans or other benefit
plans for management or employees of the Company and its Subsidiaries, (c) the
Company may repurchase or redeem shares of any class of capital stock of the
Company issued pursuant to and in accordance with stock option plans or other
benefit plans for management or employees or under other option plans of the
Company not exceeding $1,000,000 in the aggregate and (d) the Company may
declare and pay dividends with respect to its capital stock in an aggregate
amount not exceeding the net proceeds of any equity issuance by the Company
after the Closing Date (MINUS the aggregate amount of any Investments made from
such proceeds under Section 8.04(a)(viii)).
SECTION 8.6 SALE AND LEASEBACKS. The Company will not, and
will not permit any of its Subsidiaries to, enter into any transaction with any
other Person whereby such Person leases assets sold or otherwise transferred to
it by the Company or such Subsidiary if the aggregate value of the assets sold
or transferred pursuant to such a transaction shall exceed $1,000,000.
SECTION 8.7 TRANSACTIONS WITH AFFILIATES. The Company will
not, and will not permit any of its Subsidiaries to (a) enter into any material
transaction or series of transactions which in the aggregate would be material,
whether or not in the ordinary course of business,
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with any Affiliate of the Company or any Subsidiary except (i) in the ordinary
course of business at prices and on tams and conditions not less favorable to
the Company or such Subsidiary than could be obtained on an arm's-length basis
from unrelated third parties, (ii) transactions between or among Me Company and
its wholly-owned Subsidiaries not involving any other Affiliate and (iii) any
Restricted Payment permitted by Section 8.05, or (b) convey or transfer to any
other Person (including the Company or any Subsidiary) any real property,
buildings, or fixtures used in the manufacturing or production operations of the
Company or any Subsidiary, or convey or transfer to the Company or any
Subsidiary any other assets (excluding conveyances or transfer in the ordinary
course of business) if at the time of such conveyance or transfer any Default or
Event of Default exists or would exist as a result of such conveyance or
transfer.
SECTION 8.8 RESTRICTIVE AGREEMENTS. The Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, enter into,
incur or permit to exist any agreement or other arrangement that prohibits,
restricts or imposes any condition upon (a) the ability of the Company or any of
its Subsidiaries to create, incur or permit to exist any Lien upon any of its
property or assets, or (b) the ability of any Subsidiary to pay dividends or
other distributions with respect to any shares of its capital stock or to make
or repay loans or advances to the Company or any other Subsidiary or to
Guarantee Indebtedness of the Company or any other Subsidiary; PROVIDED that (i)
the foregoing shall not apply to restrictions and conditions imposed by law or
by this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof under the Senior Credit Agreement as in
effect on the date hereof or otherwise identified on Schedule 8.08 (but shall
apply to any extension, renewal, amendment or modification thereof which expands
the scope of, any such restriction or condition), (iii) the foregoing shall not
apply to customary restrictions and conditions contained in agreements relating
to the sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (iv) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (v) clause
(a) of the foregoing shall not apply to customary provisions in leases and other
contracts entered into in the ordinary course of business restricting the
assignment thereof.
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SECTION 8.9 FINANCIAL COVENANTS.
(a) INTEREST COVERAGE RATIO. The Company will not permit the
Interest Coverage Ratio to be less than the following respective ratios as at
the last day of each fiscal quarter during the following respective periods:
PERIOD RATIO
From the Closing Date through
October 31, 1998 2.00 to 1.00
From November 1, 1998 through
October 31, 2000 2.50 to 1.00
From November 1, 2000 and at 3.00 to 1.00
all times thereafter
(b) TOTAL NET FUNDED DEBT COVERAGE RATIO.
The Company will not permit the Total Net Funded Debt Coverage
Ratio to exceed the following respective ratios at any time
during the following respective periods:
PERIOD RATIO
From the Closing Date through
October 31, 1998 5.25 to 1.00
From November 1, 1998 through
October 31, 2000 4.50 to 1.00
From November 1, 2000 and at 4.00 to 1.00
all times thereafter
(c) MINIMUM NET WORTH. The Company shall at
all times maintain Consolidated Net Worth of not less than the
sum of (a) $45,000,000 (increasing to $50,000,000 on December
31, 1999), (b) Ban 50% of the cumulative Consolidated Net
Income for each fiscal quarter ending on or after December 31,
1997 (but specifically not including any Consolidated Net Loss
for any such fiscal quarter) plus (c) the cumulative net
proceeds of all equity offerings (if any) made by the Company
for each fiscal quarter ending on or after September 30, 1997.
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SECTION 8.10 MODIFICATIONS OF CERTAIN DOCUMENTS.
(a) The Company will not, and will not permit any of its
Subsidiaries to, change, amend, supplement or otherwise modify the terms of the
Senior Credit Documents, or refund or refinance the same, without the prior
consent of the Required Investors, if the effect of such amendment or such
refunding or refinancing is to:
(i) impose upon the Company, directly or indirectly, any
prohibition or limitation on its ability to make regularly scheduled
payments of principal of or interest on the Notes, or any other amounts
owing to the Investors under this Agreement, except as provided in the
subordination provisions set forth in Article XI; and
(ii) extend or shorten the scheduled maturity of any payment
of any principal amount of the loans under the Senior Credit Agreement,
except (x) altering or modifying the payment schedule of such loans so
as to cause the average life to maturity of such loans to be not more
than three years longer than the average life to maturity of such loans
as of the date hereof or (y) extending the final maturity date of such
loans by more than three years.
(b) The Company will not, and will not permit any of its
Subsidiaries to, consent to any modification, supplement or waiver of any of the
provisions of its certificate of incorporation, certificates of designation of
preferred stock or by-laws, if such modification, supplement or waiver could
reasonably be expected to be adverse to the interests of the Investors, in each
case without the prior consent of the Required Investors.
SECTION 8.11 NATURE OF BUSINESS. The Company will not, and
will not permit any of its Subsidiaries to, engage to any material extent in any
business other than businesses of the type conducted by the Company and its
Subsidiaries on the date hereof and businesses reasonably related thereto;
PROVIDED that nothing herein shall prevent the Company and its Subsidiaries from
(i) expanding the location of its business or businesses in the United States,
(ii) ceasing or omitting to exercise any rights, licenses, permits or franchises
which in good faith in the judgment of the Company and its Subsidiaries can no
longer be profitably exercised or (iii) engaging in a business or businesses
that are ancillary to those engaged in by the Company or such Subsidiary on the
date hereof.
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SECTION 8.12 SALE OF SUBSIDIARIES. The Company will not, and
will not permit any of its Subsidiaries to, sell or otherwise dispose of any
shares of capital stock of or other ownership interest in any Subsidiary (except
in connection with any acquisition, merger or consolidation permitted by Section
8.03) or permit any Subsidiary to issue any additional shares of its capital
stock or other incidents of ownership except on a pro rata basis to all its
stockholders, partners or owners, as the case may be.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1 EVENTS OF DEFAULT: REMEDIES. If any of the
following events ("EVENTS OF DEFAULT") shall occur:
(a) the Company shall fail to pay any principal of any Note
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise;
(b) the Company shall fail to pay any interest on any Note or
any fee or any other amount (other than an amount referred to in clause (a) of
this Section 9.01) payable under this Agreement or the Notes, when and as the
same shall become due and payable, and such failure shall continue unremedied
for a paled of five days;
(c) any representation or warranty made or deemed made by or
on behalf of the Obligors in or in connection with this Agreement or any
amendment or modification hereof, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with this
Agreement or any amendment or modification hereof, shall prove to have been
incorrect in any material respect when made or deemed made;
(d) the Company shall fail to observe or perform any covenant,
condition or agreement contained in Section 7.01(a) through (d) and such failure
shall continue unremedied for a period of ten days after notice thereof from any
Investor to the Company;
(e) the Company shall fail to observe or perform any covenant,
condition or agreement contained in Article VII and Article VIII;
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(f) the Company shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in clauses (a) through (e), inclusive, of this Article), and such failure shall
continue unremedied for a period of 30 days after notice thereof from any
Investor to the company;
(g) the Company or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) at final
maturity in respect of any Indebtedness (other than the Notes) having an
aggregate unpaid principal balance in excess of $1,000,000, when and as the same
shall become due and payable, or any default, event or condition occurs or
exists with respect to such Indebtedness, or under any agreement or instrument
evidencing, securing or related to such Indebtedness, that results in such
Indebtedness becoming due prior to its stated maturity date;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Company or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receive, trustee, custodian, sequestrator, conservator or
similar official for the Company or any Subsidiary or for a substantial part of
its assets, and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordain" any of the
foregoing shall be entered;
(i) the Company or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Section 9.01, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company or any Subsidiary
or for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors or (vi) take any action
for the purpose of effecting any of the foregoing;
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(j) the Company or any Subsidiary shall become unable, admit
in writing or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $1,000,000 (not fully covered by insurance) shall
be rendered against the Company, any Subsidiary or any combination thereof and
the same shall remain undischarged for a period of 60 consecutive days during
which execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to attach or levy upon any assets of the Company or
any Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the reasonable
opinion of the Required Investors, when taken together with all other ERISA
Events that have occurred, could reasonably be expected to result in a Material
Adverse Effect; or
(m) the actual or asserted invalidity of the Guarantee of any
Subsidiary under this Agreement;
then, and in every such event (other than an event with respect to any Obligor
described in clause (h) or (i) of this Section 9.01), and at any time thereafter
during the continuance of such event, the Required Investors may, by notice to
the Company (with a copy to the Senior Debt Representative in the manner set
forth in Section 11.13, PROVIDED that the failure to provide such copy, or any
delay in so providing such copy, shall not affect the validity of such notice),
declare the Notes then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Notes so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Company accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Obligors; and in case of any
event with respect to any Obligor described in clause (h) or (i) of this Section
9.01, the principal of the Notes then outstanding, together with accrued
interest thereon and all fees and other obligations of the Company accrued
hereunder, shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Company.
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ARTICLE X
SUBSIDIARY GUARANTEE
SECTION 10.1 THE GUARANTEE. The Subsidiary Guarantors hereby
jointly and severally guarantee to each Investor and its successors and assigns
the prompt payment in full when due (whether at stated maturity, by acceleration
or otherwise) of the principal of and interest on the Note(s) held by each
Investor of, the Company and all other amounts from time to time owing to the
Investors by the Company under this Agreement and the Notes, in each case
strictly in accordance with the terms thereof (such obligations being herein
collectively called the "GUARANTEED OBLIGATIONS"). The Subsidiary Guarantors
hereby further jointly and severally agree that if the Company shall fail to pay
in full when due (whether at stated maturity, by acceleration or otherwise) any
of the Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the
same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the tams of such extension or
renewal.
SECTION 10.2 OBLIGATIONS UNCONDITIONAL. The obligations of the
Subsidiary Guarantors under Section 10.01 are absolute and unconditional, joint
and several, irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of the Company under this Agreement, the Notes
or any other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 10.02 that the obligations of the
Subsidiary Guarantors hereunder shall be absolute and unconditional, joint and
several, under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not altar or impair the liability of the Subsidiary Guarantors hereunder
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Subsidiary Guarantors, the time for any performance of or
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compliance with any of the Guaranteed Obligations Hall be extended,
or such performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of,
any Investor as security for any of the Guaranteed Obligations shall
fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that any
Investor exhaust any right, power or remedy or proceed against the Company under
this Agreement or the Notes or any other agreement or instrument referred to
herein or therein, or against any other Person under any other guarantee of, or
security for, any of the Guaranteed Obligations.
SECTION 10.3 REINSTATEMENT. The obligations of the Subsidiary
Guarantors under this Article X shall be automatically reinstated if and to the
extent that for any reason any payment by or on behalf of the Company in respect
of the Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise and the Subsidiary
Guarantors jointly and severally agree that they will indemnify each Investor on
demand for all reasonable costs and expenses (including, without limitation,
reasonable fees of counsel) incurred by such Investor in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.
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SECTION 10.4 SUBROGATION. Each Subsidiary Guarantor hereby
waives all rights of subrogation or contribution, whether arising by contract or
operation of law (including, without limitation, any such right arising under
the Bankruptcy Code) or otherwise by reason of any payment by it pursuant to the
provisions of this Article X and further agrees with the Company for the benefit
of each of its creditors (including, without limitation, each Investor) that any
such payment by it shall constitute a contribution of capital by such Subsidiary
Guarantor to the Company (or an investment in the equity capital of the Company
by such Subsidiary Guarantor).
SECTION 10.5 REMEDIES. The Subsidiary Guarantors jointly and
severally agree that, as between the Subsidiary Guarantors and the Investors,
the obligations of the Company under this Agreement and the Notes may be
declared to be forthwith due and payable as provided in Article IX (and shall be
deemed to have become automatically due and payable in the circumstances
provided in Article IX) for purposes of Section 10.01 notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against the Company and that, in
the event of such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and payable
by the Company) shall forthwith become due and payable by the Subsidiary
Guarantors for purposes of Section 10.01.
SECTION 10.6 INSTRUMENT FOR THE PAYMENT OF MONEY. Each
Subsidiary Guarantor hereby acknowledges that the guarantee in this Article X
constitutes an instrument for the payment of money, and consents and agrees that
any Investor, at its sole option, in the event of a dispute by such Subsidiary
Guarantor in the payment of any moneys due hereunder, shall have the right to
bring motion-action under New York CPLR Section 3213.
SECTION 10.7 CONTINUING GUARANTEE. The guarantee in this
Article X is a continuing guarantee, and shall apply to all Guaranteed
Obligations whenever arising.
SECTION 10.8 RIGHTS OF CONTRIBUTION. The Subsidiary Guarantors
hereby agree, as between themselves, that if any Subsidiary Guarantor shall
become an Excess Funding Guarantor (as defined below) by reason of the payment
by such Subsidiary Guarantor of any Guaranteed Obligations, each other
Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor (but
subject to the next sentence), pay to such
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Excess Funding Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata
Share (as defined below and determined, for this purpose, without reference to
the property, debts and liabilities of such Excess Funding Guarantor) of the
Excess Payment (as defined below) in respect of such Guaranteed Obligations. The
payment obligation of a Subsidiary Guarantor to any Excess Funding Guarantor
under this Section 10.08 shall be subordinate and subject in right of payment to
the prior payment in full of the obligations of such Subsidiary Guarantor under
the other provisions of this Article X and such Excess Funding Guarantor shall
not exercise any right or remedy with respect to such excess until payment and
satisfaction in full of all of such obligations.
For purposes of this Section 10.08, (i) "EXCESS FUNDING
GUARANTOR" means, in respect of any Guaranteed Obligations, a Subsidiary
Guarantor that has paid an amount in excess of its Pro Rata Share of such
Guaranteed Obligations, (ii) "EXCESS PAYMENT" means, in respect of any
Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess
of its Pro Rata Share of such Guaranteed Obligations and (iii) "PRO RATA SHARE"
means, for any Subsidiary Guarantor, the ratio (expressed as a parentage) of (x)
the amount by which the aggregate present fair saleable value of all property of
such Subsidiary Guarantor (excluding any shares of stock of any other Subsidiary
Guarantor) exceeds the amount of all the debts and liabilities of such
Subsidiary Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Subsidiary
Guarantor hereunder and any obligations of any other Subsidiary Guarantor that
have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which
the aggregate fair saleable value of all property of all of the Subsidiary
Guarantors exceeds the amount of all the debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities, but excluding
the obligations of the Subsidiary Guarantors hereunder) of the Subsidiary
Guarantors, determined (A) with respect to any Subsidiary Guarantor that is a
party hereto on the Closing Date, as of the Closing Date, and (B) with respect
to any other Subsidiary Guarantor, as of the date such Subsidiary Guarantor
becomes a Subsidiary Guarantor hereunder.
SECTION 10.9 GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In
any action or proceeding involving any state corporate law, or any state or
Federal bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors generally, if the obligations of the Subsidiary Guarantors under
Section 10.01 would otherwise, be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any
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other creditors, on account of the amount of its liability under Section 10.01,
then, notwithstanding any other provision hereof to the contrary, the amount of
such liability shall, without any further action by any Subsidiary Guarantor,
any Investor or any other Person, be automatically limited and reduced to the
highest amount that is valid and enforceable and not subordinated to the claims
of other creditors as determined in such action or proceeding.
SECTION 10.10 SUBORDINATION OF GUARANTEES. The obligations of
the Subsidiary Guarantors under this Article X to the Investors are subordinated
as provided in Section 11.11.
ARTICLE XI
SUBORDINATION
SECTION 11.1 AGREEMENT TO SUBORDINATE. The Company covenants
and agrees, and each Investor likewise covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article XI, the payment of the
principal of and interest and premium (if any) on the Notes, and all other sums
due and payable by the Company to the Investors hereunder (for purposes of this
Article XI, collectively, the "Subordinated Debt"), are hereby expressly made
subordinate and subject in right of payment to the prior payment in full in cash
of all Senior Debt. Each Investor hereby agrees not to amend or otherwise modify
any provision of this Article XI (and any defined term used in this Article XI)
without the prior written consent of the requisite number of holders of Senior
Debt as provided in the Senior Credit Agreement. The holders of Senior Debt and
their agent under the Senior Credit Agreement are third-party beneficiaries of
the provisions of this Article XI and are entitled to rely thereon.
SECTION 11.2 BANKRUPTCY, LIQUIDATION, DISSOLUTION, ETC. In the
event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as such, or
to its assets, or (b) any liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event:
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(i) the holders of Senior Debt shall be entitled to receive
payment in full in cash of all amounts due or to become due on or in
respect of all Senior Debt, before any Investor is entitled to receive
any payment on account of the Subordinated Debt; and
(ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, by
set-off or otherwise, to which any Investor would be entitled but for
the provisions of this Article XI, including any such payment or
distribution which may be payable or deliverable by reason of the
payment of any other Indebtedness of the Company being subordinated to
the payment of the Subordinated Debt (other than any payment or
distribution in the form of equity or debt securities of the Company or
any successor obliger of Senior Debt provided for by a plan of
reorganization or readjustment which, in the case of any such debt
securities, are (x) subordinated in right of payment to all Senior Debt
that may at the time be outstanding to the same extent as, or to a
greater extent than, the Subordinated Debt is subordinate to the Senior
Debt as provided in this Article XI and (y) are not payable prior to
the payment in full of the Senior Debt) shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior
Debt or their representative or representatives or to the trustee or
trustees under any indenture under which any instruments evidencing any
of such Senior Debt may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the principal of and
interest and premium (if any) on, the Senior Debt held or represented
by each, to the extent necessary to make payment in full in cash of all
Senior Debt remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Debt; and
(iii) in the event that, notwithstanding the foregoing
provisions of this Section 11.02, any Investor shall have received any
such payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, including any such
payment or distribution which may be payable or deliverable by reason
of the payment of any other Indebtedness of the Company being
subordinated to the payment of the Subordinated Debt (but excluding any
payment of the character described in the parenthetical clause in the
foregoing clause (ii)) before all
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Senior Debt is paid in full in cash, then and in such event such
payment or distribution shall be held in trust for the holders of
Senior Debt and paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent
or other Person making payment or distribution of assets of the Company
for application to the payment of all Senior Debt remaining unpaid, to
the extent necessary to pay all Senior Debt in full in cash, after
giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt.
If the Investors shall have failed to file proper claims or
proofs of claim with respect to the Notes in any proceeding of the type referred
to in the first sentence of this Section 11.02 prior to 30 days before the
expiration of the time to file such claims or proofs of claim, the Investors
hereby appoint and empower the Senior Debt Representative to file such claims or
proofs of claim, and if the Investors shall fail to vote any such claim at least
15 days prior to the expiration of the time to vote such claim, the Investors
hereby appoint and empower the Senior Debt Representative to vote such claim;
PROVIDED that the Senior Debt Representative shall have no obligation to file
and/or vote any such claim. If the Senior Debt Representative votes any such
claim in accordance with the provisions of this paragraph no Investor shall be
entitled to modify, revoke or withdraw such vote. The Investors shall execute
and deliver, at the expense of the holders of the Senior Debt, such agreements,
instruments and documents as the Senior Debt Representative may reasonably
request to carry out the provisions of this paragraph.
SECTION 11.3 NO PAYMENT IN CERTAIN CIRCUMSTANCES.
(a) In the event that any principal of or interest on the
Senior Debt is not paid when due, whether at stated maturity, by mandatory
prepayment, by acceleration or otherwise, but after expiration of any applicable
grace period (each a "SENIOR DEBT PAYMENT DEFAULT") and the Senior Debt
Representative shall have given written notice of such non-payment (a "Payment
Default Notice"), then no payment shall be made by the Company, or accepted by
any Investor, on account of the Subordinated Debt unless and until such payment
shall have been made or such Senior Debt Payment Default is waived in accordance
with the tams of such Senior Debt.
(b) In the event that any Event of Default under, and as
defined in, the Senior Credit Agreement (other than a Senior Debt
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Payment Default) (each a "SENIOR DEBT NONPAYMENT DEFAULT") shall have occurred
and be continuing and the Company and the Investors shall have received written
notice of such Senior Debt Non-Payment Default from the Senior Debt
Representative (a "Payment Blockage Notice"), then no payment shall be made by
the Company, or accepted by any Investor, on account of the Subordinated Debt
(including any repurchase of the Notes) during the period (a "PAYMENT BLOCKAGE
PERIOD") commencing on the date the Company and the Investors received such
Payment Blockage Notice and ending on the earlier of (i) the date 180 days
thereafter and (ii) the date on which the Senior Debt NonPayment Default giving
rise to the Payment Blockage Period is cured or waived in accordance with the
terms of the Senior Credit Documents; PROVIDED that (x) the holders of Senior
Debt shall not be entitled to institute a Payment Blockage Period more often
than once within any period of 360 consecutive days and (y) no Senior Debt
Non-Payment Default or event which, with the giving of notice and/or lapse of
time, would become a Senior Debt Non-Payment Default which existed on the date
of the commencement of any such blockage period may be used as the basis for any
subsequent Payment Blockage Notice unless such Senior Debt NonPayment Default or
event, as the case may be, shall in the interim have been cured or waived for a
period of not less than 90 consecutive days.
(c) The failure of the Company to make any payment with
respect to the Subordinated Debt by reason of the operation of this Section
11.03 shall not be construed as preventing the occurrence of an Event of Default
hereunder. Immediately upon the expiration of any period under this Section
11.03 during which no payment may be made on account of the Subordinated Debt,
the Company may resume making any and all payments on account of the
Subordinated Debt (including any payment of principal, interest (including
interest at the applicable post-default interest rate specified in Section
2.04(b)) or any other amount missed during such period).
(d) The Company will not make any optional or mandatory
prepayment of the Notes as provided for under Section 3.01 and the Investors
shall not accept any such prepayment to the extent that such prepayment is
prohibited under the Senior Credit Agreement, unless the lenders under the
Senior Credit Agreement shall have given their written consent thereto.
(e) In the event that, notwithstanding the foregoing, the
Investors shall have received any payment prohibited by the foregoing provisions
of this Section 11.03, then and in such event such payment
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shall be held in trust for the holders of the Senior Debt and paid over or
delivered forthwith to the agent for the holders of the Senior Debt for
application to the Senior Debt remaining unpaid after giving effect to any
concurrent payment or distribution to the holders of Senior Debt in respect of
the Savior Debt. No amount paid by the Company to the Investors and paid ova by
the Investors to the holders of the Senior Debt pursuant to this Article XI
shall, as between Me Company and the Investors, be deemed to be a payment by the
Company to or on account of the Subordinated Debt.
(f) The provisions of this Section 11.03 shall not apply to
any payment with respect to which Section 11.02 would be applicable.
SECTION 11.4 PAYMENTS OTHERWISE PERMITTED. Nothing contained
in this Article XI or elsewhere in this Agreement or in the Notes shall prevent
the Company, at any time except during the pendency of any case, proceeding,
dissolution, liquidation or other winding up, assignment for the benefit of
creditors or other marshalling of assets and liabilities of the Company referred
to in Section 11.02 or under the conditions described in Section 11.03, from
making payments at any time of the Subordinated Debt.
SECTION 11.5 SUBROGATION. Subject to the payment in full in
cash of all Senior Debt, the Investors shall be subrogated to the rights of the
holders of such Senior Debt to receive payments and distributions of cash,
property and securities applicable to the Senior Debt until the principal of and
interest on the Notes shall be paid in full. For purposes of such subrogation,
no payments or distributions to the holders of Senior Debt of any cash, property
or securities to which the Investors would be entitled except for the provisions
of this Article XI, and no payments over pursuant to the provisions of this
Article XI to the holders of Senior Debt by the Investors shall, as among the
Company, its creditors (other than holders of Senior Debt), and the Investors be
deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
SECTION 11.6 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
provisions of this Article XI are and are intended solely for the purpose of
defining the relative rights of the Investors on the one hand and the holders of
Senior Debt on the other hand. Nothing contained in this Article XI or elsewhere
in this Agreement or the Notes is intended to or shall (a) impair, as among the
Company, its creditors (other than holders of Senior Debt) and the Investors,
the obligation of the
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Company, which is absolute and unconditional, to pay to the Investors the
principal of and interest or premium (if any) on, and any other amount payable
by the Company under, the Notes or this Agreement as and when the same shall
become due and payable in accordance with their respective tams; or (b) affect
the relative rights against the Company of the Investors and creditors of the
Company (other than the holders of Senior Debt); or (c) prevent the Investors
from exercising all remedies otherwise permitted by applicable law upon default
under this Agreement, subject to the rights of the holders of Senior Debt (i) in
any case, proceeding, dissolution, liquidation or other winding up, assignment
for the benefit of creditors or other marshalling of assets and liabilities of
the Company referred to in Section 11.02, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable or
deliverable to the Investors or (ii) under the conditions specified in Section
11.03, to prevent any payment prohibited by Section 11.03.
SECTION 11.7 NO WAIVER OF SUBORDINATION PROVISIONS. No right
of any present or future holder of any Senior Debt to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any non-compliance by the Company
with the tams, provisions and covenants of this Agreement, regardless of any
knowledge thereof any such holder may have or be otherwise charged with. Without
in any way limiting the generality of the foregoing sentence, the holders of
Senior Debt may, at any time and from time to time, without the consent of or
notice to the Investors, without incurring responsibility to the Investors and
without impairing or releasing the subordination provided in this Article XI or
the obligations hereunder of the Investors to the holders of Senior Debt, do any
one or more of the following: (a) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding; (b) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt, or waive any provision
thereof or the occurrence of any default thereunder; (c) release any Person
liable in any manner for the collection of Senior Debt; and (d) exercise or
refrain from exercising any rights against the Company and any other Person.
SECTION 11.8 NOTICE TO INVESTORS. Notwithstanding the
provisions of this Article XI or any other provision of this Agreement,
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the Investors shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment to it in respect of the
Subordinated Debt, unless and until the Investors shall have received written
notice thereof from an Obligor or a holder of Senior Debt or from any trustee,
fiduciary or agent therefor; and, prior to the receipt of any such written
notice, the Investors shall be entitled in all respects to assume that no such
facts exist. The Investors shall be entitled to rely on the delivery to it of a
written notice by a Person representing itself to be a holder of Senior Debt (or
a trustee, fiduciary or agent therefor) to establish that such notice has been
given by a holder of Senior Debt (or a trustee, fiduciary or agent therefor). In
the event that the Investors determine in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article XI, the
Investors may request such Person to furnish evidence to the reasonable
satisfaction of the Investors as to the amount of Senior Debt held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XI and if such evidence is not furnished, the
Investors may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 11.9 RELIANCE. Upon any payment or distribution of
assets of the Company referred to in this Article XI, the Investors shall be
entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Investors for the purpose
of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Debt and other Indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XI.
SECTION 11.10 REINSTATEMENT. If, at any time, all or part of
any payment with respect to Senior Debt theretofore made by the Company or any
other Person is rescinded or must otherwise be returned by the holders of Senior
Debt for any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of the Company or such other Person), the
subordination provisions set forth in this
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Article XI shall continue to be effective or be reinstated, as the case may be,
all as though such payment had not been made.
SECTION 11.11 SUBSIDIARY GUARANTEES. The obligations of each
Subsidiary Guarantor under Article X are subordinate and subject in right of
payment in full in cash of any Senior Debt of such Subsidiary Guarantor to the
same extent and in the same manner set forth in the preceding provisions of this
Article XI and, for purposes of applying this Section 11 . 11, references in
such preceding sections to "the Company" shall be deemed to refer to the
relevant Subsidiary Guarantor.
SECTION 11.12 LIMITATIONS ON REMEDIES.
(a) Notwithstanding anything contained herein to the contrary,
during any period commencing on the date of receipt of a Payment Default Notice
under Section 11.03(a) or a Payment Blockage Notice under Section 11.03(b) and
ending on the earlier of (i) the date the default that is the subject of such
Payment Default Notice or Payment Blockage Notice, as the case may be, is cured
or waived or (ii) 90 days after receipt by the Investors of such Payment Default
Notice or Payment Blockage Notice, as the case may be, the Investors shall not
(A) accelerate the Notes as provided in Section 9.01, (B) initiate any judicial
proceeding or action to collect the Notes or (C) initiate any case, proceeding
or other action in respect of any Obligor of the type referred to in clause (a)
or (b) of Section 11.02 unless, prior to the expiration of such period, (x) the
holder or holders (or their respective agent(s)) of any Senior Debt shall take
any action of the type referred to in clauses (A), (B) and (C) above in respect
of such Senior Debt or (y) any Senior Debt and/or the Subordinated Debt shall
have become automatically due payable in accordance with their respective tams.
(b) Prior to taking any action of the type referred to in
clauses (A), (B) and (C) of Section 11.12(a), the Investors shall give the
Senior Debt Representative not less than 5 Business Days' notice of the
Investors' intent to take any such action (which notice may be given during the
continuation of any paled during which the Investors are blocked from receiving
payments under Section 11.03).
SECTION 11.13 NOTICES. All notices or other communications
required or permitted to be made by the holders of Senior Debt or the Senior
Debt Representative to the Investors shall be made to the Investor's
Representative, at its address provided under Section 12.01
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(and upon receipt of any such notice or communication, the Investor's
Representative shall furnish a copy thereof to each Investor, and receipt
thereof by the Investor's Representative shall be deemed to satisfy the
requirements of this Article XI for delivery thereof to the Investors). By
acceptance of the benefits of this Article XI, the holders of Senior Debt agree
with the Investors that (i) all notices or other communications required or
permitted to be made to the holders of Senior Debt under this Article XI by the
Investors or the Investor's Representative may be made to the Senior Debt
Representative at its address specified in Section 10.03 of the Senior Credit
Agreement and (ii) SunTrust Bank, South Florida, National Association
("SunTrust") shall be the Senior Debt Representative for all purposes hereof
until such time as the Investor's Representative shall have received notice in
writing from SunTrust or the then current Senior Debt Representative specifying
a new Servitor Debt Representative, following which the Investor's
Representative and each Investor shall be fully protected in dealing solely with
such Senior Debt Representative for purposes of this Article XI.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 NOTICES. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, to the intended recipient thereof at its
respective address (or telecopy number) set forth beneath its name on the
signature pages hereto. Any party hereto may change its address or telecopy
number for notices and other communications hereunder by notice to the other
parties hereto. All notices and other communications given to any party hereto
in accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt or if mailed by certified mail or registered mail,
on the date three days after the date of mailing.
SECTION 12.2 WAIVERS; AMENDMENTS.
(a) No failure or delay by any Investor in exercising any
right or power hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any
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abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Investors hereunder are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or consent to any
departure by the Obligors therefrom shall in any event be effective unless the
same shall be patted by paragraph (b) of this Section 12.02, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the
issuance of a Note shall not be construed as a waiver of any Default, regardless
of whether any Investor may have had notice or knowledge of such Default at the
time.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Obligors and the Required Investors; PROVIDED that
no such agreement shall (i) increase the commitment of any Investor without the
written consent of such Investor, (ii) reduce the principal amount of any Note
or reduce the rate of interest thereon, or reduce any fees payable hereunder,
without the written consent of each Investor affected thereby, (iii) postpone
the scheduled date of payment of the principal amount of any Note, or any
interest thereon, or any fees payable hereunder, or reduce the amount of, waive
or excuse any such payment, or postpone the scheduled date of expiration of any
commitment of any Investor, without the written consent of each Investor
affected thereby, (iv) change any provision of this Agreement that would alter
the pro rata sharing of payments required thereunder, without the written
consent of each Investor, or (v) change any of the provisions of this Section
12.02 or the definition of "Required Investors" or any other provision hereof
specifying the number or percentage of Investors required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Investor. Notwithstanding
anything herein to the contrary, in the event that within 60 days after the
Closing Date the Company requests the Investors to amend or modify this
Agreement to increase the aggregate principal amount of the Notes issued
hereunder, such amendment will require the consent of each Investor.
SECTION 12.3 EXPENSES; INDEMNITY; DAMAGE WAIVER.
(a) The Company shall pay (i) all reasonable out-of-pocket
expenses incurred by any Investor and its Affiliates, including the
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reasonable fees, charges and disbursements of Milbank, Tweed, Hadley & McCloy,
special New York counsel to Chase Capital, in connection with the preparation,
negotiation, execution and delivery of this Agreement or any amendments,
modifications or waivers of the provisions hereof (whether or not the
transactions contemplated hereby or thereby shall be consummated, subject, in
the case of Chase Capital and its Affiliates only, to the limitation set forth
in the letter between the Company and Chase Capital Partners dated October 1,
1997 and (ii) all out-of-pocket expenses incurred by any Investor, including the
above fees, charges and disbursements of any counsel for any Investor, in
connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section 12.03, or in connection
with the Notes issued hereunder, including in connection with any workout,
restructuring or negotiations in respect thereof.
(b) The Company shall indemnify each Investor, and each
Related Party of any of the foregoing Poisonous (each such Person being called
an "INDEMNITEE") against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, (ii) any Note or the use of the proceeds
therefrom, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Company or any of its
Subsidiaries, or any Environmental Liability related in any way to the Company
or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; PROVIDED that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee. Promptly after receipt by an Indemnitee of notice
of any complaint or the commencement of any action or proceeding with respect to
which indemnification is being sought hereunder, such Indemnitee will notify the
Company in writing of such complaint or of the commencement of such action or
proceeding, but failure so to notify the Company will not
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relieve the Company from any liability which the Company may have hereunder or
otherwise, except to the extent that such failure materially prejudices the
Company's rights. If the Company so elects or is requested by such Indemnitee,
the Company will assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to such Indemnitee and the payment
of the fees and disbursements of such counsel, and in such event such Indemnitee
will cooperate in connection therewith as reasonably requested by the Company
(subject to the expenses of such Indemnitee being reimbursed by the Company as
provided above). In the event, however, such Indemnitee reasonably determines
that having common counsel would present such counsel with a conflict of
interest or if the Company fails to assume the defense of the action or
proceeding in a timely manner, then such Indemnitee may employ separate counsel
to represent or defend it in any such action or proceeding and the Company will
pay the reasonable fees and disbursements of such counsel, PROVIDED, HOWEVER,
that the Company will not be required to pay the fees and disbursements of more
than one separate counsel for all Indemnified Parties in any jurisdiction in any
single action or proceeding. In any action or proceeding the defense of which
the Company assumes, any Indemnitee will have the right to participate in such
litigation and to retain its own counsel at such Indemnitee's own expense.
(c) To the extent permitted by applicable law, the Obligors
shall not assert, and hereby waive, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Note or the use of the proceeds thereof.
(e) All amounts due under this Section 12.03 shall be payable
promptly after written demand therefor.
SECTION 12.4 SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto, all future holders of the Notes, and
their respective successors and assigns permitted hereby, except that no Obligor
may assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Investor (and any attempted assignment
or transfer by any Obliger without such consent shall be null and void). Nothing
in this Agreement,
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expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of each of
the Investors and, to the extent expressly provided in Article XI, the holders
of Senior Debt and the Senior Debt Representative) any legal or equitable right,
remedy or claim under or by reason of this Agreement.
(b) Notwithstanding anything herein to the contrary, no
Investor may assign all or any portion of its rights under this Agreement and
the Note(s) held by such Investor (i) to a Person engaged in the operation of
any business involving the sale of carbonic gas or the rental of bulls CO2
cylinders or high pressure cylinders, (ii) to any Person other than a Qualified
Investor and (iii) unless such assignment complies with the registration
requirements (or an applicable exemption therefrom) under the Securities Act and
any applicable state securities laws. From and after the effective date of any
transfer of a Note by any holder thereof to another Person, such Person shall
become a party to this Agreement, be an "Investor" for all purposes hereof and,
to the extent of the interest assigned pursuant to such transfer, have the
rights and obligations of an Investor under this Agreement, and the relevant
transferring Investor shall, to the extent of the interest assigned thereby, be
released from its obligations under this Agreement (and, in the case of any
transfer covering all of such transferring Investor's rights and obligations
under this Agreement, such Investor shall cease to be a party hereto but shall
continue to be entitled to the benefits of Section 12.03).
(c) The Company shall keep at its principal executive office a
register for the registration and registration of transfers of Notes. The name
and address of each holder of one or more Notes, each transfer thereof and the
name and address of each transferee of one or more Notes shall be registered in
such register. Prior to due presentment for registration of transfer, the Person
in whose name any Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is a Qualified Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
(d) Upon surrender of any Note at the principal executive
office of the Company for registration of transfer or exchange (and in
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the case of a surrender for registration of transfer, duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or his attorney duly authorized in writing and accompanied
by the address for notices of each transferee of such Note or part thereof), the
Company shall execute and deliver, at the Company's expense (except as provided
below), one or more new Notes (as requested by the holder thereof) in exchange
therefor, in an aggregate principal amount equal to the unpaid principal amount
of the surrendered Note. Each such new Note shall be payable to such Person as
such holder may request and shall be substantially in the form of Exhibit A.
Each such new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $3,000,000, PROVIDED that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $3,000,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representations set forth in
Article IV.
SECTION 12.5 SURVIVAL. All covenants, agreements,
representations and warranties made by the Obligors herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of this Agreement and the
issuance of any Note regardless of any investigation made by any such other
party or on its behalf and notwithstanding that any Investor may have had notice
or knowledge of any Default or incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Note or any fee or any
other amount payable under this Agreement is outstanding and unpaid. The
provisions of Section 12.03 shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Notes or the termination of this Agreement or any provision
hereof.
SECTION 12.6 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an
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original, but all of which when taken together shall constitute a single
contract. This Agreement constitutes the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof Delivery of an executed counterpart of a signature page of this Agreement
by telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 12.7 SEVERABILITY. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 12.8 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE
OF PROCESS.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
(b) Each Obligor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto 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.
Nothing in this Agreement shall affect any right that any Investor may otherwise
have to bring any action or proceeding relating to this Agreement against any
Obligor or its properties in the courts of any jurisdiction.
(c) Each Obligor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
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objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in Section 12.08(b). Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 12.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 12.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.09.
SECTION 12.10 HEADINGS. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
SECTION 12.11 CONFIDENTIALITY. Each of the Investors agrees to
maintain the confidentiality of the Information (-as defined below), except that
Information may be disclosed (a) to its and its Affiliates' directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process (and the Investor or the Investor's
Representative shall promptly notify the Company of any such disclosure), (d) to
any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to
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this Agreement or the enforcement of rights hereunder, (f) subject to an
agreement containing provisions substantially the same as those of this Section
12.11, to any transferee permitted under Section 12.04 (including prospective
transferee) of its rights or obligations under this Agreement, (g) with the
consent of the Company or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section 12.11 or
(ii) becomes available to any Investor on a nonconfidential basis from a source
other than the Company. For the purposes of this Section 12.11, "INFORMATION"
means all information received from the Company relating to the Company or any
Subsidiary or their respective business, other than any such information that is
available to any Investor on a nonconfidential basis prior to disclosure by the
Company; PROVIDED that, in the case of information received from the Company
after the date hereof, such information is clearly identified at the time of
delivery as confidential unless such information is received pursuant to an
inspection under Section 7.06. Any Person required to maintain the
confidentiality of Information as provided in this Section 12.11 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information and
has taken measures to cause its representatives to do the same. Each holder of a
Note, by its acceptance of a Note, will be deemed to have agreed to be bound by
and to be entitled to the benefits of this Section 12.11 as though it were a
party to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
NUCO2 INC.
By:/S/ JOSEPH CRISCUOLO
-----------------------
Title: President
Address for Notices:
NuCo2 Inc.
2800 S.E. Market Place
Stuart, Florida 34997
Attention: Ms. Joann Sabatino
Fax No.: (561) 221-1690
Telephone No.: (561) 221-1754
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SUBSIDIARY GUARANTORS
NUCO2 ACQUISITION CORP.
By: /S/JOSEPH CRISCUOLO
-----------------------
Title: Vice President
KOCH COMPRESSED GASES, INC.
By:/S/ JOSEPH CRISCUOLO
-----------------------
Title: Vice President
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INVESTORS
AMOUNT OF NOTE CHASE EQUITY ASSOCIATES L.P.
$15,000,000 By Chase Capital Partners, its general
partner
By:/S/ RICHARD D. WATERS
------------------------
Title:
Address for Notices:
Chase Capital Partners
380 Madison Avenue
12th Floor
New York, New York 10017
Attention: Mr. Richard D. Waters, Jr.
Fax No.: (212) 622-3950
Telephone No.: (212) 622-3096
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AMOUNT OF NOTE DK ACQUISITION PARTNERS, L.P.
$5,000,000 By M.H. Davidson & Co.,
its general partner
By: /S/ THOMAS L. KEMPNER
-------------------------
Title: General Partner
Address for Notices:
DK ACQUISITION PARTNERS, L.P.
c/o M.H. Davidson & Co.
885 Third Avenue
Suite 3300
New York, New York 10022
Attention: Mr. Thomas L. Kempner, Jr.
Fax No.: (212) 371-4318
Telephone No.: (212) 371-3000
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AMOUNT OF NOTE
$2,000,000 EMPIRE INSURANCE COMPANY, as executed on
their behalf by their Investment Manager,
Cohanzick Management, L.L.C.
By: /S/ DAVID SHERMAN
---------------------
Title: President
Address for Notices:
Empire Insurance Company
122 Fifth Ave.
New York, NY 10011
Attn: Frank Colalucci
Telephone No.: (212) 386-3113
Fax No.: (212) 691-6374
with a copy to:
c/o Cohanzick Management, L.L.C.
110 E. 42nd Street
Suite 1305
New York, New York 10017
Attention: Mr. David Sherman
Fax No. (212) 953-5833
Telephone No.: (212) 953-6900
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AMOUNT OF NOTE ORIX USA CORPORATION
$3,000,000
By: /S/ FRANKLIN CLARKE
-----------------------
Title: President & CEO
Address for Notices:
Orix USA Corporation
780 Third Avenue
48th Floor
New York, New York 10017
Attention: Mr. Franklin Clarke
Fax No.: (212) 418-8308
Telephone No.: (212) 418-8355
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EXECUTION COPY
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of November 14, 1997, between:
NUCO2 INC., a corporation duly organized and validly existing
under the laws of the State of Florida (the "Company") ;
each of the Subsidiaries of the Company appearing under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereto (each a
"SUBSIDIARY GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS";
and, together with the Company, the "Obligors"); and
each of the Investors, including the Additional Investor (as
defined below), appearing under the caption "INVESTORS" on the
signature pages hereto (each, an "INVESTOR", and collectively, the
"INVESTORS").
The Obligors and the Investors (other than the Additional
Investor) are party to a Senior Subordinated Note Purchase Agreement dated as of
October 31, 1997 (as heretofore modified and supplemented and in effect on the
date hereof, the "NOTE PURCHASE AGREEMENT"), pursuant to which the Company
issued on October 31, 1997 its 12% Senior Subordinated Notes due 2004 in an
aggregate principal amount of $25,000,000 to such Investors. PaineWebber High
Income Fund, a series of PaineWebber Managed Investments Trust (the "ADDITIONAL
INVESTOR") desires to become an Investor party to the Note Purchase Agreement
and to purchase from the Company, and the Company desires to issue to the
Additional Investor, an additional 12% Senior Subordinated Note due 2004 in the
principal amount of $5,000,000 having the same terms as the Notes heretofore
issued by the Company under the Note Purchase Agreement. The Obligors and the
Investors (including the Additional Investor) wish to amend the Note Purchase
Agreement to add the Additional Investor as an Investor thereunder and to
provide for the issuance of such additional Notes and to make other
modifications to the Note Purchase Agreement. Accordingly, the parties hereto
hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 1, terms defined in the Note Purchase Agreement are used herein as
defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but effective as of the date
hereof, the Note Purchase Agreement shall be amended as follows:
AMENDMENT NO. 1
<PAGE>
AMENDMENT NO. 1
A. References in the Note Purchase Agreement to "this
Agreement" (and indirect references such as "hereunder", "hereby", "herein" and
"hereof") shall be deemed to be references to the Note Purchase Agreement as
amended hereby.
B. A new Section 2.06 is added to the Note Purchase Agreement
to read as follows:
"SECTION 2.06 ISSUANCE OF ADDITIONAL NOTE. Subject to
and upon the terms and conditions set forth in the immediately
succeeding sentence, PaineWebber High Income Fund, a series of
PaineWebber Managed Investments Trust (the "ADDITIONAL INVESTOR")
agrees to purchase from the Company, and the Company agrees to issue to
the Additional Investor, its 12% Senior Subordinated Note (the
"ADDITIONAL NOTE"), which Additional Note (i) shall be issued on
November 14, 1997 (or such later date as the Company and the Additional
Investor shall mutually agree, but not later than November 21, 1997),
(ii) shall be in a principal amount of $5,000,000 and purchased at par
by the Additional Investor and (iii) shall otherwise be in the form of
Exhibit A. The Additional Note shall constitute a Note, and the
Additional Investor shall be an Investor, for all purposes of this
Agreement. The issuance of the Additional Note to the Additional
Investor is subject, at the time of purchase, to the satisfaction of
the following conditions: (i) receipt by the Additional Investor of a
certificate of a senior officer of the Company, dated the date of such
purchase, to the effect, both immediately prior to the purchase of such
Additional Note and also after giving effect thereto and the intended
use thereof, set forth in clauses (a) and (b) of Section 5.02; (ii)
receipt by the Additional Investor of the Additional Note, duly
executed and completed for the Additional Investor; and (iii) the
execution and delivery of an amendment to the Warrant Agreement
satisfactory to the Additional Investor providing for the issuance of a
Warrant to the Additional Investor (or any Affiliate thereof) for the
purchase of 109,290 Stock Units (as defined in the Warrant Agreement)
and making certain other modifications thereto as mutually agreed by
the Company and the Investors (including the Additional Investor)."
C. Section 3.01(a) of the Note Purchase Agreement is amended
to insert a new sentence at the end thereof to read as follows:
"Notwithstanding anything in this Agreement to the contrary, no
prepayment may be made under this Section 3.01 if after giving effect
to such prepayment the aggregate principal
AMENDMENT NO. 1
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amount of the Notes then outstanding would be less than
$15,000,000, unless all of the Notes are prepaid in full."
D. A new Section 8.13 is added to the Note Purchase Agreement
to read as follows:
"SECTION 8.13 CREDIT RATING. Within the period of 18
months of the Closing Date, the Company will use all reasonable efforts
to obtain a credit rating from S&P, Moody's or Duff & Phelps, Inc. or
any other nationally recognized credit rating agency acceptable to the
Required Investors, PROVIDED that the failure of the Company to obtain
such rating within such period shall not give rise to a Default
hereunder or entitle the Investors to exercise any remedy against the
Company hereunder or otherwise."
Section 3. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to the Investors that
the representations and warranties set forth in Article VI of the Note Purchase
Agreement are true and complete on the date hereof as if made on and as of the
date hereof and as if each reference in said Article VI to "this Agreement" (or
words of similar import) referred to the Note Purchase Agreement as amended by
this Amendment No. 1.
(b) The Additional Investor represents to the Company that the
representations set forth in Article IV of the Note Purchase Agreement are true
and complete with respect to the Additional Investor on the date of purchase of
the Additional Note as if made on and as of such date and as if each reference
in said Article IV to "this Agreement" (or words of similar import) referred to
the Note Purchase Agreement as amended by this Amendment No. 1.
Section 4. CONDITIONS PRECEDENT. As provided in Section 2
above, the amendments to the Note Purchase Agreement set forth in said Section 2
shall become effective, as of the date hereof, upon the execution and delivery
of one or more counterparts of this Amendment No. 1 by each of the parties
hereto.
Section 5. MISCELLANEOUS. Except as herein provided, the Note
Purchase Agreement shall remain unchanged and in full force and effect. This
Amendment No. 1 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 1 by signing any such
counterpart. This Amendment No. 1 shall be governed by, and construed in
accordance with, the law of the State of New York.
AMENDMENT NO. 1
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and delivered as of the day and year first
above written.
NUCO2 INC.
By /S/ JOANN SABATINO
---------------------
Title: CFO
SUBSIDIARY GUARANTORS
NUCO2 ACQUISITION CORP.
By /S/ JOANN SABATINO
---------------------
Title: Secretary
KOCH COMPRESSED GASES, INC.
By /S/ JOANN SABATINO
---------------------
Title: Secretary
AMENDMENT NO. 1
-4-
<PAGE>
INVESTORS
CHASE EQUITY ASSOCIATES L.P..
By Chase Capital Partners,
its general partner
By/S/ RICHARD WATERS
--------------------
Title: General Partner
DK ACQUISITION PARTNERS, L.P.
By M.H. Davidson & Co.,
its general partner
By/S/ THOMAS L. KEMPER
----------------------
Title: General Partner
EMPIRE INSURANCE COMPANY, as
executed on their behalf by their
Investment Manager, Cohanzick
Management , LLC
By/S/ DAVID SHERMAN
-------------------
Title: President
ORIX USA CORPORATION
By/S/ FRANKLIN CLARKE
---------------------
Title: Vice President
AMENDMENT NO. 1
-5-
<PAGE>
AMOUNT OF ADDITIONAL NOTE PAINEWEBBER HIGH INCOME FUND,
a series of PaineWebber
$5,000,000 Managed Investments Trust
By/S/ PAUL SCHUBERT
-------------------------
Title: Paul Schubert
Vice President and
Treasurer
Address for Notices:
PAINEWEBBER HIGH INCOME FUND,
series of PaineWebber Managed
Investments Trust
c/o Mitchell Hutchins Asset
Management Inc.
1285 Avenue of the Americas
New York, New York 10019
Attention: Ms. Jenny A. Hutchinson
Fax No.: (212) 586-8982
Telephone No.: (212) 713-6047
AMENDMENT NO. 1
-6-
EXHIBIT 10.13
AMENDMENT NO. 2 TO SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
AMENDMENT NO 2. as of dated June 30, 1998 to Senior Subordinated Note
Purchase Agreement dated as of October 31, 1997, as amended, between NuCo2 Inc.,
the Subsidiary Guarantors and the Investors (the "Agreement"). All capitalized
terms used herein and not otherwise defined shall have the meanings accorded
them in the Agreement.
WHEREAS, the Company, the Subsidiary Guarantors and the Investors have
entered into the Agreement; and
WHEREAS, the Company, the Subsidiary Guarantors and the Investors
desire to amend the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, the Subsidiary
Guarantors and the Investors agree as follows:
1. Section 8.09(a) of the Agreement is amended in its entirety to
read as follows:
"(a) INTEREST COVERAGE RATIO. The Company will not permit the
Interest Coverage Ratio to be less than the following respective ratios as at
the last day of each fiscal quarter during the following respective periods:
PERIOD RATIO
------ -----
From the Closing Date
through June 30, 1998 1.25 to 1.00
From July 1, 1998
through December 31, 1998 1.40 to 1.00
From January 1, 1999
through March 31, 1999 1.50 to 1.00
From April 1, 1999
through June 30, 1999 1.65 to 1.00
From July 1, 1999
through September 30, 1999 1.80 to 1.00
From October 1, 1999
through December 31, 1999 2.00 to 1.00
From January 1, 2000
through March 31, 2000 2.25 to 1.00
From April 1, 2000
and at all times thereafter 2.50 to 1.00"
<PAGE>
2. Section 8.09(b) of the Agreement is amended in its entirety to read
as follows:
"(b) TOTAL NET FUNDED DEBT COVERAGE RATIO. The Company will
not permit the Total Net Funded Debt Coverage Ratio to exceed the following
respective ratios at any time during the following respective periods:
PERIOD RATIO
------ -----
From the Closing Date
through September 30, 1998 7.00 to 1.00
From October 1, 1998
through December 31, 1998 6.50 to 1.00
From January 1, 1999
through March 31, 1999 5.50 to 1.00
From April 1, 1999
through June 30, 1999 5.00 to 1.00
From July 1, 1999
and at all times thereafter 4.50 to 1.00"
3. The Company represents and warrants to the Investors that (a) as of
the date hereof and after giving effect to the amendments provided in Sections 1
and 2 hereof, (i) the representations and warranties set forth in Article VI of
the Agreement are true and complete on the date hereof as if made on and as of
the date hereof and as if each reference in said Article VI to "this Agreement"
(or words of similar import) referred to the Senior Subordinated Note Purchase
Agreement as amended by this Amendment No. 2 except that (w) the lawsuit
described in Schedule 6.06(a) has been settled by the Company and is no longer
pending, (x) certain of the indebtedness listed in Schedule 6.12 has been paid
off by the Company, (y) the number of validly issued and outstanding shares of
common stock, par value $0.001 per share, referenced in Section 6.13 is
7,216,664 and (z) the number of outstanding options granted under the Company's
stock option plans has changed and (ii) no Default has occurred and is
continuing and (b) the amendment to certain of the Warrants as set forth in the
letter dated as of the date hereof from the Company to certain of the Holders
(as defined in the Warrant Agreement) have been duly authorized by all necessary
corporate action on the part of the Company and such letter has been duly
executed and delivered by the Company and such letter and such Warrants as
amended thereby constitute valid and legally binding obligations of the Company,
enforceable against it in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally, and by general principles of equity (regardless of
whether enforcement is sought at equity or in law).
4. Except as herein provided, the Agreement shall remain unchanged and
in full force and effect. This Amendment No. 2 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
amendatory instrument and any of the parties hereto may execute this Amendment
No. 2 by signing any such counterpart. This Amendment No. 2 shall be governed
by, and construed in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2
to be duly executed and delivered as of the day and year first above written.
<PAGE>
COMPANY:
NUCO2 INC.
By: /S/ JOANN SABATINO
----------------------
Name: Joann Sabatino
Title: CFO
SUBSIDIARY GUARANTORS:
NUCO2 ACQUISITION CORP.
By: /S/ JOANN SABATINO
----------------------
Name: Joann Sabatino
Title: Treasurer
KOCH COMPRESSED GASES, INC.
By: /S/ JOANN SABATINO
----------------------
Name: Joann Sabatino
Title: Treasurer
INVESTORS:
CHASE EQUITY ASSOCIATES L.P.
By: Chase Capital Partners, its general partner
By: /S/ JOHN M.B. O'CONNOR
--------------------------
Name: John M.B. O'Connor
Title: General Partner
DK ACQUISITION PARTNERS, L.P.
By: M.H. Davidson & Co., its general partner
By: /S/ THOMAS L. KEMPNER, JR.
------------------------------
Name: Thomas L. Kempner, Jr.
Title: Partner
EMPIRE INSURANCE COMPANY, as executed on their
behalf by their Investment Manager, Cohanzick
Management, L.L.C.
By: ______________________________
Name:
Title:
ORIX USA CORPORATION
By: /S/ HIROYUKI MIYAUCHI
-------------------------
Name: Hiroyuki Miyauchi
Title: Executive Vice President
PAINEWEBBER HIGH INCOME FUND, a series of
PaineWebber Managed Investments Trust
By: ______________________________
Name:
EXHIBIT 10.14
NUCO2 INC.
and
CHASE EQUITY ASSOCIATES L.P.
EMPIRE INSURANCE COMPANY,
ORIX USA,
DK ACQUISITION PARTNERS, L.P.
AND
NATIONSBANC MONTGOMERY SECURITIES, INC.
---------------------------
WARRANT AGREEMENT
Dated as of October 31, 1997
---------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. Definitions, Accounting Terms and
Determinations...............................................1
1.1 Definitions..................................................1
1.2 Accounting Terms and Determinations..........................9
Section 2. Purchase, Sale and Exercise of Warrants......................9
2.1 Authorization and Issuance of Shares
and Warrants.................................................9
2.2 The Closing..................................................9
2.3 Initial Holder Representations, Warranties
and Agreements..............................................10
2.4 Securities Act Compliance...................................10
2.5 Exercise of Warrants........................................10
Section 3. Representations and Warranties..............................13
3.1 Existence...................................................13
3.2 No Breach...................................................13
3.3 Corporate Action............................................13
3.4 Approvals...................................................14
3.5 Investment Company Act......................................14
3.6 Public Utility Holding Company Act..........................14
3.7 Capitalization..............................................14
3.8 Private Offering............................................15
3.9 SEC Documents; Financial Statements.........................15
Section 4. Transfers Generally: Securities Act
Compliance..................................................16
4.1 Transfers Generally.........................................16
4.2 Transfers of Restricted Securities
Pursuant to Registration Statements
and Rule 144, Etc...........................................16
4.3 Notice of Certain Transfers.................................16
4.4 Restrictive Legend..........................................16
4.5 Termination of Restrictions.................................17
Section 5. Additional Provisions Relating
to Transfers................................................17
(i)
<PAGE>
PAGE
5.1 Disposition of Securities...................................17
5.2 Transfer Restriction........................................18
5.3 Repurchase of Common Stock..................................19
5.4 Cancellation and Reissuance.................................19
5.5 Transfer, Division and Combination..........................19
Section 6. Adjustment of Stock Unit....................................20
6.1 Stock Dividends, Subdivisions and
Combinations................................................20
6.2 Issuance of Additional Shares of
Common Stock................................................20
6.3 Issuance of Options.........................................21
6.4 Issuance of Convertible Securities..........................22
6.5 Superseding Adjustment of Stock Unit........................23
6.6 Other Provisions Applicable to
Adjustments Under this Section 6............................24
Section 7. Consolidation, Merger, Share Exchange, etc.;
Distributions...............................................26
7.1 Consolidation, Merger, Share Exchange, etc..................26
7.2 Distributions upon Declaration of Dividend
or Other Distribution.......................................27
7.3 Dilution in Case of Other Securities........................28
Section 8. Notice to Warrant Holders...................................28
8.1 Notice of Adjustment of Stock Unit
or Exercise Price...........................................28
8.2 Notice of Certain Corporate Actions.........................29
8.3 Limitation on Holders' Rights...............................29
Section 9. Reservation and Authorization of
Common Stock................................................30
Section 10. Taking of Record; Stock and Warrant
Transfer Books..............................................30
Section 11. Holders' Special Rights.....................................31
11.1 Replacement of Instruments..................................31
11.2 Restrictions on Certain Action..............................31
11.3 Inspection Rights...........................................32
11.4 Board Attendance............................................32
(ii)
<PAGE>
PAGE
Section 12. Registration................................................34
12.1 Notice......................................................34
12.2 Proration...................................................36
12.3 Registration Procedures.....................................37
12.4 Holdback on Sales...........................................40
12.5 Expenses....................................................40
12.6 Indemnification.............................................40
12.7 No Other Registration Rights................................43
12.8 Rule 144....................................................44
Section 13. Miscellaneous...............................................44
13.1 Waiver......................................................44
13.2 Notices.....................................................44
13.3 Office of the Company.......................................44
13.4 Expenses, Transfer Taxes and
Other Charges...............................................45
13.5 Amendments, Etc.............................................46
13.6 Successors and Assigns......................................46
13.7 Survival....................................................46
13.8 Regulation Y................................................46
13.9 Captions....................................................46
13.10 Counterparts................................................46
13.11 Governing Law...............................................47
13.12 Severability................................................47
13.13 Entire Agreement............................................47
13.14 No Third Party Beneficiary..................................47
SCHEDULE 1 - Schedule of Warrants and Options
SCHEDULE 2 - Authorized and Outstanding Capital Stock
ANNEX 1 - Form of Warrant
(iii)
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of October 31, 1997 among:
NuCO2 INC., a corporation duly organized and validly existing under the laws of
the State of Florida (the "COMPANY"); and each of the investors signatory hereto
(individually, an "INITIAL HOLDER" and, collectively, the "INITIAL HOLDERS").
WHEREAS, in connection with the issuance by the Company of
up to $25,000,000 aggregate principal amount of Senior Subordinated Notes (the
"NOTES") and as an inducement for the purchase by the Initial Holders of up to
such $25,000,000 aggregate principal amount of the Notes, the Company has agreed
to issue Warrants to the Initial Holders providing for the purchase of shares of
Common Stock of the Company, in the manner hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. DEFINITIONS, ACCOUNTING TERMS AND
DETERMINATIONS.
1.1 DEFINITIONS. Except as expressly provided herein, the
following terms shall have the following meanings (all terms in this Section 1
or in other provisions of this Agreement in the singular to have the same
meanings in the plural and vice versa):
"1995 STOCK OPTION PLAN" shall mean the Company's 1995
Stock Option Plan for employees as the same may be amended from time to time.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares
(including treasury shares) of Common Stock issued or sold by the Company on or
after the date hereof, other than (i) the shares of Common Stock described as
being issued and outstanding
WARRANT AGREEMENT
<PAGE>
in Section 3.07 hereof and (ii) the Option Stock, Options and Warrants listed on
Schedule 1 hereto.
"AFFILIATE" shall have the meaning assigned thereto in
Rule 12b-2 of the Exchange Act. Notwithstanding the foregoing, (a) no individual
shall be deemed to be an Affiliate of a corporation solely by reason of his or
her being an officer or director of such corporation, and (b) none of the
Initial Holders (or any of their Affiliates) shall be an Affiliate of the
Company.
"BANK HOLDING COMPANY AFFILIATE" shall mean, with respect
to any Holder subject to the provisions of Regulation Y. (i) if such Holder is a
bank holding company, any company controlled by such bank holding company or
(ii) the bank holding company that controls such Holder and any other Person
controlled by such bank holding company.
"BOARD" shall mean the Board of Directors of the Company.
"BOC WARRANT" shall mean the warrant to acquire up to
1,000,000 shares of Common Stock dated May 1, 1997 from the Company in favor of
The BOC Group, Inc.
"BUSINESS DAY" shall mean any day on which commercial
banks are not authorized or required to close in New York City.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMMISSION" shall mean the Securities and Exchange
Commission or any other similar or successor agency of the Federal government
with primary responsibility for administering the Securities Act.
"COMMON STOCK" shall mean the Company's authorized Common
Stock, par value $.001 per share, and any stock into which such Common Stock may
thereafter be changed, and also shall
WARRANT AGREEMENT
-2-
<PAGE>
include stock of the Company of any other class (including, without limitation,
any future class(es) of such Common Stock), which is not preferred as to
dividends or assets over any class of stock of the Company and which is not
subject to redemption.
"COMPANY" shall have the meaning assigned to such term in
the first paragraph of this Agreement, and shall include any successors and
permitted assigns of the Company.
"CONVERTIBLE SECURITIES" shall mean evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable or exercisable for Additional Shares of Common Stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event.
"CONVERTIBLE SECURITY VALUE" shall mean the fair market
value of a Convertible Security on the date of issuance, reasonably determined
in good faith by the Board, less the proceeds received by the Company for such
conversion or exchange.
"CURRENT MARKET PRICE", per share of Common Stock, for the
purposes of any provision hereof or of a Warrant at the date herein or therein
specified, shall be deemed to be (a) with respect to any Additional Shares of
Common Stock issued (or to be issued) in a public offering (other than a public
offering effected as a part of a merger or other acquisition transaction by the
Company, in which case paragraph (b) below shall apply), the offering price of
such Additional Shares and (b) otherwise, the average of the daily market prices
for each day during the 20 consecutive trading days immediately preceding such
date as of which such a price can be established in the manner set forth in the
next sentence. The market price for each such trading day shall be the last sale
price on such day as reported in the Consolidated Last Sale Reporting System or
as quoted in the National Association of Securities Dealers Automated Quotation
System, or if such last sale price is not available, the average of the closing
bid and asked prices as reported in either such system. Notwithstanding the
foregoing, the "Current Market Price" per share of Common stock for shares to be
issued in
WARRANT AGREEMENT
-3-
<PAGE>
connection with an acquisition of assets or stock, a tender or exchange offer, a
merger or other business combination shall be deemed to be the price per share
as determined in such acquisition, tender or exchange offer, merger or other
business combination agreement.
"CURRENT WARRANT PRICE", for the purpose of any provision
hereof or of a Warrant at the date herein or therein specified, shall mean the
amount per share of Common Stock equal to the quotient resulting from dividing
the Exercise Price per Stock Unit in effect on such date by the number of shares
(including any fractional share) of Common Stock comprising a Stock Unit on such
date.
"DATE OF ISSUANCE" shall have the meaning assigned to such
term in SECTION 11.05 hereof.
"DEMAND NOTICE" shall have the meaning assigned to such
term in SECTION 12.01 hereof.
"DEMAND REGISTRATION" shall have the meaning assigned to
such term in SECTION 12.01 hereof.
"DIRECTORS' STOCK OPTION PLAN" shall mean the Company's
Directors' Stock Option Plan for non-employee directors as the same may be
amended from time to time.
"ELECTION NOTICE" shall have the meaning assigned to such
term in SECTION 11.05 hereof.
"ELECTION PERIOD" shall have the meaning assigned to such
term in SECTION 11.05 hereof.
"EQUITY SECURITIES" shall mean any securities the rights
of which are in the nature of those of the Company's Common Stock, including,
without limitation, common stock, any securities having the right to vote for
the election of directors, stock appreciation rights, and securities convertible
into any of the foregoing.
WARRANT AGREEMENT
-4-
<PAGE>
"EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time or any replacement act.
"EXERCISE NOTICE" shall have the meaning assigned to such
term in SECTION 2.05 hereof.
"EXERCISE PRICE" shall have the meaning assigned to such
term in the form of Warrant attached as Annex 1 hereto.
"EXPIRATION DATE" shall mean the 7th Anniversary of the
closing date of the Notes.
"GAAP" shall mean generally accepted accounting principles
applied on a consistent basis.
"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 any such government.
"HOLDER" shall mean any Person who acquires Restricted
Warrants pursuant to the provisions of this Agreement, including, without
limitation, the Initial Holders, any Affiliate of the Initial Holders, any
Person who becomes a party to this Agreement pursuant to SECTION 5.04 and an
Affiliate of such Person and any permitted transferees of any of the foregoing.
"INITIAL HOLDER" shall have the meaning assigned to such
term in the first paragraph of this Agreement.
"IPO WARRANTS" shall mean the warrants to acquire an
aggregate of 33,000 shares of Common Stock dated as of May 24, 1996 from the
Company in favor of First Analysis Securities Corporation, Allan Cohen, Michael
Siemplenski, Richard Drage, Steve Bouck and Mark Koulogeorge.
WARRANT AGREEMENT
-5-
<PAGE>
"INDEMNIFIED PARTY" shall have the meaning assigned to
such term in SECTION 12.06 hereof.
"INDEMNIFYING PARTY" shall have the meaning assigned to
such term in SECTION 12.06 hereof.
"ISSUE PRICE" shall have the meaning assigned to such term
in SECTION 11.05 hereof.
"Lien" shall mean any pledge, assignment, hypothecation,
mortgage, security interest, deposit arrangement, conditional sale or title
retaining contract, sale and leaseback transaction, financing statement filing,
or any other type of lien, charge, encumbrance or preferential arrangement.
"MAJORITY HOLDERS" shall mean Holders of a majority of the
Warrant Stock issued or issuable upon exercise of the Warrants. For purposes of
giving notices hereunder, Holders of Warrants shall be deemed holders of Warrant
Stock issued upon the exercise thereof.
"MAJORITY INITIAL HOLDERS" shall mean Initial Holders of a
majority of the Warrant Stock issued or issuable upon exercise of the Warrants.
For purposes of giving notices hereunder, Initial Holders of Warrants shall be
deemed holders of Warrant Stock issued upon the exercise thereof.
"NOTES" shall have the meaning assigned to such term in
the second paragraph of this Agreement.
"NOTICE OF ISSUANCE" shall have the meaning assigned to
such term in SECTION 11.05 hereof.
"ON A FULLY DILUTED BASIS" shall mean, with respect to the
Common Stock of the Company outstanding at any time, the number of shares of
such Common Stock then issued and outstanding, assuming full conversion,
exercise and exchange of all issued and outstanding Convertible Securities and
Options that shall be (or may become) exchangeable for, or exercisable or
WARRANT AGREEMENT
-6-
<PAGE>
convertible into, such Common Stock, including Warrants with respect thereto;
PROVIDED that the number of shares of Common Stock deemed to be outstanding "on
a fully diluted basis" shall be reduced (without duplication) by the number of
shares of Common Stock purchasable or issuable upon exercise, conversion or
exchange of (i) Options or Convertible Securities at the time of calculation
that are Out of the Money and (ii) Options issued under the Stock Option Plans.
"OPTION" shall mean any warrant, option or other right to
subscribe for or purchase Additional Shares of Common Stock or Convertible
Securities, including those listed on SCHEDULE I hereto.
"OPTION STOCK" shall mean shares of Common Stock not to
exceed, in the aggregate, 910,000 shares of Common Stock, issued or issuable in
accordance with the Stock Option Plans, PROVIDED that (i) in the case of the
1995 Stock Option Plan, the option exercise price at the time of such grant is
not less than 75% of the fair market value of such shares on the date of such
grant as reasonably determined in good faith by the Stock Option or other
administering Committee of the Board and (ii) the number of shares of Common
Stock specified above shall be adjusted as appropriate to reflect any stock
split, stock consolidation, subdivision or combination affecting the Common
Stock.
"OTHER SECURITIES" shall mean any stock (other than
Warrant Stock) and other securities of the Company or any other Person
(corporate or otherwise) which a Holder at any time shall be entitled to
receive, or shall have received, upon exercise of the Warrants held by such
Holder or pursuant to SECTION 7 hereof, in lieu of or in addition to Warrant
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Warrant Stock or Other Securities received in
an earlier exchange, exercise or replacement of Warrant Stock.
"OUT OF THE MONEY" shall mean (a) in the case of an
Option, that the fair market value of the shares of any Common Stock which the
holder thereof is entitled to purchase or
WARRANT AGREEMENT
-7-
<PAGE>
subscribe for is less than the exercise price of such Option and (b) in the case
of a Convertible Security, that the quotient resulting from dividing the fair
market value of such Convertible Security by the number of shares of any Common
Stock into or for which such Convertible Security is exercisable, convertible or
exchangeable is greater than the fair market value of a share of such Common
Stock.
"PARTICIPATING SECURITY" shall mean any security (other
than Common Stock) the rights of the holders of which are not limited to (i) a
fixed sum or percentage of liquidation preference or principal amount, (ii) a
sum determined by reference to a formula based on a published index of interest
rates, (iii) an interest rate publicly announced by a financial institution or a
similar index of interest rates in respect of interest or dividends or (iv) a
fixed sum or percentage of principal amount or liquidation preference in any
distribution of assets.
"PERSON" shall mean a corporation, an association, limited
liability company, a partnership, a joint venture, an organization; a business,
an individual or a Government Authority.
"PREFERRED STOCK" shall mean, as to any Person, any
capital stock of such Person which is preferred as to dividends or assets over
any other class of any other stock of such Person.
"REGULATED HOLDER" shall mean a Holder which is a bank, a
bank holding company or an Affiliate of any of the foregoing.
A Regulated Holder shall be deemed to have a "REGULATORY
PROBLEM" when (i) such Regulated Holder's investment in the Warrants and/or
Warrant Stock exceeds any limitation to which it is subject, or is otherwise not
permitted, under any law, rule or regulation of any Governmental Authority
(including any position to that effect taken by such Governmental Authority), or
(ii) restrictions are imposed on such Regulated
WARRANT AGREEMENT
-8-
<PAGE>
Holder which, in its reasonable judgment, make it illegal or unduly burdensome
for such Regulated Holder to continue to hold such Warrants and/or Warrant
Stock.
"REGULATION Y" shall mean Regulation Y promulgated by the
Board of Governors of the Federal Reserve System (12 C.F.R. 225) or any
successor regulation.
"REPRESENTATIVE" shall have the meaning assigned to such
term in SECTION 11.04 of this Agreement.
"RESTRICTED CERTIFICATE" shall mean a certificate for
Common Stock, Warrants or Other Securities bearing the restrictive legend set
forth in SECTION 4.04 hereof.
"RESTRICTED SECURITIES" shall mean Restricted Stock and
Restricted Warrants.
"RESTRICTED STOCK" shall mean Common Stock evidenced by a
Restricted Certificate.
"RESTRICTED WARRANTS" shall mean Warrants evidenced by a
Restricted Certificate.
"RULE 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act and any successor provision thereto, all as
the same shall be in effect at the time.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time or any replacement act.
"SELLER" shall have the meaning assigned to such term in
SECTION 12.01 hereof.
"SELLER NOTICE" shall have the meaning assigned to such
term in SECTION 12.01 hereof.
WARRANT AGREEMENT
-9-
<PAGE>
"SHAREHOLDER" shall mean any Person who directly or
indirectly owns any shares of Common Stock of the Company.
"STATE STREET WARRANT" shall mean the warrant to acquire
84,917 shares of Common Stock dated as of June 7, 1997 (original issue date
December 22, 1995) from the Company in favor of State Street Bank and Trust
Company.
"STOCK OPTION PLANS" shall mean the Company's 1995 Stock
Option Plan and the Company's Directors' Stock Option Plan.
"STOCK UNIT" shall mean one share of Common Stock, as such
Common Stock is constituted on the date hereof, and thereafter shall mean such
number of shares (including any fractional shares) of Common Stock and Other
Securities, cash or other property as shall result from the adjustments
specified in SECTIONS 6 and 7 hereof.
"SUBSIDIARY" shall mean, for any Person, any corporation
or other entity of which at least a majority of the securities or other
ownership interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
of such corporation or other entity is at the time directly or indirectly owned
or controlled by such Person and/or one or more Subsidiaries of such Person.
"TRANSFER" shall mean any disposition of any Restricted
Securities, or of any interest in any thereof, which would constitute a sale
thereof within the meaning of the Securities Act.
"WARRANTS" shall mean the warrant certificates covering
the purchase of Stock Units, each in the form of Annex 1 to this Agreement,
originally issued by the Company pursuant to SECTION 2 hereof, and all Warrants
issued upon transfer, division or combination of, or in substitution for, any
thereof. All Warrants shall at all times be identical as to terms and
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conditions and expiry date, except as to the number of Stock Units for which
they may be exercised and the Exercise Price.
"WARRANT STOCK" shall mean the shares of Common Stock of
the Company purchasable or purchased upon the exercise of Warrants issued by the
Company, including any such Common Stock into which such Common Stock may
thereafter be changed.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. Except as
otherwise may be expressly provided herein, all accounting terms used herein
shall be interpreted, and all certificates and reports as to financial matters
required to be delivered to the Holders hereunder and under the Warrants shall
be prepared, in accordance with GAAP. All calculations made for purposes of
determining compliance with the terms of this Agreement and the Warrants shall
(except as may be expressly provided herein) made by application of GAAP.
Section 2. PURCHASE, SALE AND EXERCISE OF WARRANTS.
2.1 AUTHORIZATION AND ISSUANCE OF SHARES AND WARRANTS. The
Company has authorized: (a) the issue of the Warrants for issuance to the
Initial Holders pursuant to this Agreement; and (b) the reservation for issuance
of such number of shares of its Common Stock as shall be issuable upon exercise
of the warrants.
2.2 THE CLOSING.
(a) The Company shall issue to each Initial Holder,
on the date hereof and for no cash consideration, Warrants covering such number
of Stock Units as is equal to the percentage of the issued and outstanding
shares of Common Stock on a fully diluted basis on the date of issuance of the
Warrants as is specified opposite the name of such Initial Holder on the
signature page(s) hereto. The number of shares of Common Stock comprising each
Stock Unit covered by the Warrants issued under this Agreement shall be subject
to adjustment as provided in SECTIONS 6 and 7 hereof.
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(b) On the date hereof, the Company shall deliver to
each Initial Holder a single certificate for the Warrants to be acquired by such
Initial Holder hereunder, registered in the name of such Initial Holder, except
that, if such Initial Holder shall notify the Company in writing prior to such
issuance that it desires certificates for Warrants to be issued in other
denominations or registered in the name or names of any Person or Persons
referred to in SECTION 5.01(A)(I) or (II) hereof or any nominee or nominees for
its or their benefit, then the certificates for Warrants to be issued by the
Company shall be issued to such Initial Holder in the denominations and
registered in the name or names specified in such notice.
(c) On the date hereof, the Company will deliver to
each Initial Holder a legal opinion from counsel to the Company in form and
substance reasonably satisfactory to each Initial Holder.
2.3 INITIAL HOLDER REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. Each Initial Holder represents and warrants to, and agrees with the
Company that (a) such Initial Holder is purchasing for its own account, and not
with a view to the resale or distribution of such Warrants or the Warrant Stock
or any part thereof, and such Initial Holder is prepared to bear the economic
risk of retaining such Warrants and the warrant Stock for an indefinite period,
all without prejudice, however, to the right of such Initial Holder at any time,
in accordance with this Agreement, lawfully to sell or otherwise to dispose of
all part of such Warrants or the Warrant Stock held by it, (b) Initial Holder is
an "accredited investor' (as defined in Rule 501 of Regulation D promulgated
under the Securities Act), (c) such Initial Holder is experienced in evaluating
and investing in securities, and understands that the warrants and the Warrant
Stock will be restricted securities, and that a legend to that effect shall be
placed on the Restricted Securities, and no public market shall exist for the
disposition or transfer of such Restricted Securities, and (d) the acquisition,
holding and any transfer of any Restricted Securities by an Initial Holder shall
be in compliance with all laws applicable to such Initial Holder.
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2.4 SECURITIES ACT COMPLIANCE. Each Initial Holder
understands that the Company has not registered or qualified the warrants or the
Warrant Stock under the Securities Act or any applicable state securities laws
and each Initial Holder agrees that neither the Warrants nor the Warrant Stock
shall be sold or offered for sale without registration under the Securities Act
or the availability of an exemption therefrom, all as more fully provided in
SECTION 4 hereof.
2.5 EXERCISE OF WARRANTS. On and after the date hereof and
until 5:00 p.m., New York City time, on the Expiration Date, each Holder may, on
one or more occasions, on any Business Day, in whole or in part:
(a) exercise for cash all or some of the Warrants held by
it; and
(b) convert all or some of the Warrants held by it into
the number of shares of Common Stock for each Stock Unit evidenced by
such Warrant which is being so converted, equal to (a)(i) the product
of (x) the number of shares of Common Stock comprising a Stock Unit at
the time of such conversion and (y) the Current Market Price per share
of Common Stock at the time of such conversion MINUS (ii) the Exercise
Price per Stock Unit at the time of such conversion, DIVIDED BY (b) the
Current Market Price per share of Common Stock at the time of such
conversion,
in each case by delivering to the Company, at its office maintained for such
purpose pursuant to SECTION 13.03 hereof:
(i) a written notice (the "EXERCISE NOTICE") of such
Holder's election to exercise such warrant or convert such Warrant, as
the case may be, in the form of the Exercise Form set out at the end
thereof (or a reasonable facsimile thereof), which notice shall specify
the number of Stock Units to be purchased or converted, as the case may
be; and
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(ii) such Warrant,
and, in the case of an exercise of such Warrant, a certified or bank check or
checks payable to the Company in an aggregate amount equal to the aggregate
Exercise Price for the number of Stock Units as to which such Warrant is being
exercised. Upon receipt thereof, the Company shall, as promptly as practicable
and in any event within five Business Days thereafter, execute or cause to be
executed and deliver or cause to be delivered to such Holder a stock certificate
or certificates representing the aggregate number of shares of Warrant Stock and
Other Securities issuable upon such exercise or conversion and any other
property to which such Holder is entitled by virtue of the exercise of any
Warrants.
If a Holder is subject to the provisions of Regulation Y.
such Holder shall not, and shall not permit any of its Bank Holding Company
Affiliates to, exercise any Warrant if, after giving effect to such exercise,
(i) such Holder and its Bank Holding Company Affiliates would own more than 5`
of the total issued and outstanding shares of Common Stock on a fully diluted
basis or (ii) such Holder would be deemed under Regulation Y to have the power
to exercise, directly or indirectly, a controlling influence over the management
or policies of, or would otherwise control, the Company (and for purposes of
this clause (ii), a reasoned opinion of counsel to such Holder delivered to such
Holder (which is based on facts and circumstances deemed appropriate by such
counsel) to the effect that such Holder does not have the power to exercise such
a controlling influence or otherwise control the Company shall be conclusive).
The stock certificate or certificates for warrant Stock so
delivered shall be in such denominations as may be specified in the Exercise
Notice and shall be registered in the name of such Holder or such name or names
as shall be designated in such Exercise Notice. Such stock certificate or
certificates shall be deemed to have been issued and such Holder or any other
Person so designated to be named therein shall be deemed to have
WARRANT AGREEMENT
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become a holder of record of such shares, including, to the extent permitted by
law, the right to vote such shares or to consent or to receive notice as a
Shareholder, as of the date on which the last of the Exercise Notice, payment of
the Exercise Price and the Warrant to which such exercise relates is received by
the Company as aforesaid, and all taxes required to be paid by Holder, if any,
pursuant to SECTION 13.04(C) hereof, prior to the issuance of such shares have
been paid. If such Warrant shall have been exercised or converted only in part,
the Company shall, at the time of delivery of the certificate or certificates
representing Warrant Stock and other securities, execute and deliver to such
Holder a new warrant evidencing the rights of such Holder to purchase (or
convert) the unpurchased (or unconverted) Stock Units called for by such
Warrant, which new Warrant shall in all other respects be identical with the
surrendered Warrant.
All shares of Common Stock issuable upon the exercise or
conversion of a Warrant shall, upon payment therefor in accordance herewith, be
duly and validly issued by the Company, fully paid and nonassessable and free
and clear of all Liens.
The Company shall not be required to issue a fractional
share of Common Stock or Other Securities upon exercise or conversion of any
Warrant. As to any fraction of a share of Common Stock or Other Securities which
a Holder would otherwise be entitled to purchase upon such exercise or
conversion, the Company may in lieu of the issuance of a fractional share pay a
cash adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per share of Common Stock or Other
Securities on the date of exercise.
2.6 ISSUE PRICE; ORIGINAL ISSUE DISCOUNT. Having
considered all facts relevant to a determination of the value of the Notes and
the warrants being acquired by the Initial Holders, the Company and the Initial
Holders have concluded and do hereby agree that, for the purposes of Section 305
and of Section 1273 of the Code, and for purposes of determining any original
issue
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discount with respect to the Notes to be issued at the closing hereof, the issue
price for the Notes and the Warrants is $24,750,000 and $250,000, respectively.
The Company and the Holders agree not to take a position on any income tax
return, before any governmental agency charged with collection of any income tax
or in any judicial proceeding that is inconsistent herewith, unless required to
do so pursuant to a "Determination" within the meaning of Section 1313(a)(i) of
the Code.
Section 3. REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to the Initial Holders that:
3.1 EXISTENCE. The Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Florida.
3.2 NO BREACH. Except as described in SECTION 3.04 hereof,
none of the execution and delivery of this Agreement and the Warrants, the
consummation of the transactions herein and therein contemplated and compliance
with the terms and provisions hereof and thereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws of the Company
or any applicable law or regulation, or any order, writ, injunction or decree of
any court or Governmental Authority, or any agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which any of them is bound
or to which any of them is subject, or constitute a default under any such
agreement or instrument, which conflict, breach, failure to obtain consent or
default would have a material adverse effect on the financial condition of the
Company and its Subsidiaries, taken as a whole, or on the ability of the Company
to perform its obligations hereunder.
3.3 CORPORATE ACTION. The Company has all necessary
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the Warrants; the execution, delivery and performance
by the Company of this Agreement and the Warrants have been duly authorized by
all necessary corporate action (including all required shareholder
WARRANT AGREEMENT
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action) on the part of the Company; this Agreement has been duly executed and
delivered by the Company and constitutes, and the Warrants when executed, issued
and delivered pursuant to this Agreement will constitute, valid and legally
binding obligations of the Company entitled to the benefits provided therein,
and the Warrant Stock initially covered by the Warrants shall, when issued and
delivered against payment therefor in accordance with the Warrants, be duly and
validly issued, fully paid and nonassessable; and the Warrants when executed and
delivered by the Company will constitute, its legal, valid and binding
obligations, enforceable against it in accordance with their terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally, and by general principles of equity
(regardless of whether enforcement is sought at equity or in law).
3.4 APPROVALS. No authorizations, approvals or consents
of, and no filings or registrations with, any Governmental Authority are
necessary for the execution, delivery or performance by the Company of this
Agreement or of the Warrants or for the validity or enforceability hereof or
thereof. Any such action required to be taken as a condition to the execution
and delivery of this Agreement and the Warrants, or the issuance of the
Warrants, has been duly taken by all such Governmental Authorities or other
Persons, as the case may be.
3.5 INVESTMENT COMPANY ACT. Neither the Company nor any of
its Subsidiaries is an "investment company", or a company "controlled by" an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
3.6 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Company nor any of its Subsidiaries is a "holding company", or an "affiliate" of
a "holding company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
3.7 CAPITALIZATION.
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(a) Upon the issuance of the warrants under this
Agreement, the total number of shares of capital stock which the Company has
authority to issue and the outstanding shares of the Company will be as set
forth in SCHEDULE 2 hereto. Upon the issuance of the Warrants under this
Agreement, the Company shall not have outstanding any stock or securities
convertible into or exchangeable for any shares of capital stock nor shall it
have outstanding any rights to subscribe for or to purchase, or any Options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any capital stock or stock or securities convertible into or exchangeable for
any capital stock other than (i) the Warrants to be issued pursuant to this
Agreement, and (ii) the Option Stock, Options and Warrants listed on SCHEDULE 1.
(b) There is not in effect on the date hereof any
agreement by the Company pursuant to which any holders of securities of the
Company have a right to cause the Company to register such securities under the
Securities Act other than (i) this Agreement, (ii) the BOC warrant, (iii) the
IPO warrants, and the (iv) the State Street Warrant.
3.8 PRIVATE OFFERING. The purchases to be made by the
Initial Holders pursuant to this Agreement are to be separate and several
purchases. The Company agrees that neither it nor anyone acting on its behalf
has offered or will offer the Warrants or the Warrant Stock, or any part
thereof, or any similar securities for issue or sale to, or has solicited or
will solicit any offer to acquire any of the same from, anyone so as to bring
the issuance and sale of the Warrants within the provisions of Section 5 of the
Securities Act.
3.9 SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has
filed in a timely manner all documents that the Company was required to file
with the Commission under Sections 13, 14(a) and 15(d) of the Exchange Act,
since its initial public offering. As of their respective filing dates, all
documents filed by the Company with the Commission ("SEC Documents')
WARRANT AGREEMENT
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complied in all material respects with the requirements of the Exchange Act or
the Securities Act, as applicable. None of the SEC Documents as of their
respective dates contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents (the "Financial Statements") comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto. The Financial Statements
have been prepared in accordance with GAAP and fairly present the consolidated
financial position of the Company and any Subsidiaries at the dates thereof and
the consolidated results of their operations and consolidated cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal,
recurring adjustments).
Section 4. TRANSFERS GENERALLY: SECURITIES ACT COMPLIANCE.
4.1 TRANSFERS GENERALLY. Except as otherwise permitted by
SECTION 5 hereof, the Restricted Securities shall only be transferable upon the
conditions specified in this SECTION 4, which conditions are intended, among
other things, to insure compliance with the provisions of Regulation Y and the
Securities Act in respect of the transfer of any Restricted Securities. Any
Holder shall, by its acceptance of any Warrant hereunder, be deemed to have made
the representations, warranties and agreements set forth in SECTION 2.03 hereof
on the date of such acceptance.
4.2 TRANSFERS OF RESTRICTED SECURITIES PURSUANT TO
REGISTRATION STATEMENTS AND RULE 144, ETC. The Restricted Securities may be
offered or sold by the Holder thereof pursuant to (a) an effective registration
statement under the Securities Act, (b) to the extent applicable, Rule 144 or
(c) subject to SECTION 4.03 hereof, any other applicable exemption from the
Securities Act.
WARRANT AGREEMENT
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4.3 NOTICE OF CERTAIN TRANSFERS. If any Holder of any
Restricted Security desires to transfer such Restricted Security other than
pursuant to an effective registration statement, Rule 144 under the Securities
Act an applicable exemption from the Securities Act or in accordance with
SECTION 5.01(A) hereof, such Holder shall deliver to the Company at least 7
Business Days' prior written notice with respect to the proposed transfer,
together with an opinion (at such Holder's expense) of Milbank, Tweed, Hadley &
McCloy, or such other counsel reasonably satisfactory to the Company, to the
effect that an exemption from registration under the Securities Act is available
and specifying the applicable exemption.
4.4 RESTRICTIVE LEGEND. Unless and until otherwise
permitted by this SECTION 4, each certificate for Warrants issued under this
Agreement, each certificate for any Warrants issued to any subsequent transferee
of any such certificate, each certificate for any Warrant Stock issued upon
exercise of any Warrant, each certificate for any Warrant Stock issued to any
subsequent transferee of any such certificate, each certificate for any Other
Securities issued in connection with the exercise of any Warrant and each
certificate for any Other Securities issued to any subsequent transferee of any
such certificate in respect thereof, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND
ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD
OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS
THEREFROM."
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THAT
CERTAIN WARRANT AGREEMENT DATED AS OF OCTOBER 31, 1997,
BETWEEN NUCO2 INC., A FLORIDA CORPORATION,
WARRANT AGREEMENT
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AND CERTAIN INITIAL HOLDERS, AS SUCH WARRANT AGREEMENT MAY
BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO
TIME, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. A COPY OF THE FORM OF SUCH
WARRANT AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE
PRINCIPAL EXECUTIVE OFFICE OF THE AFORESAID CORPORATION.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF SUCH
WARRANT AGREEMENT."
4.5 TERMINATION OF RESTRICTIONS. The restrictions imposed
by this SECTION 4 upon the transferability of the Restricted Securities shall
cease and terminate as to any particular Restricted Security when such
Restricted Security shall have been effectively registered under the Securities
Act and sold by the Holder thereof in accordance with such registration or sold
under and pursuant to Rule 144 or are eligible to be sold pursuant to paragraph
(k) of Rule 144. Whenever the restrictions imposed by this SECTION 4 shall
terminate as to any Restricted Security as hereinabove provided, the Holder
thereof shall, upon written request, be entitled to receive from the Company,
without expense, a new certificate evidencing such Restricted Security not
bearing the restrictive legend otherwise required to be borne by a certificate
evidencing such Restricted Security.
Section 5. ADDITIONAL PROVISIONS RELATING TO TRANSFERS.
5.1 DISPOSITION OF SECURITIES. Subject to compliance with
all of the provisions of SECTION 4 hereof, any Holder shall have the right to
transfer any Restricted Securities to any Person.
(a) Subject to compliance with the provisions of SECTION 4
hereof, except with respect to the requirement for an opinion of counsel to the
Holder, which shall not be required
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under this SECTION 5.01(A), any Holder shall have the right to transfer any
Restricted Securities:
(i) to any Person who at the time owns (directly or
indirectly) at least a majority of the voting capital stock or other
equity interests of such Holder;
(ii) to any Person at least a majority of whose voting capital
stock shall at the time be owned (directly or indirectly) by such
Holder or by any Person who owns (directly or indirectly) at least a
majority of the voting capital stock or other equity interests of such
Holder; or
(iii) to another Initial Holder.
(b) If, in the reasonable judgment of a Holder, a transfer
is required to be effected by such Holder because of a Regulatory Problem, the
Company shall use reasonable efforts to assist such Holder in disposing of its
Warrants and Warrant Stock, subject to and in accordance with the terms of this
Agreement and applicable law, to any prospective purchaser which is a financial
institution or other institutional investor approved by the Company (which
approval shall not be unreasonably withheld or delayed) of the Warrants or
Warrant Stock owned by such Holder as such purchaser may reasonably request
(PROVIDED that, the Company shall not be required to make available to such
purchaser any documents or information if doing so would, in the reasonable
judgment of counsel to the Company, compromise any attorney-client privilege
existing with respect thereto) or to a direct or indirect competitor of the
Company.
(c) In the event of any underwritten public offering of
Restricted Securities in which a Holder which is subject to the provisions of
Regulation Y is participating, the Company shall use its reasonable efforts to
assist the underwriter in ensuring that any Warrants or Warrant Stock issued by
the Company and sold by such Holder are widely disseminated.
WARRANT AGREEMENT
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5.2 TRANSFER RESTRICTION. Notwithstanding anything in this
Agreement or the Warrants to the contrary, no Holder subject to the provisions
of Regulation Y shall transfer any Warrants or shares of Warrant Stock issued by
the Company and held by it, if, as a result of such transfer or the right to
effect such transfer, such Holder would be deemed under Regulation Y to have the
power to exercise, directly or indirectly, a controlling influence over the
management or policies of, or otherwise control, the Company (and, for purposes
of this restriction, a reasoned opinion of counsel to such Holder delivered to
such Holder (which is based on facts and circumstances deemed appropriate by
such counsel) to the effect that such Holder does not have the power to exercise
such a controlling influence or otherwise control the Company shall be
conclusive).
5.3 REPURCHASE OF COMMON STOCK. The Company shall give 30
days prior written notice to each Holder before purchasing, redeeming, retiring
or otherwise acquiring any shares of Common Stock of the Company.
5.4 CANCELLATION AND REISSUANCE. If any Initial Holder or
any of its Affiliates assigns or otherwise transfers any of its Notes, or
assigns any of its rights or obligations thereunder to any Person, such Initial
Holder may request (upon 10 Business Days' prior notice to the Company) that a
number of warrants held by such Initial Holder be cancelled on the date of such
assignment and transfer and that a like number of Warrants be issued by the
Company to the Person to whom such Notes are being assigned or otherwise
transferred. Upon the date specified in such request, the Company shall issue,
and the Initial Holder shall deliver to the Company for cancellation, such
number of warrants as aforesaid and the Company and such Person shall execute
and deliver an instrument pursuant to which such Person becomes a "Holder"
hereunder entitled to all the benefits accorded to a Holder under, and subject
to all of the obligations imposed upon a Holder pursuant to, this Agreement and
the warrants.
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5.5 TRANSFER, DIVISION AND COMBINATION. Subject to
SECTIONS 4 and 5 hereof, transfer of a Warrant and all rights thereunder, in
whole or in part (the "TRANSFERRED WARRANT"), shall be registered on the books
of the Company to be maintained for such purpose, upon surrender of such
Transferred Warrant at the office of the Company maintained for such purpose
pursuant to SECTION 13.03 hereof, together with a written assignment
substantially in the form set out at the end of such Transferred Warrant, duly
executed by the relevant Holder and payment of funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to SECTIONS 4 and 5
hereof and the immediately following sentence, (a) execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, (b) issue to the
assignor a new Warrant evidencing the portion of such Transferred warrant not so
assigned or transferred and (c) promptly cancel such Transferred Warrant. A
Warrant, if properly assigned in compliance with SECTIONS 4 and 5 hereof, may be
exercised by an assignee for the purchase of shares of Common Stock without
having a new Warrant or Warrants issued. Notwithstanding any provision herein to
the contrary, the Company shall not be required to register the transfer of
Warrants or Warrant Stock in the name of any Person who acquired such Warrant
(or part thereof) or any Warrant Stock otherwise than in accordance with this
Agreement.
The Company shall maintain with its transfer agent or at
its aforesaid office, books for the registration and transfer of the Warrants.
Section 6. ADJUSTMENT OF STOCK UNIT. The number of shares
of Common Stock comprising a Stock Unit shall be subject to adjustment from time
to time as set forth in this SECTION 6. All of the adjustments referred to in
this SECTION 6 shall only apply to Warrants which have not yet been exercised.
The Company shall not create any class of Common Stock which carries any rights
to dividends or assets differing in any respect from the rights of the Common
Stock on the date hereof.
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6.1 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at
any time the Company shall:
(a) declare or pay a dividend payable in Additional Shares
of Common Stock, or
(b) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then the number of shares of Common Stock comprising a Stock Unit immediately
after the occurrence of any such event shall be adjusted to equal the number of
shares of Common Stock which a record holder of the number of shares of Common
Stock comprising a Stock Unit immediately prior to the happening of such event
would own or be entitled to receive after the happening of such event.
6.2 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If at
any time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock in exchange for consideration in an amount per
Additional Share of Common Stock less than the Current Market Price at the time
the Additional Shares of Common Stock are issued, then the number of shares of
Common Stock thereafter comprising a Stock Unit shall be adjusted to that number
determined by multiplying the number of shares of Common Stock comprising a
Stock Unit immediately prior to such adjustment by a fraction (a) the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such Additional Shares of Common Stock PLUS the number
of such Additional Shares of Common Stock so issued, and (b) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such Additional Shares of Common Stock PLUS the number
of shares of Common Stock which the aggregate consideration for the total number
of such Additional Shares of Common Stock so issued would purchase at the
Current Market
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Price. For purposes of this SECTION 6.02, for all issuances of shares of Common
Stock except for those shares issued in connection with an acquisition of assets
or stock, a tender or exchange offer, a merger or other business combination,
the date as of which the Current Market Price shall be computed shall be the
earlier of (i) the date on which the Company shall enter into a firm contract
for the issuance of such Additional Shares of Common Stock and (ii) the date of
actual issuance of such Additional Shares of Common Stock. Subject to SECTION
6.05 hereof, no further adjustment of the number of shares of COMMON Stock
comprising a Stock Unit shall be made under this SECTION 6.02 upon the issuance
of any Additional Shares of Common Stock:
(a) for which an adjustment is provided under SECTION 6.01
hereof;
(b) which are issued pursuant to the exercise of any
Options or the conversion, exchange or exercise of any Convertible
Securities, if any such adjustment shall previously have been made upon
the issuance of such Options or Convertible Securities (or upon the
issuance of any Option therefor) pursuant to SECTION 6.03 or 6.04
hereof; or
(c) as a distribution or a dividend which is distributed
or declared and paid in accordance with SECTION 7.02 hereof.
6.3 ISSUANCE OF OPTIONS. If at any time the Company shall
issue or sell, or shall fix a record date for the determination of holders of
any class of securities entitled to receive, any Options, whether or not the
rights to purchase thereunder are immediately exercisable, and the consideration
received by the Company in payment for such Options (determined in accordance
with SECTION 6.06(A) hereof) shall be less than the Current Market Price in
effect on the date of and immediately prior to such issuance, sale or fixing of
a record date, then the number of shares of Common Stock thereafter comprising a
Stock Unit shall be adjusted as provided in SECTION 6.02 hereof on the basis
that (a) the maximum number of Additional Shares of Common
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Stock issuable pursuant to all such Options shall be deemed to have been issued
as of (and, accordingly, the date as of which the Current Market Price shall be
computed shall be) the computation date specified in the next succeeding
sentence of this SECTION 6.03, and (b) the aggregate consideration for such
maximum number of Additional Shares of Common Stock shall be (subject to SECTION
6.05 hereof) the consideration received by the Company for the issuance or sale
of such Additional Shares of Common Stock pursuant to the terms of such Options
or pursuant to the terms of such Convertible Securities. For purposes of this
SECTION 6.03, the computation date for clause (a) above shall be the earlier of
(i) the date on which the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive any such Options, (ii)
the date on which the Company shall enter into a firm contract for the issuance
or sale of such Options and (iii) the date on which the Company shall issue or
sell such Options. No further adjustment of the number of shares of Common Stock
comprising a Stock Unit shall be made under this SECTION 6.03 upon the issuance
or sale of any Options to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Securities or upon the subsequent issue or sale
of Additional Shares of Common Stock upon the exercise of such Options, if any
such adjustment shall previously have been made upon the issuance or sale of
such Option or upon the setting of a record date therefor, or upon any deemed
issuance or sale of such Additional Shares of Common Stock, as a distribution or
a dividend which is distributed or declared and paid in accordance with SECTION
7.02 hereof. Notwithstanding the foregoing, any issuance of an Option which is
issued together with a debt security of the Company, as a unit, shall be treated
for the purpose of this SECTION 6 as the issuance of a Convertible Security.
6.4 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the
Company shall issue or sell any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
consideration received by the Company in payment for such Convertible Securities
shall be less than the Convertible Security Value thereof, then the number of
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shares of Common Stock thereafter comprising a Stock Unit shall be increased to
a number of shares of Common Stock having a value immediately following the
computation date (as established below) equal to the value of the number of
shares comprising such Stock Unit immediately before such increase. For this
purpose, the value before the increase will be the Current Market Price of the
Common Stock (determined as at the date immediately preceding such increase)
DIVIDED by the number of shares of Common Stock following the computation date
shall be the foregoing value, except that the numerator shall be the Current
Market Price PLUS the cash amount paid to the Company for such Convertible
Securities LESS the Convertible Security Value of such Convertible Securities on
issuance and the denominator shall be increased by the number of Additional
Shares of Common Stock issuable on exercise of such Convertible Securities. For
purposes of this SECTION 6.04, the computation date shall be the earliest of (i)
the date on which the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive any such Convertible
Securities, (ii) the date on which the Company shall enter into a firm contract
for the issuance or sale of such Convertible Securities and (iii) the date of
actual issuance or sale of such Convertible Securities. No further adjustment of
the number of shares of Common Stock comprising a Stock Unit shall be made under
this SECTION 6.04 upon the issuance or sale of any Convertible Securities or the
conversion or exchange of such Convertible Securities into Additional Shares of
Common Stock:
(A) which are issued or sold pursuant to the exercise of
any Option therefor, if any such adjustment shall previously have been
made upon the issuance or sale of an Option relating to such
Convertible Securities pursuant to SECTION 6.03 hereof; or
(B) if any such adjustment in respect thereof shall
previously have been made upon the setting of a RECORD date therefor,
or upon any deemed issuance or sale of such Convertible Securities; or
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(C) as a distribution or a dividend which is distributed
or declared and paid in accordance with SECTION 7.02 hereof.
6.5 SUPERSEDING ADJUSTMENT OF STOCK UNIT. If, at any time
after any adjustment of the number of shares of Common Stock comprising a Stock
Unit shall have been made pursuant to SECTION 6.03 or 6.04 hereof as a result of
the issuance of Options or Convertible Securities, or after any new adjustment
of the number of shares of Common Stock comprising a Stock Unit shall have been
made pursuant to this SECTION 6.05, (a) such Options or the right of conversion,
exchange or exercise of such Convertible Securities shall expire, and all or a
portion of such Options or the right of conversion, exchange or exercise with
respect to all or a portion of such Convertible Securities, as the case may be,
shall not have been exercised or treated as having been exercised or otherwise
canceled or acquired by the Company in connection with any settlement
(including, without limitation, any cash settlement) of such Options or the
rights of conversion, or exchange or exercise of such convertible Securities, or
(b) there has been any change (whether by the passage of time or otherwise) in
the number of shares issuable upon exercise, conversion or exchange of such
Options or Convertible Securities (including as a result of the operation of
antidilution provisions applicable thereto), or (c) the consideration per share,
for which Additional Shares of Common Stock are issuable pursuant to such
Options or the terms of any Convertible Securities, or the maturity of any such
Convertible Security, shall be changed (whether by the passage of time or
otherwise) then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the effect of such
Options or Convertible Securities on the basis of:
(i) treating the number of Additional Shares of Common
Stock, if any, theretofore actually issued or sold
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pursuant to the previous exercise of such Options or such right of
conversion or exchange, as having been issued or sold on the date or
dates of such issuance as determined for purposes of such previous
adjustment and for the consideration actually received therefor;
(ii) treating the maximum number of Additional Shares of Common
Stock (A) issuable pursuant to all Options which then remain
outstanding and (B) necessary to effect the conversion or exchange of
all Convertible Securities which then remain outstanding, as having
been issued (subject, however, to further adjustment under this Section
6.05); and
(iii) making the computations called for in SECTION 6.04 hereof on
the basis of the revised terms of such Convertible Securities as if the
securities being subject to recomputation were newly issued as of the
relevant recomputation date and, if and to the extent called for by the
foregoing provisions of this SECTION 6 on the basis aforesaid, a new
adjustment of the number of shares of Common Stock comprising a Stock
Unit shall be made, and such new adjustment shall supersede the
previous adjustment so rescinded and annulled.
6.6 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION 6. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock comprising a Stock Unit
hereinbefore provided for in this SECTION 6, irrespective of the accounting
treatment of any consideration described below:
(a) COMPUTATION OF CONSIDERATION. To the extent that any
Additional Shares of Common Stock, any Options or any Convertible Securities
shall be issued for cash consideration, the consideration received by the
Company therefor shall be deemed to be the amount of cash received by the
Company therefor, or, if such Additional Shares of Common Stock, Options or
Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such Additional
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Shares of Common Stock, Options or Convertible Securities are sold to
underwriters or dealers for public offering without a subscription offering, the
initial public offering price. To the extent that such issuance or sale shall be
for consideration other than cash, then the amount of such consideration shall
be deemed to be the fair market value of such consideration at the time of such
issuance, as reasonably determined by the Board. The consideration for any
Additional Shares of Common Stock issuable pursuant to any Option to subscribe
for or purchase the same shall be the consideration received or receivable by
the Company for the sale or issuance of such Option plus the additional
consideration payable to the Company upon the exercise thereof in full. The
consideration for any Additional Shares of Common Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration paid or payable
to the Company in respect of the subscription for, sale or issuance of such
Convertible Securities plus the additional consideration payable to the Company
upon the conversion or exchange thereof in full. In case of the issuance at any
time of any Additional Shares of Common Stock in payment or satisfaction of any
dividend upon any class of stock other than Common Stock, the Company shall be
deemed to have received for such Additional Shares of Common Stock consideration
equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required
by this SECTION 6 shall be made whenever and as often as any specified event
requiring an adjustment shall occur except that any adjustment of the number of
shares of Common Stock comprising a Stock Unit that would otherwise be required
may be postponed (except in the case of a subdivision or combination of shares
of the Common Stock, as provided for in SECTION 6.01 hereof) up to but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the aggregate
Exercise Price for all Warrants then outstanding. Any adjustment representing a
change of less than such minimum percent (except as aforesaid) shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this
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SECTION 6 and not previously made, would result in a minimum adjustment on the
date of exercise. For the purpose of any adjustment, any specified event shall
be deemed to have occurred at the close of business on the date of its
occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under
this SECTION 6, fractional interests in Common Stock shall be taken into account
to the nearest one-hundredth of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. (i) If the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution thereof to Shareholders,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then no adjustment shall be required by reason
of the taking of such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled, and no adjustment in the number of
shares of Common Stock thereafter comprising a Stock Unit under SECTION 6.02,
6.03 or 6.04 hereof shall be made in respect of the Warrants held by such
Holder. (ii) No adjustment shall be made hereunder in respect of the issuance of
Option Stock or options representing the right to acquire Option Stock.
Section 7. CONSOLIDATION, MERGER, SHARE EXCHANGE, ETC.;
DISTRIBUTIONS. The provisions set forth in this SECTION 7 shall only apply to
Warrants which have not yet been exercised.
7.1 CONSOLIDATION, MERGER, SHARE EXCHANGE, ETC. In case a
consolidation, merger or share exchange of the Company shall be effected with
another Person after the date hereof and the Company shall not be the surviving
entity, or the Company shall be the surviving entity but its Common Stock shall
be changed into securities or other property of another Person, or the sale,
lease or transfer of all or a substantial part of its assets to another Person
shall be effected after the date hereof, then, as a condition of such
consolidation, merger, share
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exchange, sale, lease or transfer, lawful and adequate provision shall be made
whereby each Holder shall thereafter have the right to purchase and receive,
upon the exercise of its Warrants, on the basis and the terms and conditions
specified herein (and in lieu of each Stock Unit immediately theretofore
purchasable and receivable upon the exercise of the Warrants), such shares of
stock, securities, cash or other property receivable upon such consolidation,
merger, share exchange, sale, lease or transfer as such Holder would have been
entitled to receive if its Warrants had been exercised immediately prior to such
event. In any such case, appropriate and equitable provision also shall be made
with respect to the rights and interests of each Holder to the end that the
provisions hereof (including SECTION 6 hereof) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities, cash or
other property thereafter deliverable upon the exercise of any Warrants. The
Company shall not effect any such consolidation, merger, share exchange, sale,
lease or transfer unless prior to or simultaneously with the consummation
thereof the successor Person (if other than the Company) resulting from such
consolidation, merger or share exchange or the Person purchasing, leasing or
otherwise acquiring such assets shall assume, by written instrument, the
obligation to deliver to such Holder such shares of stock, securities, cash or
other property as, in accordance with the foregoing provisions, such Holder may
be entitled to upon the exercise of its Warrants. The above provisions of this
SECTION 7.01 shall similarly apply to successive consolidations, mergers, share
exchanges, sales, leases or transfers.
7.2 DISTRIBUTIONS UPON DECLARATION OF DIVIDEND OR OTHER
DISTRIBUTION. So long as any Warrants remain outstanding, the Company shall pay,
upon the declaration and payment of any dividend or distribution (whether such
dividend or distribution is in the form of cash, debt securities, equity
securities or other property) on any class of Common Stock, to each Holder the
dividend or distribution that such Holder would be otherwise entitled to receive
had such Holder exercised the Warrants held by it in full immediately prior to
the taking of record of those holders of Common Stock entitled to any such
dividend or
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distribution, PROVIDED that, this provision shall apply only to dividends or
distributions in respect of the Common Stock other than ordinary, periodic cash
dividends paid out of earned surplus of the Company. If such dividend or
distribution is in the form of a voting equity security, such Holder will be
entitled to receive, at its option, in its stead non-voting equity securities
otherwise identical to and convertible at such Holder's option into the equity
securities to which such Holder is otherwise entitled thereunder and continuing
benefiting from antidilution provisions similar to those herein. This provision
shall not apply to stock dividends of Additional Shares of Common Stock, or to a
reclassification or recapitalization, PROVIDED that the Company adjusts the
number of shares of Common Stock comprising a Stock Unit pursuant to SECTION
6.01 hereof.
7.3 DILUTION IN CASE OF OTHER SECURITIES. In case any
Other Securities shall be issued or sold or shall become subject to issue or
sale upon the conversion or exchange of any stock (or Other Securities) of the
Company (or any issuer of Other Securities or any other Person referred to in
SECTION 7.01 hereof) or to subscription, purchase or other acquisition pursuant
to any rights, options, warrants to subscribe for, purchase or otherwise acquire
either Additional Shares of Common Stock or securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock, issued
or granted by the Company (or any such other issuer or Person) for consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of SECTION 6 hereof, the purchase rights granted by the
Warrants, then, and in each such case, the computations, adjustments and
readjustments provided for in said SECTION 6 with respect to the Stock Units
shall be made as nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time receivable upon the
exercise of the Warrants, so as to protect the Holders against the effect of
such dilution.
Section 8. NOTICE TO WARRANT HOLDERS.
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8.1 NOTICE OF ADJUSTMENT OF STOCK UNIT OR EXERCISE PRICE.
Whenever the number of shares of Common Stock comprising a Stock Unit shall be
adjusted pursuant to SECTION 6 or 7 hereof, the Company shall forthwith obtain a
certificate signed by the chief financial officer of the Company, setting forth,
in reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
the Board determined the fair market value of Additional Shares of Common Stock
issued or sold and, if the consideration therefor was other than cash, a
description of how such consideration was valued), specifying the number of
shares of Common Stock comprising a Stock Unit and (if such adjustment was made
pursuant to SECTION 7 hereof) describing the number and kind of any other
securities comprising a Stock Unit, and any change in the Exercise Price, after
giving effect to such adjustment or change. The Company shall promptly and in
any case within 10 days after the making of such adjustments cause a signed copy
of such certificate to be delivered to each Holder in accordance with SECTION
13.02 hereof. The Company shall keep at its office or agency, maintained for the
purpose pursuant to SECTION 13.03 hereof, copies of all such certificates and
cause the same to be available for inspection at said office during normal
business hours by any Holder or any prospective permitted purchaser of a Warrant
designated by a holder thereof.
8.2 NOTICE OF CERTAIN CORPORATE ACTIONS. In case the
Company shall propose (a) to pay any dividend (other than a regular periodic
dividend payable in cash out of earned surplus) to the holders of its Common
Stock or to make any other distribution to the holders of its Common Stock, or
(b) to offer to the holders of its Common Stock rights to subscribe for or to
purchase any Additional Shares of Common Stock or Other Securities, rights or
options, or (c) to effect any reclassification of its Common Stock (other than a
reclassification involving only the subdivision, or combination, of outstanding
shares of Common Stock), or (d) to effect any capital reorganization, or (e) to
effect any consolidation, merger or share exchange in which the Company is not
the surviving entity, or is the surviving entity but its Common Stock
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shall be changed into securities or other property of another Person, or sale,
lease, transfer or other disposition of all or a majority of its property,
assets or business, or (f) to effect the liquidation, dissolution or winding up
of the Company, then, in each such case, the Company shall give to each Holder,
in accordance with SECTION 13.02 hereof, a notice of such proposed action, which
shall specify the date on which a record is to be taken for the purposes of such
stock dividend, distribution or offering of rights, or the date on which such
reclassification, reorganization, consolidation, merger, share exchange, sale,
lease, transfer, disposition, liquidation, dissolution or winding up is to take
place and the date of participation therein by the holders of Common Stock, if
any such date is to be fixed and shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such action
on the Common Stock, if any, and the number and kind of any other shares of
stock which will comprise a Stock Unit, and the purchase price or prices
thereof, after giving effect to any adjustment, if any, which will be required
as a result of such action. Such notice shall be so given in the case of any
action covered by clause (a) or (b) above at least 20 days prior to the record
date for determining holders of the Common Stock for purposes of such action,
and in the case of any other such action, at least 20 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.
8.3 LIMITATION ON HOLDERS' RIGHTS. Prior to the exercise
of any Warrant, the Holder thereof shall not be entitled to any rights of a
Shareholder (subject to SECTION 7.02 hereof with respect to dividends and
distributions), including, without limitation, the right to vote or receive
dividends or other distributions, or any notice of any proceedings of the
Company except as expressly provided in this Agreement.
Section 9. RESERVATION AND AUTHORIZATION OF COMMON STOCK.
The Company shall at all times reserve and keep available for issue upon the
exercise or conversion of Warrants such number of its authorized but unissued
shares of Common Stock as will be
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sufficient to permit the exercise in full of all outstanding Warrants from time
to time. All shares of Common Stock which shall be so issuable, when issued upon
exercise of any Warrant and payment of the applicable Exercise Price therefor in
accordance with the terms hereof and of the Warrants, shall be duly and validly
issued by the Company, fully paid and nonassessable and free and clear of all
Liens.
Before taking any action which would result in an
adjustment in the number of shares of Common Stock comprising a Stock Unit or
which would cause an adjustment reducing the Current Warrant Price per share of
Common Stock below the then par value, if any, of the shares of Common Stock
issuable upon exercise of the Warrants, the Company shall take any corporate
action which is necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock free and clear of all
Liens upon the exercise of all the Warrants immediately after the taking of such
action.
Before taking any action which would result in an
adjustment in the number of shares of Common Stock comprising a Stock Unit or in
the Current Warrant Price per share of Common Stock, the Company shall obtain
all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.
The Company will list on each national securities exchange
on which any Common Stock may at any time be listed, subject to official notice
of issuance upon exercise of the Warrants, and will maintain such listing of,
all shares of Common Stock from time to time issuable upon the exercise of the
Warrants. The Company will also so list on each national securities exchange,
and will maintain such listing of, any Other Securities if at the time any
securities of the same class shall be listed on such national securities
exchange by the Company.
Section 10. TAKING OF RECORD; STOCK AND WARRANT TRANSFER
BOOKS.
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(a) In the case of all dividends or other distributions by
the Company to the holders of its Common Stock with respect to which any
provision of SECTION 6 and SECTION 7.02 hereof refers to the taking of a record
of such holders, the Company shall in each such case take such a record as of
the close of business on a Business Day.
(b) The Company shall not close its stock transfer books
or Warrant transfer books for the purpose of preventing or delaying the
exercise, conversion or transfer of any Warrant.
Section 11. HOLDERS' SPECIAL RIGHTS.
11.1 REPLACEMENT OF INSTRUMENTS. Upon receipt by the
Company of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of any certificate or instrument
evidencing any Warrants issued by the Company, and
(a) in the case of loss, theft or destruction, of an
indemnity reasonably satisfactory to it, PROVIDED that, if the owner of
the same is an Initial Holder, its own agreement of indemnity shall be
deemed to be satisfactory, or if the owner of the same is a Holder the
Company may require a bond, or
(b) in the case of mutilation, upon surrender or
cancellation thereof,
the Company, at its expense, shall execute, register and deliver, in lieu
thereof, a new certificate or instrument for (or covering the purchase of) an
equal number of warrants or warrant Stock.
11.2 RESTRICTIONS ON CERTAIN ACTION.
(a) The Company shall not at any time enter into an
agreement or other instrument limiting in any manner (other than in a de minimis
manner) its ability to perform its
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obligations under this Agreement or making such performance or the issuance of
shares of Common Stock upon the exercise of any Warrant issued by it a default
under any such agreement or instrument.
(b) So long as at least 50` of all of the Warrants issued
to the Initial Holders hereunder (not including those Warrants issued to
NationsBanc Montgomery Securities, Inc.) shall remain outstanding, neither the
Company nor any of its Subsidiaries shall (i) issue any Participating Security
or Options for or Convertible Securities convertible into a Participating
Security, (ii) issue any class of equity other than Common Stock outstanding on
the date hereof and any Preferred Stock of the Company or (iii) make or agree to
make payments to any Person, such as any "phantom" stock payments, where the
amount thereof is calculated with reference to fair market or equity value of
the Company or any of the Subsidiaries.
11.3 INSPECTION RIGHTS. As and when requested, the Company
shall provide to any transferee of Notes who is a Holder of or an Initial Holder
of more than 15% of the total outstanding Warrants or the agents or
representatives of such holder all information and/or access to all information
in respect of the Company and its Subsidiaries as the Company provides to
members of the Board at the same time or times and/or subject to the same
conditions to which such information or access thereto is provided to such
members of the Board.
11.4 BOARD ATTENDANCE. So long as the Initial Holders own
50% or more of the Warrants and the Warrant Stock, one representative (the
"Representative") appointed by the Majority Initial Holders shall be entitled to
attend all meetings of (i) the Board, (ii) the board of directors of any
Subsidiary of the Company and (iii) any committee of (i) and (ii) above
PROVIDED, HOWEVER, that the Representative shall not be entitled to vote at any
such meeting. The Company shall reimburse, by Company check mailed within 30
Business Days of receipt by the Company of proper documentation thereof, the
reasonable out-of-pocket expenses incurred by the Representative in connection
with
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attendance at any meetings pursuant to this SECTION 11.04; PROVIDED, HOWEVER,
the Representative shall not be entitled to reimbursement for first-class
travel.
11.5 RIGHT TO PURCHASE EQUITY SECURITIES. (a) So long as
an Initial Holder owns any Warrants or Warrant Stock, if the Company proposes to
and does issue any Equity Securities (other than in a registered public offering
or in a transaction in which Equity Securities are exchanged for the assets or
securities of another person; PROVIDED, that the Board has determined in good
faith that the assets or securities received by the Company in such exchange
have a fair value at least equal to the value of the Equity Securities of the
Company exchanged therefor) the Company shall offer each such Initial Holder the
right to participate proportionately in a percentage amount equal to the
percentage of the Company's Common Stock (on a fully diluted basis) represented
by the Warrants and/or Warrant Stock held by each such Initial Holder as of the
date of issuance of any such Equity Securities (the "DATE OF ISSUANCE") and on
the same terms and conditions and at the same per unit price (the "ISSUE
PRICE"). The Company shall give written notice to each such Initial Holders of
any such issuance as far in advance of the Date of Issuance as possible, but in
no event less than 10 days in advance of the Date of Issuance (a "NOTICE OF
ISSUANCE"). The Notice of Issuance will describe in reasonable detail the terms
and conditions of the proposed issuance, including the Issue Price, the maximum
number of Equity Securities that each Initial Holder will be entitled to
purchase (assuming for this purpose only that the number of Warrants and/or
shares of Warrant Stock held by each Initial Holder does not change between the
date of the giving of such notice and the Date of Issuance) on the Date of
Issuance.
(b) Each such Initial Holder shall have the option to
elect to purchase all or part of such Initial Holder's portion of the Equity
Securities described in a Notice of Issuance at the Issue Price and on the other
terms contained in the Notice of Issuance by notifying the Company in writing
(an "ELECTION NOTICE") at least two business days prior to the Date
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of Issuance (the "Election Period"), at which time such Initial Holder shall
become irrevocably bound (subject to the satisfaction of all regulatory
requirements) to purchase such Equity Securities. Each Election Notice will
indicate the number of units that each Initial Holder elects to purchase.
(c) Any purchase and sale pursuant to the provisions of
this SECTION 11.05 shall occur on the Date of Issuance at the principal offices
of the Company unless otherwise agreed. At any closing of a purchase and sale in
accordance with this SECTION 11.05, the Company will deliver certificates
evidencing the Equity Securities to be so purchased against delivery by each
Initial Holder of an amount equal to the number of units that each Initial
Holder has elected to purchase multiplied by the Issue Price. Such amount will
be payable at such closing. Each Initial Holder making a purchase of Equity
Securities pursuant to this SECTION 11.05 shall be responsible for the payment
of any transfer or other taxes due as a result of such purchase and such taxes
shall be payable at the closing (unless such Initial Holder provides evidence in
form satisfactory to the Company that such taxes have been paid).
(d) The failure of any Initial Holder to exercise its
right to purchase Equity Securities under this SECTION 11.05 in connection with
any one issuance of Equity Securities by the Company will not, in any manner,
waive or otherwise impair the rights of such Initial Holder to purchase such
Initial Holder's share of Equity Securities in connection with any other
proposed issuance of Equity Securities to which this SECTION 11.05 is
applicable.
(e) Notwithstanding anything contained in this SECTION
11.05 to the contrary, the Company may at any time, regardless of whether an
Election Notice has been given, prior to the Date of Issuance abandon an
offering as to which it has given a Notice of Issuance, in which case the
Initial Holders shall have no further right to purchase the Equity Securities
described in such Notice of Issuance.
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Section 12. REGISTRATION.
12.1 NOTICE. On and after the date of this Agreement (a)
upon receipt of notice (a "DEMAND NOTICE") from the Majority Holders requesting
that the Company effect the registration of Warrants or shares of Warrant Stock
held by any Holder or Holders, or (b) whenever the Company otherwise proposes to
effect the registration of any Common Stock under the Securities Act, the
Company shall promptly, and in any event at least 20 days prior to the
anticipated filing date of the proposed registration statement, give written
notice of such proposed registration to all Holders. Each Holder that wishes to
register its Warrants or shares of Warrant Stock (each, a "SELLER") shall,
within 15 days after receipt of such notice from the Company, deliver to the
Company a notice (a "SELLER NOTICE") stating that such Seller wishes to
participate in such offering and setting forth the number of shares of Warrant
Stock that such Seller desires to include in such offering. The Company
thereupon shall, subject to SECTION 12.01(C) as expeditiously as possible, use
its best efforts to effect the registration under the Securities Act of such
shares of Warrant Stock (any such registration effected or undertaken pursuant
to a Demand Notice being herein referred to as a "DEMAND REGISTRATION");
PROVIDED, HOWEVER, that the Company shall not be required to effect more than
two Demand Registrations PROVIDED, FURTHER that the Company's obligation to
effect registration of Warrants or shares of Warrant Stock under Section
12.01(b) shall be unlimited in number. In the event that (i) the amount of
securities proposed to be sold by Sellers pursuant to a Demand Notice shall be
reduced pursuant to SECTION 12.02(A) hereof to an amount which is less than 75%
of the amount of securities originally proposed to be sold by Sellers, or (ii)
any Demand Notice shall be withdrawn by the Holder or Holders originally giving
such Demand Notice at any time prior to the filing by the Company of a
preliminary registration statement in connection with such Demand Notice, then,
in such event, no right to a Demand Registration shall be deemed to have been
exercised or forfeited and such Demand Notice shall not operate to reduce the
Company's obligation to effect a Demand Registration pursuant to a Demand Notice
on two occasions;
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provided, however, if the Demand Notice is withdrawn by the Holder or Holders
originally giving such Demand Notice as provided in subparagraph (ii) above, the
right to a Demand Registration shall be deemed to have been exercised if such
Holder or Holders does not reimburse the Company for all costs and expenses of
such withdrawn registration.
(a) DEFERRAL OF FILING. The Company may defer the filing
(but not the preparation) of a registration statement required by SECTION
12.01(A) until a date not later than 60 days in the case of clause (i) below
and, in the case of clause (ii) below, 180 days (or, if longer, 90 days after
the effective date of the registration statement contemplated by clause (ii)
below), after the date of the Demand Notice if (i) at the time the Company
receives the Demand Notice, the Company or any of its Subsidiaries is engaged in
confidential negotiations or other confidential business activities, disclosure
of which would be required in such registration statement (but would not be
required if such registration statement were not filed), and the Board
determines in good faith that such disclosure would be materially detrimental to
the Company and its shareholders or would have a material adverse effect on any
such confidential negotiations or other confidential business activities, or
(ii) prior to receiving the Demand Notice, the Board had determined to effect a
registered underwritten public offering of the Company's securities for the
Company's account and the Company had taken substantial steps (including, but
not limited to, selecting a managing underwriter for such offering) and is
proceeding with reasonable diligence to effect such offering. A deferral of the
filing of a registration statement pursuant to this SECTION 12.01(C) shall be
lifted, and the requested registration statement shall be filed forthwith, if,
in the case of a deferral pursuant to clause (i) of the preceding sentence, the
negotiations or other activities are disclosed or terminated, or, in the case of
a deferral pursuant to clause (ii) of the preceding sentence, the proposed
registration for the Company's account is abandoned. In order to defer the
filing of a registration statement pursuant to this SECTION 12.01(C), the
Company shall promptly (but in any event within 10 days), upon
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determining to seek such deferral, deliver to each Seller a certificate signed
by an executive officer of the Company pursuant to this SECTION 12.01(C) and a
general statement of the reason for such deferral and an approximation of the
anticipated delay. Within 15 days after receiving such certificate, Seller's
holding a majority in interest of the warrant Stock for which registration was
previously requested may withdraw such request by giving notice to the Company;
if withdrawn, the Demand Notice shall be deemed not to have been made for all
purposes of this Agreement. The Company may not invoke its right to defer the
filing of a registration statement under this SECTION 12.01(C) more than once in
any eighteen month period.
(b) If the Majority Holders so elect, the offering of the
Warrants, the Warrant Stock and/or the Other Securities pursuant to a Demand
Registration shall be in the form of an underwritten offering. If any Demand
Registration is in the form of an underwritten offering, the Majority Holders
will select and obtain the investment banker or investment bankers that will
administer the offering; provided, that such investment banker shall be
reasonably satisfactory to the Company.
12.2 PRORATION.
(a) In the case of a Demand Registration, if underwriter
(or, if the offering is not underwritten, an independent financial advisor to
the Sellers) determines that marketing factors require a limitation on the
number of securities to be offered and sold, there shall be included in such
registration only that number of securities that the underwriter, or financial
advisor, as the case may be, reasonably believes will not jeopardize the success
of the offering. Any reduction in the number of securities to be so offered
shall first be pro-rata among all Persons (other than the Company) proposing to
sell securities pursuant to such offering who are not Sellers, based on the
number of securities originally proposed to be sold by each of them, and then,
if necessary, pro-rata among all Sellers based on the number of securities
originally proposed to be sold by each of them.
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(b) In the case of a registration to be effected pursuant
to SECTION 12.01(B) hereof, if the underwriter (or, if the offering is not
underwritten, an independent financial advisor to the Company) determines that
marketing factors require a limitation on the number of securities to be offered
and sold in the offering, including securities requested to be offered and sold
by Sellers, there shall be included in the offering only that number of
securities that the underwriter, or financial advisor, as the case may be,
reasonably believes will not jeopardize the success of the offering. Any
reduction in the number of securities to be so offered shall be pro-rata among
the Shareholders, the Sellers and all other Persons, proposing to sell
securities pursuant to such offering, based on the number of securities
originally proposed to be sold by each such Person.
Nothing contained herein shall be construed to limit in any way the Company's
right, in its sole discretion, to withdraw any registration statement (other
than a registration statement filed pursuant to a Demand Notice) before such
registration statement becomes effective, or to postpone the offering of
securities contemplated by any such registration statement.
12.3 REGISTRATION PROCEDURES. If and whenever the Company
is required by the provisions of SECTION 12.01(A) hereof or, with respect to
subsections (iii), (vi), (vii), (viii), (ix), (x) and (xiii) of this SECTION
12.03, by the provisions of SECTION 12.01(A) or (B) hereof, to use its best
efforts to effect the registration of any of its securities under the Securities
Act, the Company shall, as expeditiously as possible,
(i) prepare and file with the Commission a registration
statement on Form S-2, Form S-3 or such other "short-form" as may be
available with respect to such securities and use its best efforts to
cause such registration statement to become and remain effective for a
period of not less than 90 days to permit the sale of such securities
in accordance with the plan of distribution chosen by the Seller or
Sellers and the underwriter;
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(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all securities
covered by such registration statement;
(iii) furnish to each Seller such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements
of the Securities Act, and such other documents, as such Seller may
reasonably request in order to facilitate the public sale or other
disposition of the securities owned by such Seller;
(iv) use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as each
Seller shall reasonably request, and do such other reasonable acts and
things as may be requested of it to enable such Seller to consummate
the public sale or other disposition in such jurisdictions of the
securities owned by such Seller, except that the Company shall not for
any such purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(v) use its best efforts to cause the securities covered
by such registration statement to be registered with or approved by
such other U.S. or state governmental agencies or authorities as may be
necessary to enable the Seller or Sellers thereof to consummate the
disposition of such securities;
(vi) notify each Seller of any securities covered by such
registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the Company's
becoming aware that the prospectus included in such registration
statement, as then
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in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing (upon receipt of which each Seller agrees
to forthwith cease making offers and sales of such securities pursuant
to such prospectus and to deliver to the Company any copies of such
prospectus then in the possession of such Seller), and at the request
of any such Seller promptly prepare and furnish to such Seller a
reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing;
(vii) make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with one of
the first three months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission;
(ix) use its best efforts to list such securities on any securities
exchange on which the Common Stock of the Company is then listed, or,
if not so listed, on a national securities exchange, if the listing of
such securities is then permitted under the rules of such exchange;
(x) provide a transfer agent and registrar for all the
securities covered by such registration statement not later than the
effective date of such registration statement;
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(xi) enter into such agreements (including an underwriting
agreement in customary form containing without limitation customary
indemnity and contribution provisions for the benefit of the
underwriter or underwriters and the Seller or Sellers) and take such
other actions as the Seller or Sellers shall reasonably request in
order to expedite or facilitate the disposition of such securities;
(xii) obtain an opinion from the Company's counsel and a "cold
comfort" letter from the Company's independent public accountants in
customary form and covering such matters as the Seller or Sellers shall
reasonably request;
(xiii) make available for inspection by any Seller of securities
covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent
retained by any such Seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and
properties of the Company, and cause all of the Company's officers,
directors and employees to supply all information reasonably requested
by any such Seller, underwriter, attorney, accountant or agent in
connection with such registration statement; and
(xiv) permit any Seller of securities covered by such registration
statement to require the insertion therein of material, furnished to
the Company in writing, which in the reasonable judgment of such Seller
should be included.
If any such registration or comparable statement refers to any Seller by name or
otherwise as the holder of any securities of the Company, then such Seller shall
have the right to require (A) the insertion therein of language, in form and
substance satisfactory to such Seller, to the effect that the holding by such
Seller of such securities is not to be construed as a recommendation by such
Seller of the investment quality of the Company's securities covered thereby and
that such holding does not imply that such Seller will assist in meeting any
future
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financial requirements of the Company, or (B) in the event that such reference
to such Seller by name or otherwise is not required by the Securities Act, the
deletion of the reference to such Seller.
The Company may require each Holder of securities to, and
each such Holder, as a condition to including Securities in such registration,
shall, furnish the Company with such information and affidavits regarding such
holder and the distribution of such securities as the Company may from time to
time reasonably request in writing in connection with such registration. No
Seller may participate in any underwritten registration hereunder unless such
Seller (a) agrees to sell such Seller's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, lock-ups, underwriting agreements and other documents
reasonably required under the terms of such-underwriting arrangements and these
registration rights.
Each Seller of securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
SECTION 12.03(VI), such Seller will forthwith discontinue such Seller's
disposition of securities pursuant to the registration statement relating to
such securities until such Seller's receipt of the copies of the supplemented or
amended prospectus contemplated by SECTION 12.03 (VI) and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such Seller's possession of any
prospectus relating to such securities at the time of receipt of such notice.
12.4 HOLDBACK ON SALES. The Company and the Holders hereby
agree not to effect any public sale or distribution of any securities similar to
those registered in accordance with SECTION 12.03 hereof during the 14 day
period prior to, and during the 45 day period beginning on, the
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effective date of any registration statement (except as part of such
registration statement).
12.5 EXPENSES. Subject to SECTION 12.01, all reasonable
expenses incurred in complying with this Section, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, the reasonable fees and disbursements of one counsel
for the Seller or the Sellers (to be chosen by the Seller or by the Sellers
holding a majority of the securities to be included by Sellers in a registration
statement), expenses of any special audits incident to or required by any such
registration and expenses of complying with the securities or blue sky laws of
any jurisdictions (PROVIDED, HOWEVER, the Company may delay such registration
for up to 30 days, if such delay will eliminate the need for such special
audit), shall be paid by the Company; provided, that in no event shall the
Company be required to pay any underwriting discounts, commissions or fees
attributable to the sale of warrant Shares by a Seller hereunder.
12.6 INDEMNIFICATION.
(a) In the event of any registration of any of its
securities under the Securities Act pursuant to this SECTION 12, the Company
shall, and hereby agrees to, indemnify and hold harmless each Seller of such
securities, its directors and officers, partners, and each other Person, if any,
who controls such Seller within the meaning of Section 15 of the Securities Act,
against any losses to which such Seller or any such director, officer, partner
or Person may become subject under the Securities Act or any other statute or at
common law, insofar as such losses (or actions in respect thereof) arise out of
or are based upon any alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus with respect
thereto, or any amendment or supplement thereto, or any alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and
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shall reimburse such Seller or such director, officer, partner or participating
Person or controlling Person for any legal or any other expenses reasonably
incurred by such Seller or such director, officer, partner or participating
Person or controlling Person in connection with investigating or defending any
such loss; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that any such loss arises out of or is based upon any alleged
untrue statement or alleged omission made in such registration statement,
preliminary prospectus, prospectus, or amendment or supplement in reliance upon
and in conformity with written information furnished to the Company for
inclusion therein through an instrument duly executed by such Seller; PROVIDED
FURTHER, HOWEVER that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, the
indemnity agreement contained in this paragraph shall not apply to the extent
that any such loss, claim, damage, liability or expense results from the fact
that a current copy of the prospectus was not sent or given to the Person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the securities concerned to such Person if
the Company had prior thereto given such Seller the notice referred to in
SECTION 12.03(VI) hereof and provided to such Seller a supplemented or amended
prospectus as contemplated by SECTION 12.03(VI), and such current copy of the
prospectus would have cured the defect giving rise to such loss, claim, damage,
liability or expense. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Seller or such
director, officer or participating Person or controlling Person, and shall
survive the transfer of such securities by such Seller.
(b) Each Seller of securities which are included in a
registration statement hereunder, as a condition to including securities in such
registration statement, shall, to the full extent permitted by law, indemnify
and hold harmless the Company, its directors and officers and each other Person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act, against any losses to which the Company or
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any such director, officer or Person may become subject under the Securities Act
or otherwise, insofar as such losses (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, if such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such Seller specifically for use in the preparation thereof;
PROVIDED, HOWEVER, that the obligation to provide indemnification pursuant to
this SECTION 12.06(B) shall be several, and not joint and several, among such
Sellers on the basis of the number of securities included by each in such
registration statement and the aggregate amount which may be recovered from any
holder of securities pursuant to the indemnification provided for in this
SECTION 12.06(B) in connection with any sale of securities shall be limited to
the total proceeds received by such holder from the sale of such securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such other Person and
shall survive the transfer of such securities by such Seller.
(c) Promptly after receipt by any Person under this
Section of notice of the commencement of any action, such Person (an
"INDEMNIFIED PARTY") shall, if a claim in respect thereof is to be made against
any other Person (an "INDEMNIFYING PARTY") for indemnity under this Section,
notify the Indemnifying Party in writing of the commencement thereof; but the
omission so to notify the Indemnifying Party shall not relieve it from any
liability which it may have to any Indemnified Party, except to the extent that
the Indemnifying Party is prejudiced thereby. The Indemnifying Party may, upon
being notified of such action, assume the defense thereof, with counsel
satisfactory to such
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Indemnified Party, and, after such assumption, the Indemnifying Party shall not
be liable to such Indemnified Party under this Section for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
Indemnified Party, in connection with the defense thereof; PROVIDED, HOWEVER,
that the Indemnifying Party may not assume the defense of the action, and shall
remain liable to the Indemnified Party for its legal expenses of counsel and
other expenses, in the event that the Indemnified Party has been advised in
writing by counsel who, in good faith determines that a conflict of interest may
exist between the Indemnified Party and the Indemnifying Party.
(d) If the indemnification provided for in this Section is
unenforceable although available, or insufficient to hold harmless an
Indemnified Party hereunder for any losses (or actions in respect thereof) in
respect of which the provisions of SECTION 12.06(A) or (B) would otherwise apply
by their terms, then the Indemnifying Party shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and the Indemnified Party on the
other hand in connection with the statements or omissions which resulted in such
losses (or actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
relates to information supplied by the Indemnifying Party on the one hand or
such Indemnified Party on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties agree that it would not be just and equitable
if contribution pursuant to this subsection were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this subsection. The amount paid or
payable as a result of the losses (or actions in respect thereof) referred to
above in this subsection shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with
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investigating or defending any such action or claim. In no event shall any
Seller be required to contribute in the aggregate an amount exceeding the amount
of proceeds received by such Seller in connection with any offering. 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.
12.7 NO OTHER REGISTRATION RIGHTS. The Company shall not
grant any registration rights to any holder of securities of the Company in
respect of such securities if such registration rights would rank senior to, or
otherwise adversely affect in any material respect, the registration rights
granted in this Section 12.
12.8 RULE 144. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
so long as the Company is registered under the Exchange Act. Upon the request of
any Holders, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
Section 13. MISCELLANEOUS.
13.1 WAIVER. No failure on the part of any Holder to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
13.2 NOTICES. All notices and other communications
provided for herein and the Warrants (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be given
or made in writing (including, without limitation, by telecopy), if to (a) any
party hereto,
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delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof; or, as to any party, at such other
address as shall be designated by such party in a written notice to each other
party, or (b) any other Person who is the registered Holder of any Warrants or
Warrant Stock, to the address for such Holder as it appears in the stock or
warrant ledger of the Company. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when transmitted
by telecopier or personally delivered, or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid. The Company agrees to
deliver to each Holder in the manner prescribed by this SECTION 12.02 any
notices or other communications delivered to the shareholders of the Company.
13.3 OFFICE OF THE COMPANY. So long as any of the Warrants
remains outstanding, the Company shall maintain an office in the continental
United States of America where the Warrants may be presented for exercise,
transfer, division or combination provided herein and in the Warrants. Such
office shall be at 2800 Southeast Market Place, Stuart, Florida 34997 unless and
until the Company shall designate and maintain some other office for such
purposes and give notice thereof to all Holders.
13.4 EXPENSES, TRANSFER TAXES AND OTHER CHARGES.
(a) EXPENSES. ETC. The Company agrees to pay or reimburse
each of the Initial Holders for paying: (i) all reasonable out-of-pocket costs
and expenses of the Initial Holders (including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special counsel
to the Initial Holders), in connection with (x) the negotiation, preparation,
execution and delivery of this Agreement and the issuance of warrants hereunder
and (y) any amendment, modification or waiver of any of the terms of this
Agreement or the Warrants; and (ii) all reasonable fees, costs and expenses of
the Initial Holders (including reasonable fees of a single counsel for the
Holders) in connection with any default by the
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Company hereunder or under any Warrant or in connection with any enforcement
action or other proceedings relating hereto or thereto (including, without
limitation, the enforcement of this SECTION 13.04).
(b) CERTAIN TAXES, ETC. Except as otherwise provided in
SECTION 13.04(C), the Company shall pay all taxes (other than Federal, state or
local income taxes) which may be payable in connection with the execution and
delivery of this Agreement or the issuance and sale of the Warrants hereunder or
in connection with any modification of this Agreement or the Warrants and shall
hold each Holder harmless without limitation as to time against any and all
liabilities with respect to all such taxes. The obligations of the Company under
this SECTION 13.04(B) shall survive any redemption, repurchase or acquisition of
Warrants by the Company and the termination of this Agreement.
(c) TRANSFER TAXES, ETC. The Company shall pay any and all
expenses, transfer taxes and other charges, including all costs associated with
the preparation, issue and delivery of stock or warrant certificates, that are
incurred in respect of the issuance or delivery of shares of Common Stock upon
exercise or conversion of the Warrants pursuant to SECTION 2 thereof or in
connection with any transfer, division or combination of Warrants pursuant to
SECTION 3 thereof. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the
relevant Warrant is registered, and no such issue or delivery shall be made
unless and until the Person requesting such issue has paid to the Company the
amount of any such tax, or has established, to the satisfaction of the Company,
that such tax has been paid.
13.5 AMENDMENTS, ETC. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Company and the Holders
of at least 66-2/3% of the Restricted Warrants; PROVIDED that (a) the consent of
the Holders of Restricted Warrants shall not be required with respect to any
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amendment or waiver which does not affect the rights or benefits of such Holders
under this Agreement, (b) the consent of the Holders of Restricted Stock shall
be required with respect to any amendment or waiver of SECTION 12, and (c) no
such amendment or waiver shall, without the written consent of all Holders of
Restricted Stock and Restricted Warrants at the time outstanding, amend this
SECTION 13.05.
13.6 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
13.7 SURVIVAL. All representations and warranties made by
the Company herein or in any certificate or other instrument delivered by it or
on its behalf under this Agreement shall be considered to have been relied upon
by each Initial Holder and shall survive the execution and delivery of this
Agreement and the issuance of the Warrants or the Warrant Stock regardless of
any investigation made by or on behalf of any Initial Holder. All
representations and warranties made by the Initial Holders herein shall be
considered to have been relied upon by the Company and shall survive the
execution and delivery of this Agreement and the issuance to the Initial Holders
of the Warrants, the Warrant Stock and any Other Securities regardless of any
investigation made by or on behalf of the Company.
13.8 REGULATION Y. The Company shall not be liable for any
Holder's breach of any of the provisions herein relating to Regulation Y.
13.9 CAPTIONS. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
13.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
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<PAGE>
13.11 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.
13.12 SEVERABILITY. In the event that any one or more of
the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
13.13 ENTIRE AGREEMENT. This Agreement supersedes all
prior discussions and agreements between the parties with respect to the subject
matter hereof, and (together with the Warrants) contains the sole and entire
agreement among the parties hereto with respect to the subject matter hereof.
13.14 NO THIRD PARTY BENEFICIARY. The terms and provisions
of this Agreement are intended solely for the benefit of each party hereto,
their respective successors and permitted assigns, and it is not the intention
of the parties to confer third-party beneficiary rights upon any other Person.
WARRANT AGREEMENT
-58-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
COMPANY
NUCO2 INC.
By: /S/ JOSEPH CRISCUOLO
------------------------
Title: President
Address for Notices:
NUCO2 INC.
2800 Southeast Market Place
Stuart, Florida 34997
Attention: Joann Sabatino
Chief Financial Officer
Telephone: 561-221-1754
Fax: 561-221-1690
WITH A COPY TO:
Olshan, Grundman, Frome & Rosenzweig LLP
505 Park Avenue, 17th Floor
New York, NY 10022
Attention: Steve Wolosky, Esq.
Telephone: 212-753-7200
Fax: 212-980-7177
WARRANT AGREEMENT
-59-
<PAGE>
PERCENTAGE
3.5% CHASE EQUITY ASSOCIATES L.P.
By Chase Capital Partners,
its general partner
By: /S/ RICHARD D. WATERS
-------------------------
Title:
WARRANT AGREEMENT
-60-
<PAGE>
PERCENTAGE
.70% ORIX USA CORPORATION
By: /S/ FRANKLIN CLARKE
-----------------------
Title: President & CEO
WARRANT AGREEMENT
-61-
<PAGE>
PERCENTAGE
.47% EMPIRE INSURANCE COMPANY, as
executed on their behalf by their
Investment Manager, Cohanzick
Management, L.L.C.
By: /S/ DAVID SHERMAN
---------------------
Title: President
WARRANT AGREEMENT
-62-
<PAGE>
PERCENTAGE
1.17% DK ACQUISITION PARTNERS, L.P.
By M.H. Davidson & Co.,
its general partner
By:/S/ THOMAS L. KEMPNER
------------------------
WARRANT AGREEMENT
-63-
<PAGE>
PERCENTAGE
.32% NATIONSBANC MONTGOMERY SECURITIES,
INC.
By: /S/ ROBERT D. LONG
----------------------
Title:
Managing Director
WARRANT AGREEMENT
-64-
<PAGE>
Addresses for Notices:
CHASE CAPITAL PARTNERS
380 Madison Avenue
12th Floor
New York, New York 10017-3100
Attention: Richard D. Waters
Telephone: (212) 622-3096
Fax: (212) 622-3950
WITH A COPY TO:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: John T. O'Connor
Telephone: (212) 530-5548
Fax: (212) 530-5219
EMPIRE INSURANCE COMPANY
122 5th Avenue
New York, New York 10011
Attention: Frank Colalucci
Telephone: (212) 387-3113
Fax: (212) 691-6374
WITH A COPY TO:
COHANZICK MANAGEMENT, L.L.C.
110 East 42nd Street
Suite 1305
New York, New York 10017
Attention: David K. Sherman
WARRANT AGREEMENT
-65-
<PAGE>
Telephone: (212) 953-6900
Fax: (212) 953-5833
ORIX USA
780 Third Avenue
48th Floor
New York, New York 10017
Attention: Franklin Clark
Telephone: (212) 418-8355
Fax: (212) 418-8308
DK ACQUISITIONS PARTNERS, L.P.
c/o M.H. Davidson & Co.
885 Third Avenue, Suite 3300
New York, New York 10022
Attention: Thomas L. Kempner, Jr.
Telephone: (212) 371-3000
Fax: (212) 371-4318
WITH A COPY TO:
Akin, Gump, Strauss, Hauer &
Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: Ronald W. Goldberg
Telephone: (212) 872-1000
Fax: (212) 872-1002
NATIONSBANC MONTGOMERY SECURITIES,
INC.
9 West 57th Street
New York, New York 10019
Attention: Thomas C. Liu
Telephone: (212) 583-8531
Fax: (212) 583-8561
WARRANT AGREEMENT
-66-
<PAGE>
Annex 1 to
Warrant Agreement
[Form of Warrant]
WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT
DATED AS OF OCTOBER 31, 1997, BETWEEN NUCO2 INC., A FLORIDA
CORPORATION, AND CERTAIN INITIAL HOLDERS, AS SUCH WARRANT AGREEMENT MAY
BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE
VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF
THE FORM OF SUCH WARRANT AGREEMENT IS ON FILE AND MAY BE INSPECTED AT
THE PRINCIPAL EXECUTIVE OFFICE OF THE AFORESAID CORPORATION. THE HOLDER
OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY THE PROVISIONS OF SUCH WARRANT AGREEMENT.
No. of Stock Units: ________________ Warrant No.__________
WARRANT
to Purchase Common Stock of
NUCO2 INC.
THIS IS TO CERTIFY THAT [NAME OF INITIAL HOLDER], or its
registered assigns, is entitled to purchase in whole or in
WARRANT AGREEMENT
<PAGE>
part from NUCO2 INC., a Florida corporation (the "COMPANY"), at any time and
from time to time on or after the date hereof, but not later than 5:00 p.m., New
York City time, on [ ] (the "EXPIRATION DATE"), [_] Stock Units (as defined in
the Warrant Agreement referred to below) at a PURCHASE PRICE of [ ] per Stock
Unit, PROVIDED that such purchase price shall not be less than the aggregate par
value of the capital stock contained in a Stock Unit (the "EXERCISE PRICE"),
subject to the terms and conditions set forth herein and in the Warrant
Agreement, each such purchase of a Stock Unit to be made, and to be deemed
effective for the purpose of determining the date of exercise, only upon
surrender of this warrant to the Company at its office referred to in SECTION
13.03 of the Warrant Agreement, with the Form of Exercise attached hereto (or a
reasonable facsimile thereof) duly completed and signed, and upon payment in
full to the Company of the Exercise Price (i) in cash or (ii) by certified or
official bank check or (iii) by any combination of the foregoing, all as
provided in the warrant Agreement and upon compliance with and subject to the
conditions set forth herein and in the Warrant Agreement.
On and after the date hereof and prior to the Expiration
Date, this Warrant may be converted, in whole or in part, at the Holder's
option, into the number of shares of Common Stock for each Stock Unit evidenced
hereby which is being so converted, equal to (a)(i) the product of (x) the
number of shares of Common Stock comprising a Stock Unit at the time of such
conversion and (y) the Current Market Price per share of Common Stock at the
time of such conversion MINUS (ii) the Exercise Price per Stock Unit at the time
of such conversion, DIVIDED BY (b) the Current Market Price per share of Common
Stock at the time of such conversion, all as provided in the Warrant Agreement
and upon compliance with and subject to the conditions set forth herein and in
the Warrant Agreement.
If a Holder is subject to the provisions of Regulation Y.
such Holder shall not, and shall not permit any of its Bank Holding Company
Affiliates to, exercise this Warrant if, after giving effect to such exercise,
(i) such Holder and its Bank Holding Company Affiliates would own more than 5`
of the total issued and outstanding shares of Common Stock on a fully
WARRANT AGREEMENT
<PAGE>
diluted basis or (ii) such Holder would be deemed under Regulation Y to have the
power to exercise, directly or indirectly, a controlling influence over the
management or policies of, or would otherwise control, the Company (and for
purposes of this clause (ii), a reasoned opinion of counsel to such Holder
delivered to such Holder (which is based on facts and circumstances deemed
appropriate by such counsel) to the effect that such Holder does not have the
power to exercise such a controlling influence or otherwise control the Company
shall be conclusive).
This Warrant is issued under and in accordance with the
Warrant Agreement dated as of October 31, 1997 between the Company and certain
investors (as the same may be modified and supplemented in accordance with its
terms and as in effect from time to time, the "WARRANT AGREEMENT"), and is
subject to the terms and provisions of the Warrant Agreement, which terms and
provisions are hereby incorporated by reference herein and made a part hereof.
Every Holder of this Warrant consents to all of the terms contained in the
Warrant Agreement by acceptance hereof.
The number of shares of Common Stock or other securities
of the Company constituting one "Stock Unit" are subject to adjustment in
certain events as provided in the Warrant Agreement.
The Company shall not be required to issue a fractional
share of Common Stock upon exercise of this Warrant. As to any fraction of a
share which the Holder hereof would otherwise be entitled to purchase upon such
exercise, the Company may pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise.
This Warrant may be exchanged either separately or in
combination with other warrants at the office of the Company referred to in
SECTION 12.03 of the Warrant Agreement for new Warrants representing the same
aggregate number of warrants evidenced by the Warrant or Warrants exchanged,
upon surrender of this and any other Warrant being exchanged and upon compliance
WARRANT AGREEMENT
<PAGE>
with and subject to the conditions set forth herein and in the Warrant
Agreement.
The Warrants and the Warrant Stock shall be transferable
only upon compliance with the conditions specified in SECTIONS 4, 5 and 12 of
the Warrant Agreement, which conditions are intended, among other things, to
ensure compliance with the provisions of the Securities Act in respect of the
transfer of any Warrant or any Warrant Stock, and any Holder hereof shall be
bound by the provisions of (and entitled to the benefits of) said Sections 4, 5
and 12. Upon any such transfer effected in compliance with said Sections 4, 5
and 12, a new Warrant or new Warrants of different denominations, representing
in the aggregate a like number of warrants, will be issued to the transferee.
Every Holder hereof, by accepting this Warrant, consents and agrees with the
Company and with every subsequent Holder of this Warrant that until due
presentation for the registration of transfer of this Warrant on the warrant
register maintained by the Company, the Company may deem and treat the Person in
whose name this Warrant is registered as the absolute and lawful owner for all
purposes whatsoever and the Company shall not be affected by any notice to the
contrary.
Nothing contained in the Warrant Agreement or in this
Warrant shall be construed as conferring on the holder of any Warrants or his or
her transferee any rights whatsoever as a Shareholder of the Company.
No provision hereof, in the absence of affirmative action
by the Holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of such Holder, shall give rise to any
liability of such Holder for the Exercise Price or as a Shareholder of the
Company, whether such liability is asserted by the Company, by any creditor of
the Company or any other Person.
Any notices and other communications pursuant to the
provisions hereof shall be sent in accordance with SECTION 13.02 of the Warrant
Agreement.
WARRANT AGREEMENT
<PAGE>
This Warrant shall be deemed a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of the State of New York without giving effect to the
principles of conflicts of laws thereof.
Each term used herein without definition shall have the
meaning assigned thereto in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has duly executed this
Warrant.
Dated: _________________ _____, 1997
NUCO2 INC.
By _______________________________________
Name:
Title:
WARRANT AGREEMENT
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of
this Warrant hereby sells, assigns and transfers unto the assignee named below
all the rights of the undersigned under this Warrant with respect to the number
of Stock Units covered thereby set forth hereinbelow unto:
Number of
Stock
Name of Assignee Address Units
Dated:________________________
_______________________________________
Signature of Registered Holder
_______________________________________
Name of Registered Holder
(Please Print)
Witness:
_______________________________________
WARRANT AGREEMENT
<PAGE>
FORM OF EXERCISE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant
hereby
SELECT ONE OF THE FOLLOWING TWO CHOICES:
[irrevocably exercises this Warrant for the purchase of
Stock Units of NUCO2 INC., a Florida corporation, and
herewith makes payment therefor in the amount of
$__________________, all at the price and on the terms and
conditions specified in this Warrant,]
OR
[irrevocably converts this Warrant into shares of Common
Stock of NUCO2 INC., a Florida corporation, all in the
manner and on the terms and conditions specified in this
Warrant,]
and requests that (i) certificates and/or other instruments covering such Stock
Units be issued in accordance with the instructions given below and (ii) if such
Stock Units shall not include all of the Stock Units to which the Holder is
entitled under this warrant, that a new warrant of like tenor and date for the
balance of the Stock Units issuable hereunder be delivered to the undersigned.
Dated:___________, ______________
_______________________________________
(Signature of Registered Holder)
Instructions for issuance and registration of Stock Units:
Name of Registered Holder:______________________________________________________
(Please print)
Social Security or Other Identifying Number:____________________________________
WARRANT AGREEMENT
<PAGE>
Please deliver certificate to the following address:
_____________________________________________
_____________________________________________
_____________________________________________
WARRANT AGREEMENT
EXHIBIT 10.15
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of November 14, 1997, between:
NUCO2 INC., a corporation duly organized and validly existing
under the laws of the State of Florida (the "COMPANY");
each of the Initial Holders, including the Additional Initial
Holder (as defined below), appearing under the caption "INITIAL
HOLDERS" on the signature pages hereto (each, an "INITIAL HOLDER", and
collectively, the "INITIAL Holders").
WHEREAS, the Company and the Initial Holders (other than the
Additional Initial Holder) are party to a Warrant Agreement dated as of October
31, 1997 (as heretofore modified and supplemented and in effect on the date
hereof, the "WARRANT AGREEMENT");
WHEREAS, pursuant to the Warrant Agreement, in connection with
the issuance by the Company of up to $25,000,000 aggregate principal amount of
Senior Subordinated Notes (the "OLD NOTES") and as an inducement for the
purchase by the Initial Holders (other than the Additional Initial Holder) of up
to such $25,000 aggregate principal amount of the Notes, the Company issued
Warrants to the Initial Holders (other than the Additional Initial Holder)
providing for the purchase of shares of Common Stock of the Company;
WHEREAS, in connection with the issuance by the Company of an
additional $5,000,000 aggregate principal amount of Senior Subordinated Notes
(the "ADDITIONAL NOTE", and together with the Old Notes, the "NOTES") to
PaineWebber High Income Fund, a series of PaineWebber Managed Investments Trust
(the "ADDITIONAL INITIAL HOLDER") and as an inducement for the purchase by the
Additional Initial Holder of such $5,000,000 aggregate principal amount of the
Additional Note, the Company has agreed to issue a Warrant to the Additional
Initial Holder providing for the purchase of shares of Common Stock of the
Company;
-1-
<PAGE>
WHEREAS, the Additional Initial Holder desires to become an
Initial Holder party to the Warrant Agreement and to purchase the Additional
Note from the Company, and the Company desires to issue to the Additional
Initial Holder, a Warrant having the same terms as the Warrants heretofore
issued by the Company under the Warrant Agreement. The Company and the Initial
Holders (including the Additional Initial Holder) wish to amend the Warrant
Agreement to add the Additional Initial Holder as an Initial Holder thereunder
and to provide for the issuance of such additional Warrant and to make other
modifications to the Warrant Agreement. Accordingly, the parties hereto hereby
agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 1, terms defined in the Warrant Agreement are used herein as
defined therein.
Section 2. AMENDMENTS. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but effective as of the date
hereof, the Warrant Agreement shall be amended as follows:
A. References in the Warrant Agreement to "this Agreement"
(and indirect references such as "hereunder, "hereby", "herein" and "hereof")
shall be deemed to be references to the Warrant Agreement as amended hereby.
B. A new Section 2.07 is added to the Warrant Agreement to
read as follows:
"SECTION 2.07 ISSUANCE OF ADDITIONAL WARRANT. (a) Subject to
and upon the conditions set forth in this Agreement, the Company shall issue to
PaineWebber High Income Fund, a series of PaineWebber Managed Investments Trust
(the "Additional Initial Holder"), on November 14, 1997 and for no cash
consideration, a Warrant (the "ADDITIONAL WARRANT") in the form of Annex I
covering such number of Stock Units as is equal to the percentage of the issued
and outstanding shares of Common Stock on a fully diluted basis on the date of
issuance of the Additional warrant as is specified opposite the name of the
Additional Initial Holder on the signature page(s) hereto. The number of shares
of Common Stock comprising each Stock unit covered by the Additional Warrant
issued under this Agreement shall be subject to
-2-
<PAGE>
adjustment as provided in SECTIONS 6 and 7 hereof. The Additional Warrant shall
constitute a Warrant, and the Additional Initial Holder shall be an Initial
Holder, for all purposes of this Agreement. On November 14, 1997, the Company
shall deliver to the Additional Initial Holder a single certificate for the
Warrant to be acquired by such Additional Initial Holder hereunder, registered
in the name of such Additional Initial Holder.
C. Section 12.01(b) of the Warrant Agreement is amended to
insert a new sentence at the end thereof to read as follows:
"Notwithstanding the foregoing, if any Initial Holder (including the
Additional Initial Holder) who holds at least $5,000,000 of Notes (the
"$5 MILLION NOTE HOLDER") requests a Demand Registration and the
Majority Holders do not want to consummate a Demand Registration, then
upon receipt of a Demand Notice from the $5 Million Note Holder, the
Company shall effect a Demand Registration for such Warrants or shares
of Warrant Stock held by such $5 Million Note Holder (a "$5 MILLION
NOTE HOLDER DEMAND REGISTRATION"); PROVIDED, HOWEVER, each $5 Million
Note Holder may exercise its right to request a $5 Million Note Holder
Demand Registration pursuant to this sentence only once."
Notwithstanding the foregoing, no right to a Demand Registration shall
be deemed to have been exercised or forfeited and such Demand Notice
for a $5 Million Note Holder Demand Registration shall not operate to
reduce the Company's obligation to effect a Demand Registration
pursuant to a Demand Notice on two occasions. In addition, the Company
shall comply with Section 12.01(b) for each $5 Million Note Holder
Demand Registration.
Section 3. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to the Initial Holders
that the representations and warranties set forth in Section 3 of the Warrant
Agreement are true and complete on the date hereof as if made on and as of the
date hereof and as if each reference in said Section 3 to "this Agreement" (or
words of similar import) referred to the Warrant Agreement as amended by this
Amendment No. 1.
-3-
<PAGE>
(b) The Additional Initial Holder represents to the Company
that the representations set forth in Section 2.03 of the warrant Agreement are
true and complete with respect to the Additional Initial Holder on the date of
issuance of the Additional Warrant as if made on and as of such date and each
reference in said Section 2.03 to "this Agreement (or words of similar import)
referred to the Warrant Agreement as by this Amendment No. 1.
Section 4. CONDITIONS PRECEDENT. As provided in Section 2
above, the amendments to the Warrant Agreement set forth in said Section 2 shall
become effective, as of the date hereof, upon the execution and delivery of one
or more counterparts of this Amendment No. 1 by each of the parties hereto.
Section 5. MISCELLANEOUS. Except as herein provided, the
warrant Agreement shall remain unchanged and in full force and effect. This
Amendment No. 1 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 1 by signing any such
counterpart. This Amendment No. 1 shall be governed by, and construed in
accordance with, the law of the State of New York.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be duly executed and delivered as of the day and year first above written.
COMPANY
NUCO2 INC.
By: /S/ JOANN SABATINO
----------------------
Title: CFO
-5-
<PAGE>
INITIAL HOLDERS
CHASE EQUITY ASSOCIATES L.P.
By Chase Capital Partners,
its general partner
By: /S/ RICHARD D. WATERS
-------------------------
Title: General Partner
ORIX USA CORPORATION
By:/S/ FRANKLIN CLARKE
----------------------
Title: Vice President
EMPIRE INSURANCE COMPANY, as
executed on their behalf by their
Investment Manager, Cohanzick
Management, L.L.C.
By: /S/DAVID SHERMAN
--------------------
Title: President
DK ACQUISITION PARTNERS, L.P.
By M.H. Davidson & Co.
its general partner
By:/S/ THOMAS L. KEMPNER
------------------------
Title: General Partner
-6-
<PAGE>
NATIONSBANC MONTOGOMERY SECURITIES,
INC.
By: /S/ ROBERT D. LONG
----------------------
Title: Managing Director
-7-
<PAGE>
PERCENTAGE
1.17% PAINEWEBBER HIGH INCOME FUND, a series
of PaineWebber Managed Investments Trust
By:/S/ PAUL SCHUBERT
--------------------
Title: Vice President and
Treasurer
Address for Notices:
PAINEWEBBER HIGH INCOME FUND, a
series of PaineWebber Managed
Investments Trust
c/o Mitchell Hutchins Asset
Management Inc.
1285 Avenue of the Americas
New York, New York 10019
Attention: Ms. Jenny A. Hutchinson
Fax No.: (212) 586-8982
Telephone No.: (212) 713-6047
-8-
Exhibit 11 - Statement re Computation of Per Share Earnings
The net income or loss per share computations presented are based on
the weighted average number of common shares and dilutive common equivalent
shares outstanding during each year. Diluted and basic income or loss per common
share are the same amounts for each period.
In connection with the Initial Public Offering (IPO), 155,164 and
300,266 shares of common stock were issued upon the conversion of the Company's
Series C convertible preferred stock and Series D convertible preferred stock,
respectively. An additional 805,209 shares of common stock were issued upon the
conversion of the convertible portion of the Senior Subordinated Notes and
118,167 shares of common stock upon exercise of warrants and options. The above
shares have been treated as outstanding since July 1, 1995. Stock options and
warrants to purchase an additional 152,851 shares of common stock granted during
1995 have also been treated as outstanding since July 1, 1995, using the
treasury stock method.
EXHIBIT 21
SUBSIDIARIES
NuCo2 Acquisition Corp., a Florida corporation
Koch Compressed Gases, Inc., a New Jersey corporation
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement (No.333-06705) on Form S-8 of our report dated September 18, 1998 for
the years ended June 30, 1996, 1997 and 1998, and to the addition of our firm
under the caption "Experts" in the Prospectus, insofar as it relates to our
report on the financial statements for the three years ended June 30, 1998.
/S/ MARGOLIN, WINER & EVENS LLP
-----------------------------------
MARGOLIN, WINER & EVENS LLP
New York, New York
September 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NUCO2 INC.
FINANCIAL STATEMENTS AS OF JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 336,510
<SECURITIES> 0
<RECEIVABLES> 4,457,505
<ALLOWANCES> 395,491
<INVENTORY> 211,027
<CURRENT-ASSETS> 5,267,479
<PP&E> 97,827,945
<DEPRECIATION> 12,392,012
<TOTAL-ASSETS> 124,498,267
<CURRENT-LIABILITIES> 8,387,017
<BONDS> 0
0
0
<COMMON> 7,217
<OTHER-SE> 55,635,670
<TOTAL-LIABILITY-AND-EQUITY> 124,498,267
<SALES> 35,077,361
<TOTAL-REVENUES> 35,077,361
<CGS> 18,578,063
<TOTAL-COSTS> 36,886,190
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,809,138
<INCOME-PRETAX> (5,447,807)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,447,807)
<DISCONTINUED> 0
<EXTRAORDINARY> 186,945
<CHANGES> 0
<NET-INCOME> (5,634,752)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> (0.78)
</TABLE>
