NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this "Agreement"), dated as of
October 31, 1995, is by and among LABOR READY, INC., a Washington
corporation, LABOR READY OF NEVADA, INC., a Washington
corporation, and LABOR READY FRANCHISE DEVELOPMENT CORP. INC., a
Washington corporation (individually and collectively, the
"Company" or the "Companies"), SEACOAST CAPITAL PARTNERS LIMITED
PARTNERSHIP, a Delaware limited partnership ("Seacoast"), and
ALLIED INVESTMENT CORPORATION, a Maryland corporation, ALLIED
INVESTMENT CORPORATION II, a Maryland corporation, and ALLIED
CAPITAL CORPORATION II, a Maryland corporation (collectively, the
"Allied Investors") (Seacoast and the Allied Investors are
collectively referred to herein as the "Purchaser"). Capitalized
terms used in this Agreement are defined in Section 11.1.
To induce Purchaser to purchase the Senior Subordinated
Notes from 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.
I. DESCRIPTION OF SENIOR SUBORDINATED NOTES AND COMMITMENT
1.1 Description of Senior Subordinated Notes. The Company will
authorize the issuance and sale of the Senior Subordinated Notes
which shall be dated as of the Closing Date, shall be in the
aggregate original principal amount of $10,000,000, and shall
bear interest at the fixed rate of thirteen percent (13%) per
annum; provided, however, that upon the occurrence of any Event
of Default, and during the continuation thereof, the unpaid
principal amount of the Senior Subordinated Notes shall bear
interest at a rate equal to eighteen percent (18%) per annum.
Interest on the Senior Subordinated Notes shall be computed on
the basis of the actual number of days elapsed over a three
hundred-sixty (360) day year. Each Senior Subordinated Note
shall be substantially in the form attached hereto as Exhibit A.
1.2 Funding.
(a) Subject to the terms and conditions hereof and
on the basis of the representations and warranties hereinafter
set forth, the Company agrees to issue and sell to each
Purchaser, and each Purchaser agrees to purchase from the
Company, a Senior Subordinated Note in the principal amount set
forth beneath the name of such Purchaser on the signature page of
this Agreement. Each Senior Subordinated Note will be delivered
to each respective Purchaser in fully registered form, and shall
be issued in each Purchaser's name or the name of its respective
nominee.
(b) On the Closing Date, the Company shall deliver
to each Purchaser a Senior Subordinated Note in the original
principal amount set forth beneath the name of such Purchaser on
the signature page of this Agreement, and upon receipt thereof
and subject to Section 1.3, each Purchaser shall disburse one
hundred percent (100%) of such principal amount in immediately
available funds to such Persons as the Company shall designate in
writing (the "Principal Amount").
1.3 Commitment Fee. Each Purchaser hereby acknowledges
that the Company has paid to such Purchaser, prior to the date
hereof, a commitment fee equal to the amount set forth each such
Purchaser's name on Schedule 1.3 attached hereto (the "Commitment
Fee"), which fee was fully earned and nonrefundable on the date
of such payment. On or prior to the Closing Date, the Company
shall pay to each Purchaser, in immediately available funds, a
closing fee equal to the amount set forth each such Purchaser's
name on Schedule 1.3 attached hereto (the "Closing Fee"), which
fee shall be payable and deemed fully earned and nonrefundable on
the Closing Date. At closing, each Purchaser will deduct its
portion of the Closing Fee and its portion of all reasonable fees
and expenses of Purchaser's counsel from the Principal Amount to
be disbursed by it on the Closing Date.
1.4 Use of Proceeds. The proceeds from the sale of the
Senior Subordinated Notes shall be used solely: (a) to fund the
Company's bonding requirements for self insured workers'
compensation programs; (b) to finance the expansion of the
Company's business into new dispatch hall locations during the
years ending December 31, 1995 and December 31, 1996; (c) to pay
costs and expenses payable pursuant to this Agreement and the
transactions contemplated hereunder (including, without
limitation, fees, expenses and disbursements of the Purchaser's
counsel and the Company's broker), (d) to provide the Company
with general working capital and (e) to finance up to $400,000 of
costs and expenses associated with the construction of
improvements to the Company's real property facility located at
2156 Pacific Avenue South, Tacoma, Washington 98402.
II. PAYMENT AND PREPAYMENT OF SENIOR SUBORDINATED
OBLIGATIONS
2.1 Principal and Interest Payments. Principal and
interest on each of the Senior Subordinated Notes shall be due
and payable as follows:
(a) Unless otherwise accelerated pursuant to the
terms hereof, principal shall be due and payable in seventeen
(17) installments (each in an equal amount sufficient to fully
amortize the principal balance of such Senior Subordinated Note
in seventeen (17) installments), commencing on the fifth Business
Day of October, 1998, and continuing on the fifth Business Day of
each January, April, July and October thereafter through and
including October 5, 2002, with all remaining unpaid principal
being due and payable in full on Termination Date.
(b) Interest shall be due and payable (i) quarterly
in arrears on the fifth Business Day of each October, January,
April and July, commencing on the fifth Business Day of January,
1995, and (ii) on the Termination Date.
2.2 Optional Prepayments.
(a) At the Company's option, upon notice given as
provided below, the Company may, at any time and from time to
time, prepay all or any part of the principal of the Senior
Subordinated Notes.
(b) Each partial prepayment under this Section 2.2
shall be in a principal amount of not less than $100,000 or, if
greater than $100,000, then in integral multiples of $100,000.
Each prepayment under this Section 2.2 shall be applied first to
accrued interest on the principal amount prepaid, second to
installments of principal in the inverse order of their
maturities, and third to any expenses and/or damages to which
Purchaser may be entitled. The amount of any such prepayment may
not be reborrowed by the Company. The Company shall give notice
of any optional prepayment to Purchaser not less than thirty (30)
days nor more than sixty (60) days before the date for
prepayment, specifying in each such notice the date upon which
prepayment is to be made and the principal amount (together with
accrued interest) to be prepaid on such date. Notice of
prepayment having been so given, the applicable prepayment amount
shall become due and payable on the specified prepayment date.
The Company shall have no right to prepay the Senior Subordinated
Notes except as provided in this Section 2.2 or in Section 2.3.
2.3 Mandatory Prepayments. Any prepayment under this
Section 2.3 shall be applied first to accrued interest, second to
installments of principal in the inverse order of their
maturities and third to any expenses and/or damages for which
Purchaser may be entitled. The amount of any such mandatory
prepayment may not be reborrowed by the Company. The Company
shall make mandatory prepayments in each of the following
circumstances:
(a) If during any fiscal year the Company shall
sell or otherwise dispose of (other than in the ordinary course
of business or a disposition governed by Section 2.3(b) hereof or
a disposition permitted by Section 6.8 or Section 7.3) any
property or properties, then the Company shall prepay the Senior
Subordinated Obligations in an amount equal to the lesser of (i)
the aggregate net cash proceeds of such sales or other
dispositions or (ii) the aggregate amount of all Senior
Subordinated Obligations, such prepayment to be made within five
(5) Business Days of receipt of such net proceeds. The amount of
any prepayment required under this Section 2.3(a) shall be
reduced, if applicable, by the amount of any prepayment required
under the Senior Loan Documents resulting from the same event
triggering the mandatory prepayment required under this Section
2.3(a).
(b) In the event of any sale or other disposition
of all or substantially all of the stock or assets of the Company
or any Significant Subsidiary of the Company in a single
transaction or series of transactions, the Company shall prepay
the Senior Subordinated Notes in an amount equal to the lesser of
(i) the aggregate net cash proceeds of such sales or dispositions
or (ii) the aggregate amount of all Senior Subordinated
Obligations, such prepayment to be made within five (5) Business
Days of receipt of such net proceeds.
(c) In the event of the resignation or termination
of Glenn A. Welstad as Chief Executive Officer of the Company,
the Company shall prepay the Senior Subordinated Obligations in
full, such prepayment to be made within ninety (90) Business
Days from the date of such resignation or termination.
2.4 Additional Payments. Unless otherwise provided
herein or in the Other Agreements, all Senior Subordinated
Obligations, other than principal and interest on the Senior
Subordinated Notes, shall be payable by the Company to the Holder
thereof within thirty (30) days of demand therefor, and shall
bear interest thereafter until paid at the rate of interest then
applicable under Section 1.1. Payment of reasonable fees and
expenses due and payable on the Closing Date to Purchaser and
Purchaser's legal counsel shall be paid in full on the Closing
Date.
2.5 Direct Payment. The Company will pay all sums
becoming due hereunder and on the Senior Subordinated Notes to
each Purchaser at the address specified for each Purchaser on
Annex I hereto, by wire transfer in U.S. Dollars of Federal
Reserve Funds or other immediately available funds, to the
account specified for such Purchaser on Annex I, or at such other
address or in such other form as such Purchaser shall have
designated by notice to the Company at least five Business Days
prior to the date of any payment, in each case without
presentment and without notations being made thereon. All
payments by the Company shall be made without set-off or
counterclaim. Any wire transfer shall identify such payment as
"Labor Ready, Inc., 13% Senior Subordinated Note" and shall
identify the payment as principal, premium, interest and/or
reimbursement of costs and expenses, together with the applicable
date or period to which it relates.
2.6 Payments Payable on Business Days. Payments of all
amounts due hereunder or under the Senior Subordinated Notes
shall be made on a Business Day. Any payment due on a day that
is not a Business Day shall be made on the next Business Day.
2.7 Interest Laws. Notwithstanding any provision to the
contrary contained in this Agreement or any Other Agreement, the
Company shall not be required to pay, and Purchaser shall not be
permitted to contract for, take, reserve, charge or receive, any
compensation which constitutes interest under applicable law in
excess of the maximum amount of interest permitted by law
("Excess Interest"). If any Excess Interest is provided for or
determined by a court of competent jurisdiction to have been
provided for in this Agreement or in any Other Agreement or
otherwise contracted for, taken, reserved, charged or received,
then in such event: (a) the provisions of this Section 2.7 shall
govern and control; (b) the Company shall not be obligated to pay
any Excess Interest; (c) any Excess Interest that Purchaser may
have contracted for, taken, reserved, charged or received
hereunder shall be, at Purchaser's option, (i) applied as a
credit against the outstanding principal balance of the Senior
Subordinated Obligations or accrued and unpaid interest (not to
exceed the maximum amount permitted by law), (ii) refunded to the
payor thereof, or (iii) any combination of the foregoing; (d) the
interest provided for shall be automatically reduced to the
maximum lawful rate allowed from time to time under applicable
law (the "Maximum Rate"), and this Agreement and the Other
Agreements shall be deemed to have been, and shall be, reformed
and modified to reflect such reduction; and (e) the Company shall
have no action against Purchaser for any damages arising due to
any Excess Interest. Notwithstanding the foregoing, if for any
period of time interest on any Senior Subordinated Obligations is
calculated at the Maximum Rate rather than the applicable rate
under this Agreement, and thereafter such applicable rate becomes
less than the Maximum Rate, the rate of interest payable on such
Senior Subordinated Obligations shall remain at the Maximum Rate
until Purchaser shall have received the amount of interest which
Purchaser would have received during such period on such Senior
Subordinated Obligations had the rate of interest not been
limited to the Maximum Rate during such period. All sums paid or
agreed to be paid hereunder or under the Other Agreements for the
use, forbearance or detention of sums due shall, to the extent
permitted by applicable law, be amortized, pro-rated, allocated
and spread throughout the full term of the Senior Subordinated
Obligations until payment in full so that the rate or amounts of
interest on account of the Senior Subordinated Obligations does
not exceed the Maximum Rate. The terms of this Section 2.7 shall
be deemed incorporated into each Other Agreement and any other
document or instrument between the Company and any Purchaser or
directed to the Company by any Purchaser, whether or not specific
reference to this Section 2.7 is made.
2.8 Security. Payment of the Senior Subordinated Notes
and the other Senior Subordinated Obligations, and the
performance of the covenants set forth herein and in the Other
Agreements, will be secured by a perfected security interest,
mortgage, assignment or Lien, as the case may be (subject only to
Permitted Liens), in favor of the Purchaser, in and upon the
Collateral. The Company shall execute, acknowledge and deliver,
and/or cause to be executed, acknowledged and delivered, to each
Purchaser such certificates, stock powers, instruments, security
agreements, pledges, statements, assignments, consents, Lien
waivers, financing statements or amendments thereof, guarantees
and other documents, in form and substance reasonably acceptable
to each such Purchaser, as in each such Purchaser's good faith
belief may be required to grant, enforce, perfect and protect
such security interest, assignments, Liens and mortgages,
including, without limitation, the Security Documents.
2.9 Joint and Several Liability; Rights of Contribution.
(a) Each Company states and acknowledges that: (i)
pursuant to this Agreement, the Companies desire to utilize their
borrowing potential on a consolidated basis to the same extent
possible if they were merged into a single corporate entity; (ii)
it has determined that it will benefit specifically and
materially from the advances of credit contemplated by this
Agreement; (iii) it is both a condition precedent to the
obligations of the Purchaser hereunder and a desire of the
Companies that each Company execute and deliver to the Purchaser
this Agreement; and (iv) the Companies have requested and
bargained for the structure and terms of and security for the
advances contemplated by this Agreement.
(b) Each Company hereby irrevocably and
unconditionally: (i) agrees that it is jointly and severally
liable to the Purchaser for the full and prompt payment of the
Senior Subordinated Obligations and the performance by each
Company of its obligations hereunder in accordance with the terms
hereof; (ii) agrees to fully and promptly perform all of its
obligations hereunder with respect to each advance of credit
hereunder as if such advance had been made directly to it; and
(iii) agrees as a primary obligation to indemnify the Purchaser
on demand for and against any loss incurred by the Purchaser as a
result of any of the obligations of any Company being or becoming
void, voidable, unenforceable or ineffective for any reason
whatsoever, whether or not known to the Purchaser or any Person,
the amount of such loss being the amount which the Purchaser
would otherwise have been entitled to recover from such Company.
(c) It is the intent of each Company that the
indebtedness, obligations and liability hereunder of no one of
them be subject to challenge on any basis. Accordingly, as of
the date hereof, the liability of each Company under this Section
2.9, together with all of its other liabilities to all Persons as
of the date hereof and as of any other date on which a transfer
is deemed to occur by virtue of this Agreement, calculated in
amount sufficient to pay its probable net liabilities on its
existing Indebtedness as the same become absolute and matured
("Dated Liabilities") is, and is to be, less than the amount of
the aggregate of a fair valuation of its assets as of such
corresponding date ("Dated Assets"). To this end, each Company
under this Section 2.9, (i) grants to and recognizes in each
other Company, ratably, rights of subrogation and contribution in
the amount, if any, by which the Dated Assets of such Company,
but for the aggregate of subrogation and contribution in its
favor recognized herein, would exceed the Dated Liabilities of
such Company or, as the case may be, (ii) acknowledges receipt of
and recognizes its right to subrogation and contribution ratably
from each other Company in the amount, if any, by which the Dated
Liabilities of such Company, but for the aggregate of subrogation
and contribution in its favor recognized herein, would exceed the
Dated Assets of such Company under this Section 2.9. In
recognizing the value of the Dated Assets and the Dated
Liabilities, it is understood that the Companies will recognize,
to at least the same extent of their aggregate recognition of
liabilities hereunder, their rights to subrogation and
contribution hereunder. It is a material objective of this
Section 2.9 that each Company recognizes rights to subrogation
and contribution rather than be deemed to be insolvent (or in
contemplation thereof) by reason of an arbitrary interpretation
of its joint and several obligations hereunder.
2.10 Certain Rights and Obligations Among Holders. The
provisions of this Section 2.10 are solely for the benefit of the
Holders, and neither the Company nor any other Person shall have
any rights with respect to or be entitled to enforce this Section
2.10.
(a) Sharing of Payments. If, at any time or times,
a Holder shall not have received a payment on its Senior
Subordinated Note, then it shall notify the other Holders of such
fact, the amount of such nonpayment, the date or period to which
it relates and, subject to the terms of the Senior Subordination
Agreement, such other Holders which have received such payments
shall remit to the unpaid Holder such amount as is necessary to
allocate the aggregate amount of such payments pro rata among all
Holders. The amount of any such remittance shall be credited on
the Senior Subordinated Note of the Holder to whom it is
remitted, and shall not be credited on the Senior Subordinated
Note of the remitting Holder.
(b) Sharing of Prepayments. Subject to the terms
and provisions of the Senior Subordination Agreement, if, at any
time or times, a Holder shall receive a prepayment on its Senior
Subordinated Note, it shall notify the other Holders of the
amount and date of such prepayment. If all other Holders shall
not have received a pro rata prepayment as agreed, the Holder
giving such notice shall remit to the other Holders such amount
as is necessary to distribute such prepayment pro rata among all
Holders. The amount of any such remittance shall be credited on
the Senior Subordinated Note of the Holder to whom it is
remitted, and shall not be credited on the Senior Subordinated
Note of the remitting Holder.
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Each Purchaser severally and not jointly represents and
warrants to the Company as follows:
3.1 Existence. It is a limited partnership or
corporation, as the case may be, duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
organization.
3.2 Authority. It has the right and power and authority
to enter into, execute, deliver and perform its obligations under
this Agreement, and its partners, officers or agents executing
and delivering this Agreement are duly authorized to do so. This
Agreement has been duly and validly executed and delivered and
constitutes the legal, valid and binding obligation of such
Purchaser, enforceable in accordance with its terms.
3.3 Investor Status. It (i) is an "accredited
investor," as that term is defined in Regulation D under the
Securities Act of 1933, as amended, and (ii) has such knowledge,
skill, sophistication and experience in business and financial
matters, based on actual participation, that it is capable of
evaluating the merits and risks of the purchase of its Senior
Subordinated Note from the Company and the suitability thereof
for such Purchaser.
3.4 Investment for own Account. Except as otherwise
contemplated by this Agreement, it is acquiring its Senior
Subordinated Note for investment for its own account and not with
a view to any distribution thereof in violation of applicable
securities laws.
3.5 Legend on Notes. Its Senior Subordinated Note will
bear the appropriate legends referencing restrictions on transfer
and will not be offered, sold or transferred in the absence of
registration or exemption under applicable securities laws.
3.6 Access to Information; Due Diligence and Principal
Place of Business. Purchaser has had the opportunity to ask
questions of and receive answers from officers of the Company,
including Glenn A. Welstad and John R. Coghlan, the Company's
President and Chief Executive Officer and Secretary and
Treasurer, respectively, and the Company's accountants and legal
counsel concerning the transactions contemplated hereby and by
the Warrant Documents. Purchaser's principal place of business
is set forth on Annex I hereto. Notwithstanding anything in this
Section 3.6 to the contrary, nothing in this Section 3.6 shall
affect any representation or warranty made by the Company in
Article IV.
IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce each Purchaser to enter into this Agreement, the
Company represents and warrants to each Purchaser that the
following statements are true, correct and complete:
4.1. Corporate Existence and Authority. The Company (a)
is a corporation duly organized, validly existing, and in good
standing under the laws of Washington; (b) has all requisite
corporate power and authority to own its assets and carry on its
business as now conducted; and (c) is qualified to do business in
all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would
have a Material Adverse Effect. The Company has the corporate
power and authority to execute, deliver, and perform its
obligations under this Agreement, the Senior Loan Documents, and
all Other Agreements to which it is, or in connection with the
transactions contemplated hereby, may become, a party.
4.2 Financial Statements. The Company has delivered to
Purchaser (a) audited consolidated financial statements of the
Company as at and for the fiscal year ended December 31, 1994,
(b) unaudited consolidated financial statements of the Company
for the eight (8) month period ended August 31, 1995, and (c)
cash flow projections and analyses of the Company through
December 31, 1999, together with a written statement of the
assumptions underlying them, which financial statements are
attached hereto as Schedule 4.2. The financial statements
referred to in clauses (a) and (b) of this Section 4.2 are true
and correct in all material respects, have been prepared in
accordance with GAAP (except as otherwise noted therein or on
Schedule 4.2), and fairly present both the financial condition of
the Company as of the respective dates indicated therein and the
results of the Company's operations for the respective periods
indicated therein. The cash flow projections and analyses
referred to in clause (c) of this Section 4.2 fairly present the
Company's best estimate of the future cash flow position of the
Company, based on the Company's historical performance and the
Company's knowledge of its business plans and assumptions
underlying them. It is the Company's good faith belief that such
cash flow projections are reasonably achievable by the Company.
At August 31, 1995, the Company has no liabilities or obligations
(absolute, accrued, contingent or otherwise) of a nature required
by GAAP to be reflected in such financial statements which are,
individually or in the aggregate, material to the condition,
financial or otherwise, or operations of the Company as of that
date which are not reflected on such financial statements. There
has been no material adverse change in the condition, financial
or otherwise, or operations of the Company since August 31, 1995,
nor has there otherwise occurred a Material Adverse Effect.
4.3 Default. Except as disclosed on Schedule 4.3, the
Company is not in default under any loan agreement, indenture,
mortgage, security agreement, lease, franchise, permit, license
or other agreement or obligation to which it is a party or by
which any of its properties may be bound. The Company is paying
its debts as they become due.
4.4 Authorization and Compliance with Laws and Material
Agreements. The execution, delivery and performance by the
Company of this Agreement, the Senior Loan Documents and the
Other Agreements to which it is or may in connection with the
transactions contemplated hereby become a party, have been or
prior to the consummation of such transactions will be duly
authorized by all requisite action on the part of the Company and
do not and will not violate its Articles of Incorporation or
Bylaws or any law or any order of any court, governmental
authority or arbitrator, and, except as set forth on Schedule
4.4, do not and will not upon the consummation of the
transactions contemplated hereby conflict with, result in a
breach of, or constitute a default under, or result in the
imposition of any Lien (except Permitted Liens) upon any assets
of the Company pursuant to the provisions of any loan agreement,
indenture, mortgage, security agreement, franchise, permit,
license or other instrument or agreement by which the Company or
any of its properties is bound. Except as set forth on Schedule
4.4, no authorization, approval or consent of, and no filing or
registration with, any court, governmental authority or third
Person is or will be necessary for the execution, delivery or
performance by the Company of this Agreement, the Senior Loan
Documents, and the Other Agreements to which it is a party or the
validity or enforceability thereof. All such authorizations,
approvals, consents, filings and registrations described in
Schedule 4.4 have been obtained. The Company is not in violation
of any term of its Articles of Incorporation or Bylaws or any
contract, agreement, judgment or decree and is in full compliance
with all applicable laws, regulations and rules.
4.5 Environmental Condition of the Property. Except as
disclosed on Schedule 4.5, to the best of the Company's
knowledge:
(a) The location, construction, occupancy,
operation and use of the Property do not violate any applicable
law, statute, ordinance, rule, regulation, order or determination
of any governmental authority or other body exercising similar
functions, or any restrictive covenant or deed restriction
(recorded or otherwise) affecting the Property, including,
without limitation, all applicable zoning ordinances and building
codes, flood disaster, occupational health and safety laws and
Environmental Laws and regulations (as referred to in this
Section 4.5, collectively, "applicable laws");
(b) Without limitation of clause (a) of this
Section 4.5, neither the Company nor the Property is subject to
any existing, pending or threatened investigation or inquiry by
any governmental authority or subject to any remedial obligations
due to violations of applicable laws;
(c) The Company is not subject to any liability or
obligation relating to (i) the environmental conditions on, under
or about the Property, including, without limitation, the soil
and ground water conditions at the Property, or (ii) the use,
management, handling, transport, treatment, generation, storage,
disposal, release or discharge of any Polluting Substance;
(d) There is no Polluting Substance or other
substance that may pose any risk to safety, health or the
environment on, under or about any Property;
(e) The Company has taken reasonable steps to
determine and hereby represents and warrants that no Polluting
Substances have been disposed of or otherwise released on, onto,
into, or from the Property, and the use which the Company makes
and intends to make of the Property does not and will not result
in the disposal or other release of any Polluting Substances on,
onto, into or from the Property; and
(f) The Company has been issued all required
federal, state and local licenses, certificates or permits
relating to, and the Property, the Company and the Company's
facilities, business, assets, leaseholds and equipment are all in
compliance in all respects with all applicable federal, state and
local laws, rules and regulations relating to, air emissions,
water discharge, noise emissions, solid or liquid waste disposal,
Polluting Substances, or other environmental, health or safety
matters.
4.6 Solvency. After giving effect to the transactions
contemplated by the Senior Loan Agreement, this Agreement and the
Other Agreements, the Company will be solvent, able to pay its
debts as they mature, have capital sufficient to carry on its
business and all businesses in which it is about to engage, and
(a) the assets of the Company, at a fair valuation,
exceed the total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of the Company;
(b) current projections which are based on
underlying assumptions which provide a reasonable basis for the
projections and which reflect the Company's judgment based on
present circumstances, the most likely set of conditions and the
Company's most likely course of action for the period projected,
demonstrate that the Company will have sufficient cash flow to
enable it to pay its debts as they mature; and
(c) the Company does not have an unreasonably small
capital base with which to engage in its anticipated business.
For purposes of clause (a) of this Section 4.6, the "fair
valuation" of the assets of the Company shall be determined on
the basis of the amount which may be realized within a reasonable
time, either through collection or sale of such assets at market
value, deeming the latter as the amount which could be obtained
for the property in question within such period by a capable and
diligent businessman from an interested buyer who is willing to
purchase under ordinary selling conditions.
4.7 Litigation and Judgments. Except as disclosed on
Schedule 4.7, there is no material action, suit, proceeding or
investigation before any court, governmental authority or
arbitrator pending, or to the knowledge of the Company
threatened, against or affecting the Company, this Agreement, the
Senior Loan Documents and/or the Other Agreements. Except as
disclosed on Schedule 4.7, there are no outstanding judgments
against the Company. None of the matters listed on Schedule 4.7
could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.
4.8 Rights in Properties; Liens. The Company has good
and indefeasible title to all properties and assets reflected on
its balance sheets, and none of such properties or assets is
subject to any Liens, except Permitted Liens. The Company enjoys
peaceful and undisturbed possession under all leases necessary
for the operation of its other properties, assets, and businesses
and all such leases are valid and subsisting and are in full
force and effect. There exists no default under any provision of
any lease which would permit the lessor thereunder to terminate
any such lease or to exercise any rights under such lease which,
individually or together with all other such defaults, could have
a Material Adverse Effect. Except as otherwise set forth on
Schedule 4.8, the Company has the right to terminate each of its
leases upon ninety (90) days prior notice to the respective
landlord. The Company has the exclusive right to use all of the
Intellectual Property necessary to its business as presently
conducted, and the Company's use of the Intellectual Property
does not infringe on the rights of any other Person. To the best
of the Company's knowledge, no other Person is infringing the
rights of the Company in any of the Intellectual Property. The
Company owes no royalties, honoraria or fees to any Person by
reason of its use of the Intellectual Property.
4.9 Enforceability. This Agreement, the Senior Loan
Documents and the Other Agreements to which the Company is a
party, when delivered, shall constitute the legal, valid and
binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except to the
extent that such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditor's rights generally, or
(b) general principles of equity.
4.10 Indebtedness. The Company has no Indebtedness,
except Permitted Indebtedness. All Indebtedness owed by the
Company to any Affiliate is set forth on Schedule 4.10.
4.11 Taxes. The Company has filed all tax returns
(federal, state, and local) required to be filed, including,
without limitation, all income, franchise, employment, property,
and sales taxes, and has paid all of its tax liabilities, other
than immaterial amounts and taxes that are being contested by the
Company in good faith by appropriate actions or proceedings
diligently pursued, and for which adequate reserves in conformity
with GAAP with respect thereto have been established to the
reasonable satisfaction of Purchaser. The Company knows of no
pending investigation of the Company by any taxing authority or
pending but unassessed tax liability of the Company. The Company
has made no presently effective waiver of any applicable statute
of limitations or request for an extension of time to file a tax
return, and the Company is not a party to any tax-sharing
agreement.
4.12 Use of Proceeds; Margin Securities. The Company is
not engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System),
and no part of the proceeds of any extension of credit under this
Agreement will be used to purchase or carry any such margin stock
or to extend credit to others for the purpose of purchasing or
carrying margin stock. Neither the Company nor any Person acting
on its behalf has taken any action that might cause the
transactions contemplated by this Agreement, the Senior Loan
Documents or any Other Agreements to violate Regulations G, T, U
or X or to violate the Securities Exchange Act of 1934, as
amended.
4.13 ERISA. All members of any Controlled Group have
complied with all applicable minimum funding requirements and all
other applicable and material requirements of ERISA and the Code,
applicable to the Employee Benefit Plans it or they sponsor or
maintain, and there are no existing conditions that would give
rise to material liability thereunder. With respect to any
Employee Benefit Plan, all members of any Controlled Group have
made all contributions or payments to or under each Employee
Benefit Plan required by law, by the terms of such Employee
Benefit Plan or the terms of any contract or agreement. No
Termination Event has occurred in connection with any Pension
Plan, and there are no unfunded benefit liabilities, as defined
in Section 4001(a)(18) of ERISA, with respect to any Pension Plan
which poses a risk of causing a Lien to be created on the assets
of the Company or which will result in the occurrence of a
Reportable Event. No member of any Controlled Group has been
required to contribute to a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, since September 2, 1974. No
material liability to the Pension Benefit Guaranty Corporation
has been, or is expected to be, incurred by any member of a
Controlled Group. The term "liability," as referred to in this
Section 4.13, includes any joint and several liability. No
prohibited transaction under ERISA or the Code has occurred with
respect to any Employee Benefit Plan which could have a Material
Adverse Effect or a material adverse effect on the condition,
financial or otherwise, of an Employee Benefit Plan.
4.14 Non-Compete Agreements. Purchaser has received a
complete copy of the Non-Compete Agreements and all documents
executed in connection therewith (including all exhibits,
schedules and disclosure letters referred to therein or delivered
pursuant thereto, if any) and all amendments thereto, waivers
relating thereto and other side letters or agreements affecting
the terms thereof. None of such documents and agreements has
been amended or supplemented, nor have any of the provisions
thereof been waived, except pursuant to a written agreement or
instrument which has heretofore been delivered to Purchaser.
4.15 Disclosure. No representation or warranty made by
the Company in this Agreement, the Senior Loan Documents or any
Other Agreement to which the Company is a party contains any
untrue fact or omits to state any material fact necessary to make
the statements herein or therein not misleading. There is no
fact known to the Company which the Company has determined has a
Material Adverse Effect, or which the Company has determined
could have a Material Adverse Effect, that has not been disclosed
in writing to Purchaser.
4.16 Subsidiaries and Capitalization. The Company has
no Subsidiaries except as otherwise set forth on Schedule 4.16.
All the issued and outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and
nonassessable. The capitalization of the Company on the Closing
Date is set forth on Schedule 4.16. No violation of any
preemptive rights of shareholders of the Company has occurred by
virtue of the transactions contemplated under this Agreement, the
Senior Loan Documents or any Other Agreement. Except as
otherwise set forth on Schedule 4.16, there are no outstanding
contracts, options, warrants, instruments, documents or
agreements binding upon the Company granting to any Person or
group of Persons any right to purchase or acquire shares of the
Company's capital stock, except pursuant to the Warrant
Documents.
4.17 Current Locations. Schedule 4.17 identifies (a)
the Company's principal place of business and chief executive
office, (b) all the locations where the Company maintains any
books or records relating to any of its assets, (c) all other
locations where the Company has a place of business, and (d) each
address where any of the Company's assets are located. Schedule
4.17 accurately indicates whether each such location is owned or
leased, and, if leased, identifies the owner or manager of such
location. No Person other than the Company has possession of any
material amount of the assets of the Company except as disclosed
on Schedule 4.17.
4.18 Investment Company Act. Neither the Company nor any
company controlling the Company is required to be registered as
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
4.19 Public Utility Holding Company Act. The Company is
not a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.20 Securities Laws. Based in part on the Purchaser's
representations and warranties contained herein, the Company has
complied with or is exempt from the registration and/or
qualification requirements of all federal and state securities or
blue sky laws applicable to the issuance or sale of the Senior
Subordinated Notes.
4.21 Labor Relations. The Company is not involved in
any labor dispute. Except as disclosed on Schedule 4.21, the
Company is not a party to any collective bargaining agreement,
and there are no strikes or walkouts of any of the Company's
employees threatened or in existence and no labor contract is
scheduled to expire during the term of this Agreement.
4.22 Brokers. Neither the Company nor any of its
shareholders has dealt with any broker, finder, commission agent
or other Person in connection with the transactions referenced in
or contemplated by this Agreement, nor is the Company or any of
its shareholders under any obligation to pay any broker's fee or
commission in connection with such transactions, except as set
forth on Schedule 4.22.
4.23 Liens. Purchaser's Liens attaching to the
Collateral and the Mortgaged Property will constitute at all
times valid, perfected and enforceable Liens, subject to no prior
or superior Lien, except Permitted Liens. Before purchase of the
Senior Subordinated Notes, the Company will have taken, or will
have participated with Purchaser in taking, such action
(including making all necessary filings) as requested by the
Purchaser to provide Purchaser with perfected Liens in the
Collateral and the Mortgaged Property under the laws of all
applicable jurisdictions.
4.24 Insurance. Except as otherwise disclosed on
Schedule 4.24 hereto, the amount and types of insurance carried
by the Company, and the terms and conditions thereof, are
substantially similar to the coverage maintained by companies in
the same or similar business as the Company and similarly
situated. The Company has, under the direction of its insurance
carriers, established workers compensation reserves in an amount
sufficient to cover any losses payable under the Company's self
insured workers compensation program.
4.25 Conduct of Business. On the Closing Date, the
Company is engaged only in businesses of the type described in
Schedule 4.25.
4.26 Small Business Concern. The Company is a "small
business concern" as defined in Section 103(5) of the Act, which
for purposes of size eligibility meets the applicable criteria
set forth in Section 121.802(a)(3) of Title 13 of the Code of
Federal Regulations.
4.27 Projections. The projections delivered to
Purchaser in connection herewith and with the Warrant Documents
have been prepared on the basis of the assumptions accompanying
them, and such projections and assumptions, as of the date of
preparation thereof and as of the Closing Date, are reasonable
and represent the Company's good faith estimate of its future
financial performance, it being understood that nothing contained
in this Section 4.27 shall constitute a representation or
warranty that such future financial performance or results of
operation will in fact be achieved.
4.28 Net Income. The Company's net income (determined
in accordance with GAAP) for the period commencing on July 1,
1995 and ending on September 30, 1995 was in excess of One
Million Dollars ($1,000,000).
V. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
Each Purchaser's obligations hereunder shall be subject to
(a) the performance by the Company of its obligations hereunder
which by the terms hereof are to be performed at or prior to
delivery of the Senior Subordinated Notes, and (b) the
satisfaction of the following conditions on or before the Closing
Date:
5.1 Effectiveness of Senior Loan Documents. The Senior
Loan Documents have been duly executed and delivered by the
parties thereto and shall be on terms and conditions satisfactory
to Purchaser. All conditions precedent to the making of the
Senior Loans shall have been satisfied or waived with Purchasers'
consent.
5.2 Portfolio Financing Report. The Company shall have
provided Purchaser with all information and documentation that
Purchaser shall have requested in connection with the preparation
and completion of the Portfolio Financing Report on SBA Form
1031.
5.3 Effectiveness of Senior Subordination Agreement.
The Senior Subordination Agreement shall have been duly executed
and delivered by the parties thereto, and shall be on terms and
conditions which are satisfactory to Purchaser.
5.4 No Litigation; Consummation of Transactions. No
injunction, preliminary injunction, or temporary restraining
order shall be threatened or shall exist which prohibits or may
prohibit the transactions contemplated herein or any other
related transaction, and no litigation or similar proceeding
(including, without limitation, any litigation or other
proceeding seeking injunctive or similar relief) shall be
threatened or shall exist with respect to the transactions
contemplated herein, which, if adversely determined, could in the
judgment of Purchaser have a Material Adverse Effect.
5.5 Documents. Purchaser shall have received the
following, each in form and substance satisfactory to Purchaser:
(a) Senior Subordinated Notes. The Senior
Subordinated Notes issued in the name of each Purchaser and duly
executed by the Company;
(b) Warrants and Warrant Documents. The Warrants,
duly issued by the Company to each Purchaser in the denomination
specified on Annex I hereto, along with the other fully executed
Warrant Documents and all other documents and instruments
required pursuant thereto;
(c) Security Documents and Other Agreements. The
Security Documents and all Other Agreements, duly executed by the
parties thereto;
(d) Approvals and Consents. Copies, certified by
the Company of all consents, authorizations, filings, licenses
and approvals, if any, required in connection with the execution,
delivery and performance by the Company, or the validity and
enforceability of, this Agreement, the Senior Loan Documents or
the Other Agreements to which the Company is a party;
(e) Opinion of Counsel to the Company. The written
legal opinions of Brad E. Herr, P.S., general counsel to the
Company, and Preston Gates & Ellis, special counsel to the
Company; and written permission from each other legal counsel
issuing a legal opinion to the Company or the Senior Lender in
connection with this Agreement or the Senior Loan Documents,
authorizing the Purchaser to rely on such opinion;
(f) General Certificate of the Company's Secretary.
A certificate of the Secretary of the Company together with true,
correct and complete copies of the following:
(i) Articles of Incorporation. The Articles
of Incorporation of the Company, including all amendments
thereto, certified by the Secretary of State of the state of its
incorporation and dated within thirty (30) days prior to the
Closing Date;
(ii) Bylaws. The Bylaws of the Company,
including all amendments thereto;
(iii) Resolutions. The resolutions of the Board
of Directors of the Company authorizing the execution, delivery
and performance of this Agreement and the Other Agreements to
which the Company is a party;
(iv) Existence and Good Standing Certificates.
Certificates of the appropriate government officials of the state
of incorporation of the Company as to its existence and good
standing, and certificates of the appropriate government
officials in each state where the Company does business and where
failure to qualify as a foreign corporation would have a Material
Adverse Effect, as to its good standing and due qualification to
do business in such state, each dated within sixty (60) days
prior to the Closing Date; and
(v) Incumbency. The names of the officers of
the Company authorized to sign this Agreement and the Other
Agreements to be executed by the Company, together with a sample
of the true signature of each such officer;
(g) Senior Loan Documents. Copies of the Senior
Loan Documents and each document relating thereto in form and
substance satisfactory to Purchaser, and a certificate of the
Chief Executive Officer and Chief Financial Officer or Treasurer
of the Company certifying that the attached documents are a true,
correct and complete set of the Senior Loan Documents, that all
conditions precedent to funding of the Senior Loans have been met
or waived, and that those transactions have been consummated
prior to or are being consummated simultaneously with the sale of
the Senior Subordinated Note;
(h) Sources and Uses Certificate. A certificate
executed by the Chief Executive Officer and Chief Financial
Officer of the Company, setting forth in reasonable detail the
sources and uses of funds in the transactions contemplated herein
and in the Other Agreements;
(i) Communication with Accountants. Purchaser
shall have received a copy of a letter from the Company addressed
to its accountants authorizing such accountants to disclose to
Purchaser any and all financial information concerning the
Company requested by Purchaser in determining compliance with any
of the financial covenants set forth in Sections 7.10 and 7.11;
(j) Transaction Certificate. A certificate of the
Chief Executive Officer and the Chief Financial Officer of the
Company that, to the best of their knowledge after due
investigation, all conditions precedent to the effectiveness of
this Agreement have been satisfied or waived;
(k) Liens. Evidence satisfactory to Purchaser
that, as of the Closing Date, Purchaser has (other than with
respect to Permitted Liens) a (i) first priority Lien on all
Collateral which is not subject to a Lien in favor of the Senior
Lender and (ii) second priority Lien on all other Collateral;
(l) SBA Documentation. Originals executed by the
Company of each of (i) the Size Status Declaration on SBA Form
480, and (ii) the Assurance of Compliance on SBA Form 652-D;
(m) Non-Compete Agreements. A copy of the Non-
Compete Agreements; and
(n) Additional Information, Other Documents and
Agreements. Such other information, documents, agreements,
commitments and undertakings as Purchaser or Purchaser's counsel
shall reasonably request.
5.6 Material Adverse Change. For the period from June
30, 1995 to the Closing Date, and except for the transactions
contemplated by this Agreement, the Other Agreements, and the
Senior Loan Documents, there shall have been (a) no occurrence or
event which, in Purchaser's opinion, has or could have a Material
Adverse Effect, and (b) no occurrence or event which would lead
the Company or Purchaser to believe that the Company would fail
to meet the cash flow projections delivered to Purchaser pursuant
to Section 4.2.
5.7 No Event of Default. No Event of Default or
Potential Default shall have occurred and be continuing.
5.8 Representations and Warranties. All representations
and warranties contained in this Agreement and the Other
Agreements shall be true and correct on the Closing Date.
VI. AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from the date hereof
and until the Senior Subordinated Obligations have been finally
and irrevocably paid in full in accordance with the terms hereof
and thereof:
6.1 Financial Statements. The Company will furnish to
Purchaser:
(a) As soon as available, and in any event within
ninety (90) days after the end of each fiscal year of the
Company, beginning with the fiscal year ending December 31, 1995,
(i) a copy of the annual report of the Company for such fiscal
year on Form 10-K, containing a balance sheet, statement of
income, statement of stockholders' equity, and statement of cash
flow as at the end of such fiscal year and for the fiscal year
then ended, in each case setting forth in comparative form the
figures for the preceding fiscal year, all in reasonable detail
and audited and certified by BDO Seidman, or other independent
certified public accountants of recognized national standing
selected by the Company, to the effect that such report has been
prepared in accordance with GAAP; (ii) a certificate delivered to
Purchaser by such independent certified public accountants
confirming the calculations set forth in the officers'
certificate delivered to Purchaser simultaneously therewith in
accordance with Section 6.2(a); and (iii) a comparison of the
actual results during such fiscal year to those originally
budgeted by the Company prior to the beginning of such fiscal
year, together with a summary analysis of variances prepared by
the Company's management. The annual audit report required
hereby shall not be qualified or limited. The Company shall
deliver copies of all material reports and correspondence
(including, without limitation, any management letters) sent to
the Company by its independent certified public accountants
promptly upon receipt thereof.
(b) As soon as available, and in any event within
forty-five (45) days after the end of each calendar quarter, a
copy of the Company's Form 10-Q, containing balance sheets,
statements of income, and statements of cash flow, in each case
setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year, together with
a comparison of the actual results during such period to those
originally budgeted by the Company for such period.
(c) As soon as available, and in any event within
thirty (30) days after the end of each calendar month, a copy of
an unaudited financial report of the Company as of the end of
such calendar month and for the portion of the fiscal year then
ended, containing balance sheets, statements of income, and
statements of cash flow, in each case setting forth in
comparative form the figures for the corresponding period of the
preceding fiscal year, together with a comparison of the actual
results during such period to those originally budgeted by the
Company for such period.
(d) On or before thirty (30) days prior to the
beginning of each fiscal year of the Company, an annual budget or
business plan for such fiscal year on a monthly basis, including
projected consolidated and consolidating balance sheets, income
statements, and cash flow statements for each month of such
fiscal year, and, promptly during each fiscal year, all revisions
thereto.
6.2 Certificates; Other Information. The Company will
furnish to Purchaser all of the following:
(a) Concurrently with the delivery of each of the
financial statements referred to in Section 6.1(a) and Section
6.1(b), a certificate of an authorized officer of the Company in
the form of the officer's certificate attached hereto as Exhibit
B (i) stating that no Potential Default or Event of Default has
occurred and is continuing or, if such officer has knowledge of a
Potential Default or Event of Default, the nature thereof and
specifying the steps taken or proposed to remedy such matter,
(ii) showing in reasonable detail the calculations showing
compliance with Sections 7.10 and 7.11, (iii) stating that the
financial statements attached have been prepared in accordance
with GAAP (except as otherwise noted thereon) and fairly and
accurately present (subject to year-end audit adjustments, for
the annual certificates) the financial condition and results of
operations of the Company at the date and for the period
indicated therein, (iv) containing summaries of accounts payable
agings and accounts receivable agings, (v) containing a schedule
of the outstanding Indebtedness for borrowed money of the Company
and its Subsidiaries describing in reasonable detail each such
debt issue or loan outstanding and the principal amount and
amount of accrued and unpaid interest with respect to each such
debt issue or loan, (vi) containing management's discussion and
analysis of the business and affairs of the Company which
includes, but is not limited to, a discussion of the results of
operations compared to those originally budgeted for such period,
and (vii) a report detailing all matters that could reasonably be
expected to have a Material Adverse Effect.
(b) As soon as available, (i) a copy of each
financial statement, report, notice or proxy statement sent by
the Company to its stockholders in their capacity as
stockholders, (ii) a copy of each regular, periodic or special
report, registration statement, or prospectus filed by the
Company with any securities exchange or the Securities and
Exchange Commission or any successor agency, (iii) any material
order issued by any court, governmental authority, or arbitrator
in any material proceeding to which the Company is a party, (iv)
copies of all press releases and other statements made available
generally by the Company to the public generally concerning
material developments in the Company's business, and (v) a copy
of all correspondence and reports sent by the Company to the
Senior Lender outside of the ordinary course of business.
(c) Promptly, such additional information
concerning the Company as Purchaser may reasonably request.
6.3 Books and Records. The Company will keep (a) proper
books of record and account in which full, true and correct
entries will be made of all dealings or transactions of or in
relation to its business and affairs; (b) set up on its books
accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its
books from its earnings allowances against doubtful receivables,
advances and investments and all other proper accruals
(including, without limitation, by reason of enumeration,
accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of
properties), which should be set aside from such earnings in
connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required
by, GAAP consistently applied.
6.4 Financial Disclosure. The Company hereby
irrevocably authorizes and directs all accountants and auditors
employed by it at any time during the term of this Agreement to
exhibit and deliver to Purchaser copies of any of the Company's
financial statements, trial balances or other accounting records
in the accountant's or auditor's possession, and to disclose to
Purchaser any information they may have concerning the Company's
financial status and business operations. The Company will, upon
the request of Purchaser, authorize any federal, state or
municipal authority to furnish to Purchaser copies of reports or
examinations relating to the Company, whether made by the Company
or otherwise.
6.5 Disclosure of Material Matters. The Company will
promptly report to Purchaser all matters materially and adversely
affecting the value, enforceability or collectibility of any
material portion of the Collateral or its business.
6.6 Performance of Obligations. The Company will duly
and punctually pay and perform its obligations under this
Agreement, the Senior Loan Documents and the Other Agreements.
6.7 Preservation of Existence and Conduct of Business.
The Company will preserve and maintain its corporate existence
and all of its leases, privileges, franchises, qualifications and
rights that are necessary or useful in the ordinary conduct of
its business, and conduct its business as presently conducted in
an orderly and efficient manner in accordance with good business
practices.
6.8 Maintenance of Properties. The Company will operate
and maintain in good condition and repair (ordinary wear and tear
excepted) and replace as necessary, all of its assets and
properties which are necessary or useful in accordance with sound
business practices in the proper conduct of its business so that
the value and operating efficiency of its assets and properties
are maintained and preserved. The Company will at all times
maintain the Intellectual Property in full force and effect, and
will defend and protect the Intellectual Property against all
adverse claims.
6.9 Payment of Taxes and Claims. The Company will pay
or discharge, at or before maturity or before becoming delinquent
(a) all taxes, levies, assessments, vault, water and sewer rents,
rates, charges, levies, permits, inspection and license fees and
other governmental and quasi-governmental charges and any
penalties or interest for nonpayment thereof, heretofore or
hereafter imposed or which may become a Lien upon any property
owned by the Company or arising with respect to the occupancy,
use, possession or leasing thereof (collectively the
"Impositions") and (b) all lawful claims for labor, material, and
supplies, which, if unpaid, might become a Lien upon any of its
property; provided, however, the Company will not be required to
pay or discharge any claim for labor, material, or supplies or
any Imposition which is being contested in good faith by
appropriate actions or proceedings diligently pursued, and for
which adequate reserves in conformity with GAAP with respect
thereto have been established to the reasonable satisfaction of
Purchaser.
6.10 Compliance with Laws. The Company will comply with
all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to the
operation of the Company's business if noncompliance with such
acts, rules, regulations or orders could have a Material Adverse
Effect; provided, however, the Company may contest or dispute any
acts, rules, regulations, orders and directions of those bodies
or officials by appropriate actions or proceedings diligently
pursued, if adequate reserves in conformity with GAAP with
respect thereto are established to the reasonable satisfaction of
Purchaser.
6.11 Payment of Leasehold Obligations. The Company will
at all times pay, when and as due, its rental obligations under
all leases under which it is a tenant or lessee, and shall
otherwise comply, in all material respects, with all other terms
of such leases and keep them in full force and effect and, at
Purchaser's request, will provide evidence of its having done so;
provided, however, the Company may contest or dispute its
obligations under such leases by appropriate actions or
proceedings diligently pursued if adequate reserves in conformity
with GAAP with respect thereto are established.
6.12 Insurance. Except as otherwise disclosed on
Schedule 6.12 hereto, the Company will maintain, with financially
sound, reputable and solvent companies, insurance policies (a)
insuring its assets against loss by fire, explosion, theft and
other risks and casualties as are customarily insured against by
companies engaged in the same or a similar business and (b)
insuring it against liability for personal injury and property
damages relating to its assets, such policies to be in such
amounts and covering such risks as are usually insured against by
companies engaged in the same or a similar business. All general
liability policies shall be endorsed in favor of Purchaser as an
additional insured. The Company shall provide copies of all such
insurance policies to Purchaser within ten (10) days following
Purchaser's request for the same. The Company shall (i) pay, or
cause to be paid, all premiums for such insurance on or before
the date on which such premiums become due, (ii) cause such
policies to require the insurer to give notice to Purchaser of
termination of any such policy at least thirty (30) days before
such termination is to be effective, and (iii) immediately
deliver written notice to Purchaser of any casualty loss
affecting the Collateral. If the Company fails to provide and
pay for any such insurance, Purchaser may, at its option, but
shall not be required to, pay the same and charge the Company
therefor.
6.13 Inspection Rights. Subject to the provisions of
Section 12.15 hereof, at any reasonable time and from time to
time, the Company will permit representatives of Purchaser to
examine and make copies of the books and records of, and visit
and inspect the properties of, the Company, and to discuss the
business, operations, and financial condition of the Company with
its respective officers and employees and with its independent
certified public accountants. Such examinations and inspections
may include, but are not limited to, audits of the application of
proceeds from the Senior Subordinated Notes. In accordance with
the terms of Section 12.1 hereof, the Company will promptly
reimburse Purchaser for all reasonable expenses incurred by
representatives of Purchaser in connection with such inspections.
6.14 Notices. The Company will promptly, but in any
event within (i) fifteen (15) Business Days with respect to
Subsection (a) below and (ii) five (5) Business Days with respect
to Subsections (b) and (c) below after first becoming aware
thereof, notify Purchaser in writing of:
(a) the commencement of any event, including but
not limited to, any action, suit, or proceeding against the
Company, that could have a Material Adverse Effect, which notice
shall specify the nature of such event and what action the
Company has taken or is taking or proposes to take with respect
thereto;
(b) the occurrence of an event of default, or an
event which with the passage of time or giving of notice or both
constitutes an event of default under the Senior Loan Documents
or under any instrument or agreement evidencing any other
Indebtedness of the Company, which notice shall specify the
nature of such event, condition or default and what action the
Company has taken or is taking or proposes to take with respect
thereto; or
(c) The occurrence of a Potential Default or an
Event of Default, which notice shall specify the nature of such
event, condition or default and what action the Company has taken
or is taking or proposes to take with respect thereto.
6.15 Senior Loan Document Amendments. The Company shall
promptly provide Purchaser with copies of all proposed amendments
to the Senior Loan Documents, all other material loan agreements
to which the Company is a party and all other loan agreements to
which the Company is a party that could have a Material Adverse
Effect or in any way impair the Purchaser's Liens on the
Collateral.
6.16 Further Assurances. The Company shall execute and
deliver to Purchaser from time to time, upon demand, such
supplemental agreements, statements, assignments and transfers,
or instructions or documents as Purchaser may request, in order
that the full intent of this Agreement and the Other Agreements
may be carried into effect.
6.17 Compliance with ERISA and the Code. The Company
will comply, and will cause each other member of any Controlled
Group to comply, with all minimum funding requirements, and all
other material requirements, of ERISA and the Code, if
applicable, to any Employee Benefit Plan it or they sponsor or
maintain, so as not to give rise to any liability thereunder.
The Company will pay and will cause each other member of any
Controlled Group to pay when due any amount payable by it to the
Pension Benefit Guaranty Corporation. Promptly after the filing
thereof, the Company shall furnish to Purchaser with regard to
each Employee Benefit Plan, copies of each annual report required
to be filed pursuant to Section 104 of ERISA in connection with
each such plan for each plan year.
6.18 Compliance with Regulations G, T, U and X. Neither
the Company nor any Person acting on its behalf will take any
action which might cause this Agreement, the Senior Subordinated
Note, the Warrant Documents, the Senior Loan Documents or any
Other Agreements to violate, and the Company will take all
actions necessary to cause compliance with, Regulations G, T, U
and X of the Board of Governors of the Federal Reserve System and
the Securities Exchange Act of 1934, in each case as now in
effect or as the same may hereafter be in effect.
6.19 Board Observation and Membership. The Company will
deliver to Purchaser a copy of the minutes of and all materials
distributed at or prior to all meetings of the Board of Directors
of the Company (including, without limitation, meetings of the
executive committee), certified as true and accurate by the
Secretary of the Company, promptly following each such meeting.
The Company will (a) permit Seacoast, so long as Seacoast is a
Holder, to designate one (1) Observer who shall be entitled to
attend all meetings of the Company's Board of Directors and
shareholders as an observer, (b) permit the Allied Investors,
collectively, so long as any Allied Investor is a Holder, to
designate one (1) Observer who shall be entitled to attend all
meetings of the Company's Board of Directors and shareholders as
an observer (provided that if a representative of Purchaser is
serving as a member of the Company's Board of Directors,
Purchaser shall be allowed to collectively designate only one (1)
Observer), (c) provide such Observers not less than twenty one
(21) calendar days' actual notice of all regular meetings of the
Company's Board of Directors and shareholders and two (2)
Business Days' actual notice via facsimile of all special
meetings of the Company's Board of Directors (provided that the
approval at a duly-called meeting of the Company's Board of
Directors of a schedule of dates of future regular meetings of
the Company's Board of Directors shall satisfy the notice
requirements of this Subsection (c) if (i) the Observer(s) is/are
in attendance at such meeting and (ii) the approved schedule of
dates is clearly reflected in the minutes of the meeting), (d)
permit Purchaser to collectively designate one (1) person to
serve as a member of the Company's Board of Directors; provided,
however, that the Purchaser will not have any obligation to
designate or cause such individuals to serve on the Company's
Board of Directors, and (e) provide to such designees a copy of
all materials distributed at such meetings or otherwise to the
Board of Directors of the Company. Any failure by the Purchaser
to designate such persons pursuant to Subsection (d) above will
not constitute a failure to comply with this Agreement or result
in any liability to the Purchaser. Such meetings shall be held
in person at least quarterly, and the Company will cause its
Board of Directors to call a meeting at any time upon the request
of any such designated observer on two (2) occasions per calendar
year on seven (7) calendar days' actual notice to the Company.
The Company agrees to compensate such individuals referred to in
Subsection (d) above in the same manner as each of the other
members of the Company's Board of Directors and agrees to
reimburse each individual referred to in Subsections (a), (b) and
(d) above for all reasonable expenses incurred in traveling to
and from such meetings and attending such meetings.
6.20 Environmental Costs.
(a) The Company hereby indemnifies and holds
Purchaser harmless from and against any liability, loss, damage,
suit, action or proceeding pertaining to solid or hazardous waste
materials or other waste-like or toxic substances, including, but
not limited to, claims of any federal, state or municipal
government or quasi-governmental agency or any third person,
whether arising under any federal, state or municipal law or
regulation, or tort, contract or common law that relates to the
Company.
(b) To the extent the laws of the United States or
any state in which property, leased or owned, of the Company
provide that a Lien upon the property of the Company may be
obtained for the removal of Polluting Substances which have been
released, no later than sixty (60) days after notice is given by
Purchaser to the Company, the Company shall deliver to Purchaser
a report issued by a qualified, third party environmental
consultant selected by the Company and approved by Purchaser as
to the existence of any Polluting Substances located upon or
beneath the specified property, leased or owned by the Company.
To the extent any such Polluting Substance is located therein or
thereunder that either (i) subjects the property to Lien or (ii)
requires removal to safeguard the health of any Person, the
Company shall remove, or cause to be removed, such Lien and such
Polluting Substance at the Company's expense.
6.21 The Act. At the request any Purchaser, the Company
will promptly correct any defect, error, or omission with respect
to the Act which may be discovered in the contents of this
Agreement or the Other Agreements or in the execution or
acknowledgment thereof, and will execute, acknowledge and deliver
such further instruments and do such further acts as may be
reasonably necessary for this Agreement and the Other Agreements,
and all transactions contemplated thereby, to comply with the
Act.
6.22 Key-Man Life Insurance. The Company will maintain
and pay for a key-man life insurance policy in the amount of at
least $1,000,000 on the life of Glenn A. Welstad, such life
insurance policy to be issued by a life insurance company
reasonably satisfactory to the Purchaser. Promptly after the
Closing Date, the Company will use its best efforts to procure,
maintain and pay for an additional key-man life insurance policy
in the amount of at least $4,000,000 on the life of Glenn A.
Welstad, such life insurance policy to be issued by a life
insurance company reasonably satisfactory to the Purchaser.
6.23 Non-Compete Agreements. The Company will at all
times maintain the Non-Compete Agreements in full force and
effect, and will diligently enforce the Non-Compete Agreements
against any parties thereto who violate or attempt to violate the
terms of such Non-Compete Agreements.
VII. NEGATIVE COVENANTS
The Company covenants and agrees that from the date hereof
until the Senior Subordinated Obligations have been finally and
irrevocably paid in full in accordance with the terms hereof and
thereof:
7.1 Indebtedness. The Company will not create, incur,
issue, assume, guarantee or otherwise become liable for any
Indebtedness except (a) Permitted Indebtedness; (b) any
extension, renewal or refinancing of any Permitted Indebtedness
(other than the Senior Loans) on such terms and conditions as
are, on the whole, no more onerous to the Company than the terms
and conditions of such Permitted Indebtedness on the date of such
extension, renewal or refinancing; and (c) any replacement or
refinancing of the Senior Loans; provided that (i) the interest
rate on such refinancing shall be no greater than the interest
rate provided for in the Senior Loan Agreement in effect on the
date hereof, (ii) the Company will not incur any term
Indebtedness in connection with any replacement or refinancing of
the Senior Loans, (iii) the amount so replaced or refinanced
shall be no greater than an amount equal to eighty percent (80%)
of the Company's billed Eligible Accounts, (iv) the collateral
security for such replacement or refinancing does not extend to
assets other than those contemplated by the Senior Loan Agreement
in effect on the date hereof (and proceeds thereof) and (v) the
other terms and conditions of such replacement or refinancing
are, on the whole, no more onerous to the Company than the terms
of the Senior Loan Agreement in effect on the date hereof. Any
Permitted Indebtedness which is subordinated to the Senior
Subordinated Obligations shall continue to be subordinated to the
Senior Subordinated Obligations on terms and conditions
satisfactory to Purchaser.
7.2 Limitation on Liens. The Company will not incur,
create, assume, or permit to exist any Lien upon any of its
property, assets, or revenues, including, but not limited to, its
shares of capital stock of each of its Subsidiaries, whether now
owned or hereafter acquired, except Permitted Liens.
7.3 Merger, Acquisition, Dissolution and Sale of Assets.
The Company will not (a) become a party to any merger or
consolidation if the Purchase Price for the assets to be acquired
in connection with any such merger or consolidation would exceed,
when combined with the Purchase Price of all other Acquisitions
consummated during any calendar year, ten percent (10%) of the
Company's Net Worth (determined as of the first day of such
calendar year), (b) purchase or otherwise acquire all or a
substantial part of the assets of any Person or any shares or
other evidence of beneficial ownership of any Person if the
Purchase Price for the assets or shares to be acquired in
connection with any such acquisition would exceed, when combined
with the Purchase Price of all other Acquisitions consummated
during any calendar year, ten percent (10%) of the Company's Net
Worth (determined as of the first day of such calendar year), (c)
dissolve or liquidate, (d) form or acquire any Significant
Subsidiary, or (e) without Purchaser's prior written consent,
sell, assign or transfer any of its assets (except assets
reasonably and in good faith determined by the Company to be
obsolete or no longer necessary to the Company's business).
7.4 Negative Pledge. Until payment and performance in
full of all of the Senior Subordinated Obligations and
termination of this Agreement, the Company will not, without
Purchaser's prior written consent, pledge or suffer to exist any
Lien (except for Permitted Liens) on any part of its assets.
7.5 Restricted Payments. The Company will not at any
time make or become obligated to make, directly or indirectly,
any (a) declaration of any dividend on, or any other payment or
distribution in respect of, any shares of capital stock of the
Company (except for the payment of an annual cumulative dividend
of not more than five percent (5%) on the Preferred Stock, but
only if no Potential Default or Event of Default (A) shall have
occurred and be continuing at the time any such dividend is
declared or paid or (B) would arise as a result of the
declaration or payment of any such dividend), (b) payment or
distribution on account of the purchase, repurchase, redemption,
put, call or other retirement of any shares of the Company or of
any warrant, option or other right to acquire such shares (except
pursuant to the Warrant Documents or the Kemper Agreement), or
(c) payment or distribution on account of any Indebtedness of the
Company which is subordinate to the Senior Subordinated Note,
except Permitted Indebtedness.
7.6 Loans and Investments. Except for Permitted
Investments or except as otherwise permitted by Section 7.3, the
Company will not make any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase any stock,
bonds, notes, debentures, or other securities of any Person.
7.7 Transactions with Affiliates. Except as
contemplated by this Agreement and the Other Agreements, the
Company will not enter into any transaction with any director,
officer, employee, shareholder, or Affiliate of the Company
except transactions (including those permitted by Section 7.6, if
any) that are (i) approved by the Company's Board of Directors
and, (ii) upon terms which are fair and reasonable and which are
at least as favorable as would result in a comparable arm's-
length transaction with a Person not a director, officer,
employee, shareholder or Affiliate of the Company.
7.8 Nature of Business. The Company will not engage in
any business other than the businesses set forth on Schedule
4.25, or any business reasonably related thereto.
7.9 Modification of Senior Loan Agreement. The Company
will not agree or consent to any modification, amendment or
waiver of any of the terms or provisions of the Senior Loan
Documents in effect on the date hereof without Purchaser's prior
written consent, which consent will not be unreasonably withheld.
7.10 Capital Expenditures. The Company will not make
any Capital Expenditures if, as a result thereof, the Capital
Expenditures of the Company in the aggregate would, as a result
thereof, exceed the following maximum aggregate amounts for any
of the corresponding periods set forth below:
Period Amount
January 1, 1995 - December 31, 1995 $3,000,000
January 1, 1996 - December 31, 1996 $4,000,000
January 1, 1997 - December 31, 1997 $5,000,000
January 1, 1998 - December 31, 1998 $5,000,000
January 1, 1999 - December 31, 1999 $5,000,000
January 1, 2000 - December 31, 2000 $5,000,000
January 1, 2001 - December 31, 2001 $5,000,000
January 1, 2002 - October 30, 2002 $5,000,000
In the event that the Company enters into a capital lease with
respect to fixed assets, for purposes of calculating Capital
Expenditures under this Section 7.10, the lesser of (a) the
aggregate amount of the present value of all minimum payments
(excluding executory costs) due for the entire term of such
capital lease or (b) the cost of such fixed asset at the
inception of such capital lease shall be considered expended in
full on the date that the Company enters into such capital lease.
7.11 Financial Covenants.
(a) Minimum Net Worth. At all times during the
periods set forth below, the Company shall not permit its Net
Worth to be less than the amounts set forth below for the period
corresponding thereto:
Period Minimum Net Worth
Closing Date - December 31, 1995 $ 6,000,000
January 1, 1996 - September 30, 1996 $ 6,000,000
October 1, 1996 - December 31, 1996 $ 8,000,000
January 1, 1997 - December 31, 1997 $10,000,000
January 1, 1998 - December 31, 1998 $15,000,000
January 1, 1999 - December 31, 1999 $20,000,000
January 1, 2000 and thereafter $25,000,000
(b) Minimum Cash Flow Coverage Ratio. The Company
shall not permit its Minimum Cash Flow Coverage Ratio to be or
become less than 2.0 to 1.0, measured as of the last day of each
calendar quarter for the twelve-month period ending on the last
day of such calendar quarter.
(c) Maximum Indebtedness to Net Worth Ratio. The
Company shall not permit its Maximum Indebtedness to Net Worth
Ratio to exceed the ratios set forth below, measured as of the
end of the calendar quarters specified below:
Calendar Quarter Ratio
December 31, 1995 3.0 to 1.0
Last day of each calendar quarter from
January 1, 1996 through December 31, 1996 3.0 to 1.0
Last day of each calendar quarter thereafter 2.0 to 1.0
7.12 Remuneration. The Company will not permit (a) the
base compensation (including, without limitation, all salary,
employee benefits and professional, consulting and management
fees) paid by the Company to either of Glenn A. Welstad or John
R. Coghlan to exceed (i) with respect to the Company's fiscal
year ending December 31, 1995, the amounts set forth on Schedule
7.12 hereto, and (ii) with respect to any fiscal year of the
Company thereafter, an amount greater than one hundred ten
percent (110%) of the amount permitted to be paid under this
Section 7.12(a) during the preceding fiscal year of the Company,
or (b) the payment of any bonuses (or other incentive
compensation or commissions, whether direct or indirect) by the
Company to either of Glenn A. Welstad or John R. Coghlan, unless
(i) the payment of such bonuses (or other incentive compensation)
is approved by the compensation committee of the Company's Board
of Directors (and such compensation committee is comprised of
Persons other than Glenn A. Welstad and John R. Coghlan), (ii)
the aggregate amount of such bonuses (or other incentive
compensation) does not exceed $200,000 during any fiscal year of
the Company and (iii) no Potential Default or Event of Default
exists at the time any such bonuses (other incentive
compensation) are approved or would exist after giving effect to
any such payments.
7.13 Modification of Non-Compete Agreement. The Company
will not agree to any modification, amendment or waiver of any of
the terms or provisions of the Non-Compete Agreement without
Purchaser's prior written consent.
7.14 Use of Proceeds. The Company will not use the
proceeds of the sale of the Senior Subordinated Notes for any
purpose except as set forth in Section 1.4.
7.15 Going Private. The Company will not enter into a
Rule 13e-3 transaction within the meaning of Section 13e-3(a)(3)
of the Exchange Act.
7.16. Junior Debt Documents. The Company will not agree
or consent to any modification, amendment or waiver of any of the
terms or provisions of the Junior Debt Documents as in effect on
the date hereof without Purchaser's prior written consent.
VIII. EVENTS OF DEFAULT AND REMEDIES THEREFOR
8.1 Events of Default. The occurrence of any one or
more of the following events shall constitute an "Event of
Default":
(a) The Company or the Guarantor shall fail to pay,
when due (whether upon acceleration or otherwise), any principal,
interest or other sums payable under the Senior Subordinated
Notes or this Agreement, or shall fail to pay, when due (whether
upon acceleration or otherwise), any other Senior Subordinated
Obligations;
(b) The Company or the Guarantor shall fail to pay
when due and after passage of any applicable notice and cure
periods (whether upon acceleration or otherwise), any
Indebtedness (excluding the Senior Loans) in excess of $250,000
in the aggregate;
(c) The Company shall fail to perform or observe
any agreement, covenant, term or condition contained in the
Senior Subordinated Notes or in Sections 6.1, 6.2, 6.7, 6.13,
6.14, 6.19, or in Article VII of this Agreement;
(d) The Company shall fail to perform or observe
any agreement, covenant, term or condition contained in this
Agreement (excluding the specific Sections and Article referred
to in Section 8.1 (c) above), and such failure shall continue for
a period of thirty (30) days after the later to occur of (i) the
initial occurrence of such failure or (ii) the date that any
Responsible Officer first becomes aware of the occurrence of such
failure;
(e) The Company or the Guarantor shall fail to
comply, after giving effect to any applicable notice or cure
periods, with any material agreement, indenture, mortgage, deed
of trust, or other agreement binding on it or affecting its
properties or business, including, without limitation, the Senior
Loan Documents and the Other Agreements to which the Company is a
party;
(f) Any representation, warranty or other material
information whatsoever made or provided by the Company or the
Guarantor in connection with this Agreement or otherwise to
induce Purchaser to purchase the Senior Subordinated Notes or the
Warrants was incorrect or misleading in any respect, when made;
(g) The Company or the Guarantor shall become
subject to an Event of Bankruptcy;
(h) Any judgment or order for payment of money
shall be rendered against the Company or the Guarantor which
exceeds $250,000 and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order,
or (ii) there shall be a period of thirty (30) consecutive days
during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
(i) The occurrence or existence of any event of
default under the Senior Loan Documents, except for such defaults
as have been waived by the Senior Lender;
(j) The Guarantor shall revoke or attempt to revoke
the Guaranty Agreement, or shall repudiate its liability
thereunder or shall fail to observe or comply with any of the
terms thereof; or
(k) The occurrence of a change in control of the
Company (excluding a material change in ownership arising solely
from the exercise of the Warrants).
8.2 Remedies of Holders upon Occurrence of Event of
Default. When any Event of Default described in Section 8.1
above, other than any Event of Default described in clause (g)
thereof, has occurred and is continuing, any Purchaser may (in
addition to any other right, power or remedy permitted to such
Purchaser by law) declare the entire amount of the Senior
Subordinated Obligations owing to it, including, without
limitation, the entire principal and all interest accrued then
outstanding under its Senior Subordinated Note, to be, and the
same shall thereupon become, forthwith due and payable, without
any presentment, demand, protest, notice of default, notice of
intention to accelerate, notice of acceleration or other notice
of any kind, all of which are hereby expressly waived, and in
such event the Company shall (subject to the terms of the Senior
Subordination Agreement) forthwith pay to such Purchaser an
amount equal to one hundred percent (100%) of the amount thereof.
When any Event of Default described in clause (g) of Section 8.1
above shall occur, all of the Senior Subordinated Obligations,
including, without limitation, the entire principal and all
accrued interest then outstanding under the Senior Subordinated
Notes, shall thereupon be forthwith due and payable without any
presentment, demand, protest, notice of default, notice of
intention to accelerate, notice of acceleration or other notice
of any kind (including any notice by the Holders of the Senior
Subordinated Notes), all of which are hereby expressly waived by
the Company, and the Company will (subject to the terms of the
Senior Subordination Agreement) forthwith pay to Purchaser an
amount equal to one hundred percent (100%) of the amount thereof.
Notwithstanding anything to the contrary in this Section 8.2, any
action taken under this Section 8.2 will be deemed binding and
effective (i) with respect to Seacoast, if such action is
approved by not less than fifty percent (50%) of the Holders of
the Senior Subordinated Notes held by Seacoast on the date hereof
and (ii) with respect to the Allied Investors, if such action is
approved by not less than fifty percent (50%) of the Holders of
the Senior Subordinated Notes held by the Allied Investors on the
date hereof.
8.3 Joint Action by Holders after Default. The
provisions of this Section 8.3 are solely for the benefit of the
Holders, and neither the Company nor any other Person shall have
any rights with respect to or be entitled to enforce this Section
8.3. If, at any time or times, the Company shall be in default
under the Senior Subordinated Notes, this Agreement or any Other
Agreement, the Holders shall consult one another before taking
any action with respect to such default and shall attempt to
agree on the action to be taken to protect all Holders' interests
and/or enforce their rights and remedies. To the extent the
Holders agree on such matters, all expenses incurred and all
amounts realized shall be apportioned among the Holders, pro
rata, and reimbursed by the Company as provided in this
Agreement.
8.4 Annulment of Acceleration. The provisions of the
foregoing Section 8.2 are subject to the condition that, if all
or any part of the Senior Subordinated Obligations have been
declared or have otherwise become immediately due and payable by
reason of the occurrence of any Event of Default, any Purchaser
may, by written instrument delivered to the Company (an
"Annulment Notice"), rescind and annul such declaration and the
consequences thereof as to its Senior Subordinated Note, provided
that (a) at the time such Annulment Notice is delivered no
judgment or decree has been entered for the payment of any monies
due pursuant to such Senior Subordinated Obligations in
connection therewith, and (b) all arrears of interest and all
other sums payable on such Senior Subordinated Obligations in
connection therewith (except any principal or interest which has
become due and payable solely by reason of such declaration under
Section 8.2 hereof) shall have been duly paid or deferred by the
Holder of the Senior Subordinated Obligations agreeing to such
rescission and annulment; and provided further, that no such
rescission and annulment shall extend to or affect any subsequent
default or Event of Default or impair any right consequent
thereto, and shall not be deemed a waiver of the Event of Default
giving rise to the acceleration unless specifically waived in
writing by the Purchaser consenting to such rescission and
annulment.
8.5 Payment of Senior Subordinated Obligations. Subject
to the terms of the Senior Subordination Agreement, Purchaser
shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest on such Senior
Subordinated Notes and payment of all other Senior Subordinated
Obligations on the date when due and, upon the occurrence and
continuance of an Event of Default, to institute suit against the
Company for the enforcement of any such payment. Such rights
shall not be impaired without Purchaser's prior written consent.
8.6 Remedies. Subject to the terms of the Senior
Subordination Agreement, if any Event of Default shall occur and
be continuing, each and every Holder may exercise any right or
remedy it has at law, in equity or under this Agreement or any
Other Agreement. No right or remedy conferred upon or reserved
to Purchaser under this Agreement or any Other Agreement is
intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative and in addition to every
other right or remedy given hereunder or now or hereafter
existing under any applicable law. Every right and remedy given
by this Agreement or by applicable law to Purchaser may be
exercised from time to time and as often as may be deemed
expedient by Purchaser.
8.7 Conduct No Waiver. No course of dealing on the part
of any Purchaser, nor any delay or failure on the part of any
Purchaser to exercise any of its rights, shall operate as a
waiver of such right or otherwise prejudice any Purchaser's
rights, powers and remedies. If the Company fails to pay, when
due, the principal of or the interest on, the Senior Subordinated
Notes, or fails to comply with any other provision of this
Agreement, the Company shall pay to the Holder, to the extent
permitted by law, on demand, such further amounts as shall be
sufficient to cover the cost and expenses, including, but not
limited to, reasonable attorney's fees, incurred by Purchaser in
collecting any sums due on the Senior Subordinated Notes or in
otherwise enforcing any of Purchaser's rights.
IX. SUBORDINATION
Notwithstanding any provision in this Agreement to the
contrary, the Indebtedness evidenced by the Senior Subordinated
Notes shall be subordinate in right of payment to all regularly
scheduled payments of principal and interest with respect to
Senior Debt, and Purchaser's rights and remedies hereunder shall
be subordinate to the rights and remedies of the Senior Lender,
in accordance with the terms of the Senior Subordination
Agreement. Nothing contained in this Article IX or elsewhere in
this Agreement, in the Senior Subordinated Notes or the Senior
Subordination Agreement is intended to or shall impair, as
between the Company and Purchaser, the obligations of the
Company, which are absolute and unconditional, to pay to
Purchaser the principal of and interest on the Senior
Subordinated Notes and all other Senior Subordinated Obligations
as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative
rights of Purchaser and creditors of the Company other than the
holders of the Senior Debt, nor shall anything herein or therein
prevent Purchaser from exercising all remedies otherwise
permitted by applicable law upon an Event of Default under this
Agreement.
X. FORM OF SENIOR SUBORDINATED NOTES, REGISTRATION, TRANSFER
AND REPLACEMENT
10.1 Form of Senior Subordinated Notes. The Senior
Subordinated Notes initially delivered under this Agreement will
be fully registered notes on the books of the Company. The
Senior Subordinated Notes are issuable only in fully registered
form in such denominations as are requested by each Purchaser.
Each Senior Subordinated Note shall contain the following legend:
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
OR FOR SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED,
SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND
ALL APPLICABLE STATE SECURITIES LAWS.
THIS NOTE IS SUBJECT TO THE TERMS AND PROVISIONS OF A NOTE
PURCHASE AGREEMENT, DATED AS OF OCTOBER 31, 1995, BY AND AMONG
LABOR READY, INC., LABOR READY OF NEVADA, INC. AND LABOR READY
FRANCHISE DEVELOPMENT CORP. INC. (INDIVIDUALLY AND COLLECTIVELY,
THE "COMPANY"), SEACOAST CAPITAL PARTNERS LIMITED PARTNERSHIP,
ALLIED INVESTMENT CORPORATION, ALLIED INVESTMENT CORPORATION II
AND ALLIED CAPITAL CORPORATION II (AS SUCH AGREEMENT MAY BE
SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME,
THE "AGREEMENT"). COPIES OF THE AGREEMENT ARE AVAILABLE AT THE
CHIEF EXECUTIVE OFFICES OF THE COMPANY.
THE TRANSFER OF AND ANY PAYMENTS ON THIS NOTE ARE RESTRICTED BY
AND SUBJECT TO THE TERMS AND PROVISIONS OF, AN INTERCREDITOR AND
SUBORDINATION AGREEMENT DATED AS OF OCTOBER 31, 1995, BY AND
AMONG CONCORD GROWTH CORPORATION, SEACOAST CAPITAL PARTNERS
LIMITED PARTNERSHIP, ALLIED INVESTMENT CORPORATION, ALLIED
INVESTMENT CORPORATION II AND ALLIED CAPITAL CORPORATION II (AS
SUCH AGREEMENT MAY BE SUPPLEMENTED, MODIFIED, AMENDED OR RESTATED
FROM TIME TO TIME), A COPY OF WHICH IS ON FILE AT THE CHIEF
EXECUTIVE OFFICES OF THE COMPANY.
10.2 Senior Subordinated Notes Register. The Company
shall cause to be kept at the principal office a register for the
registration and transfer of the Senior Subordinated Notes. The
names and addresses of the Holder of the Senior Subordinated
Notes, the transfer thereof and the name and address of the
transferee of such Senior Subordinated Note shall be recorded in
such register.
10.3 Issuance of New Senior Subordinated Notes upon
Exchange or Transfer. Upon surrender for exchange or
registration of transfer of a Senior Subordinated Note at the
office of the Company designated for notices in accordance with
Section 12.3 hereof, the Company shall execute and deliver, at
its expense, one or more new Senior Subordinated Notes of any
authorized denomination requested by the Holder of the
surrendered Senior Subordinated Note, each dated the date to
which interest has been paid on the Senior Subordinated Note so
surrendered (or, if no interest has been paid, the date of such
surrendered Senior Subordinated Note), but in the same aggregate
unpaid principal amount as such surrendered Senior Subordinated
Note, and registered in the name of such Person or Persons as
shall be designated in writing by such Holder. Every Senior
Subordinated Note surrendered for registration of transfer shall
be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the Holder of such Senior Subordinated
Note or by his attorney duly authorized in writing.
10.4 Replacement of Senior Subordinated Notes. Upon
receipt of evidence satisfactory to the Company of the loss,
theft, mutilation or destruction of any Senior Subordinated Note
and, in the case of any such loss, theft or destruction, upon
delivery of a bond of indemnity in such form and amount as shall
be reasonably satisfactory to the Company or, in the event of
such mutilation upon surrender and cancellation of such Senior
Subordinated Note, the Company, without charge to the Holder
thereof, will make and deliver a new Senior Subordinated Note of
like tenor and the same series in lieu of such lost, stolen,
destroyed or mutilated Senior Subordinated Note. If any such
lost, stolen or destroyed Senior Subordinated Note is owned by
any Purchaser or any other Holder whose credit is satisfactory to
the Company, then the affidavit of an authorized officer of such
owner setting forth the fact of loss, theft or destruction and of
its ownership of such Senior Subordinated Note at the time of
such loss, theft or destruction shall be accepted as satisfactory
evidence thereof, and no further indemnity shall be required as a
condition to the execution and delivery of a new Senior
Subordinated Note, other than a written agreement of such owner
(in form reasonably satisfactory to the Company) to indemnify the
Company.
XI. INTERPRETATION OF AGREEMENT
11.1 Certain Terms Defined. When used in this
Agreement, the terms set forth below are defined as follows:
"Acquisitions" means, with respect to the Company, any
purchase of, or investment in, any assets or stock of any Person
(whether by asset purchase, stock purchase, merger, consolidation
or otherwise).
"Act" means the Small Business Investment Act of 1958, as
amended and in effect from time to time, and the regulations
promulgated thereunder.
"Affiliate" means any Person directly or indirectly
controlling, controlled by, or under common control with, the
Person in question. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of
voting securities, by contract, or otherwise.
"Agreement" means this Note Purchase Agreement, including
all schedules and exhibits hereto, as the same may be modified,
supplemented, extended and/or amended from time to time.
"Allied Investors" is defined in the opening paragraph.
"Annulment Notice" is defined in Section 8.4.
"Business Day" means each day of the week except Saturdays,
Sundays, and days on which banking institutions are authorized by
law to close in the Commonwealth of Massachusetts.
"Capital Expenditures" means expenditures made and
liabilities incurred for the acquisition of any fixed assets or
improvements, replacements, substitutions or additions thereto
which have a useful life of more than one (1) year, including,
but not limited to, the direct or indirect acquisition of such
assets or incurrence of such expenses by way of increased product
or service charges, offset items or otherwise and payments with
respect to capitalized lease obligations.
"Closing Date" means October 31, 1995.
"Closing Fee" is defined in Section 1.3.
"Code" means the Internal Revenue Code of 1986, as amended
and in effect from time to time, and the regulations promulgated
thereunder.
"Collateral" is defined in Section 2 of the Security
Agreement.
"Commitment Fee" is defined in Section 1.3.
"Company" means Labor Ready, Inc., a Washington corporation
and, unless the context requires otherwise, shall include its
Subsidiaries, if any.
"Controlled Group" means any group of organizations within
the meaning of Section 414(b), (c), (m) or (o) of the Code of
which the Company is a member.
"Dated Assets" is defined in Section 2.9.
"Dated Liabilities" is defined in Section 2.9.
"EBITDA" means, for any period of determination, (a) net
income; plus, (b) in each case, to the extent deducted in
determining net income for such period (i) taxes, (ii) interest
expenses and (iii)amortization and depreciation and similar non-
cash charges; and minus (c) to the extent included in determining
net income for such period, extraordinary gains, all calculated
in accordance with GAAP.
"Eligible Accounts" means accounts created by the Company in
the ordinary course of its business which are and remain
acceptable to Purchaser for lending purposes. Purchaser will
deem the Company's accounts to be Eligible Accounts if:
(a) such accounts arise from bona fide completed
transactions and have not remained unpaid for more than ninety
(90) days after the invoice date;
(b) the amounts of the account reported to Purchaser are
absolutely owing to the Company and do not arise from sales on
consignment, guaranteed sale or other terms under which payment
by the account debtors may be conditional or contingent;
(c) the account debtor's chief executive office or
principal place of business is located in the United States or
Canada;
(d) such accounts do not arise from progress billings or
retainages or bill and hold sales;
(e) there are no contra relationships, setoffs,
counterclaims or disputes existing with respect thereto and there
are no other facts existing or threatened which would impair or
delay the collectibility of all or any portion thereof;
(f) the goods giving rise thereto were not at the time
of the sale subject to any liens except those permitted in this
Agreement and the Senior Loan Agreement;
(g) such accounts are not accounts with respect to which
the account debtor or any officer or employee thereof is an
officer, employee or agent of or is affiliated with the Company,
directly or indirectly, whether by virtue of family membership,
ownership, control, management or otherwise;
(h) such accounts are not accounts with respect to which
the account debtor is the United States or any State or political
subdivision, unless there has been compliance with the Assignment
of Claims Act or any similar State or local law, if applicable;
(i) The Company has delivered to the Purchaser or the
Purchaser's representative such original documents as the
Purchaser may have requested in connection with such accounts and
the Purchaser shall have received a verification of such account,
satisfactory to it, if sent to the account debtor or any other
obligor or any bailee;
(j) there are no facts existing or threatened which
might result in any adverse change in the account debtor's
financial condition;
(k) such accounts owned by a single account debtor or
its affiliates do not represent more than twenty percent (20%) of
all otherwise Eligible Accounts (accounts excluded from Eligible
Accounts solely by reason of this Subsection (k) shall
nevertheless be considered Eligible Accounts to the extent of the
amount of such accounts which does not exceed twenty percent
(20%) of all otherwise Eligible Accounts;
(l) such accounts are not owned by an account debtor who
is or whose affiliates are past due upon other accounts owed to
the Company comprising more than twenty-five percent (25%) of the
accounts of such account debtor or its affiliates owed to the
Company; and
(m) such accounts are owed by account debtors whose
total indebtedness to the Company does not exceed the amount of
any customer credit limits as established, and changed, from time
to time by the Purchaser on notice to the Company (accounts
excluded from Eligible Accounts solely by reason of this
Subsection (m) shall nevertheless be considered Eligible Accounts
to the extent the amount of such accounts does not exceed such
customer credit limit).
"Employee Benefit Plan" means any employee benefit plan, as
defined in Section 3(3) of ERISA, which is, previously has been
or will be established or maintained by any member of a
Controlled Group.
"Environmental Laws" means all federal, state, or local
laws, ordinances, rules, regulations, interpretations and orders
of courts or administrative agencies or authorities relating to
pollution or protection of the environment (including, without
limitation, ambient air, surface water, ground water, land
surface, and subsurface strata), and other laws relating to (a)
Polluting Substances or (b) the manufacture, processing,
distribution, use, treatment, handling, storage, disposal, or
transportation of Polluting Substances.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended and in effect from time to time, and the
regulations promulgated thereunder.
"Event of Bankruptcy" means any of (a) the filing by a
Person of a voluntary petition in bankruptcy under any provision
of any bankruptcy law or a petition to take advantage of any
insolvency act, (b) the admission in writing by the Company of
its inability to pay its debts generally as they become due, (c)
the appointment of a receiver or receivers for all or a material
part of a Person's assets with the consent of such Person, (d)
the filing of any bankruptcy, arrangement or reorganization
petition by or, with the consent of a Person, against such Person
under any provision of any bankruptcy law, (e) a receiver,
liquidator or trustee of a Person or a substantial part of its
assets shall be appointed pursuant to the Federal Bankruptcy Code
by the order of a court of competent jurisdiction which shall not
be dismissed or stayed within thirty (30) days, or (f) an
involuntary petition to reorganize or liquidate a Person pursuant
to the Federal Bankruptcy Code shall be filed against such Person
and shall not be dismissed or stayed within 30 days.
"Event of Default" is defined in Section 8.1.
"Excess Interest" is defined in Section 2.7.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"GAAP" means generally accepted accounting principles,
applied on a consistent basis, as set forth in Opinions of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and/or in statements of the
Financial Accounting Standards Board and/or their respective
successors and which are applicable in the circumstances as of
the date in question, provided, that the Company may not change
the use or application of any accounting method, practice or
principle without the prior written consent of Purchaser, which
consent may require that an adjustment be made to any and all the
financial covenants and the capital expenditure covenant set
forth herein. Accounting principles are applied on a "consistent
basis" when the accounting principles observed in a current
period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Guarantor" means Labour Ready Temporary Services, Ltd., a
corporation organized under the laws of the Province of British
Columbia, Canada.
"Guaranty Agreement" means the Unconditional Guaranty
Agreement dated as of the Closing Date executed by Guarantor for
the benefit of the Purchaser.
"Holder" when used in reference to the Senior Subordinated
Notes and/or the Senior Subordinated Obligations, means the
Person or Persons who, at the time of determination, is the
lawful owner of all or a portion of the Senior Subordinated Notes
or an obligee of all or a portion of the Senior Subordinated
Obligations.
"Impositions" is defined in Section 6.9.
"Indebtedness" means for any Person: (a) all indebtedness,
whether or not represented by bonds, debentures, notes,
securities, or other evidences of indebtedness, for the repayment
of money borrowed, (b) all indebtedness representing deferred
payment of the purchase price of property or assets, (c) all
indebtedness under any lease which, in conformity with GAAP, is
required to be capitalized for balance sheet purposes and leases
of property or assets made as a part of any sale and lease-back
transaction if required to be capitalized, (d) all indebtedness
under guaranties, endorsements, assumptions, or other contractual
obligations, including any letters of credit, or the obligations
in respect of, or to purchase or otherwise acquire, indebtedness
of others, (e) all indebtedness secured by a Lien existing on
property owned, subject to such Lien, whether or not the
indebtedness secured thereby shall have been assumed by the owner
thereof, (f) trade accounts payable more than [120] days past
due, (g) all amendments, renewals, extensions, modifications and
refundings of any indebtedness or obligations referred to in
clauses (a), (b), (c), (d) or (e), excluding trade accounts
payable in the ordinary course of business.
"Intellectual Property" means all patents, patent rights,
patent applications, licenses, inventions, trade secrets, know-
how, proprietary techniques (including processes and substances),
trademarks, service marks, trade names and copyrights.
"Kemper Agreement" means that certain agreement between the
Company and Everen Securities, Inc., formerly known as Kemper
Securities, Inc., dated as of February 21, 1995, as amended on
October 3, 1995, providing for the payment by the Company to
Everen Securities, Inc. of a private placement fee and for the
issuance by the Company to Everen Securities, Inc. of warrants to
purchase 40,000 shares of the Company's common stock, pursuant to
the terms and conditions thereunder.
"Junior Debt Documents" means, collectively, that certain
(a) Convertible Promissory Note dated May 8, 1995, in the
original principal amount of $100,000, executed by Labor Ready,
Inc. and payable to the order of Norman H. Schroth, (b)
Convertible Promissory Note dated May 18, 1995, in the original
principal amount of $100,000, executed by Labor Ready, Inc. and
payable to the order of Willis Glinz, and (c) Convertible
Promissory Note dated May 22, 1995, in the original principal
amount of $100,000, executed by Labor Ready, Inc. and payable to
the order of William C. Newton.
"Lien" means any lien, mortgage, security interest, tax
lien, pledge, encumbrance, financing statement, or conditional
sale or title retention agreement, or any other interest in
property designed to secure the repayment of Indebtedness or any
other obligation, whether arising by agreement, operation of law,
or otherwise.
"Material Adverse Effect" means (a) a material adverse
effect upon the business, operations, properties, assets or
condition (financial or otherwise) of the Company taken as a
whole or (b) the impairment of the ability of any party to
perform its obligations under this Agreement or any of the Other
Agreements to which it is a party or of Purchaser to enforce or
collect any of the Senior Subordinated Obligations. In
determining whether any individual event would result in a
Material Adverse Effect, notwithstanding that such event does not
of itself have such effect, a Material Adverse Effect shall be
deemed to have occurred if such event and all other then existing
events would result in a Material Adverse Effect.
"Maximum Indebtedness to Net Worth Ratio" means at any date
of determination thereof, the ratio of the Company's (a)
Indebtedness to (b) Net Worth.
"Maximum Rate" is defined in Section 2.7.
"Minimum Cash Flow Coverage Ratio" means at any date of
determination thereof, the ratio of (a) EBITDA to (b) an amount
equal to (i) interest expense for the period ending on such date
on all of the Company's Indebtedness plus (ii) all principal
payments made on all of the Company's Indebtedness during such
period.
"Mortgaged Property" means the Company's real property
located at 2156 Pacific Avenue South, Tacoma, Washington,
together with all improvements constructed thereon and all
fixtures affixed thereto.
"Net Worth" means at any date of determination thereof, the
aggregate amount of (i) all assets of the Company, less (ii) the
aggregate amount of all liabilities of the Company, all as
determined in accordance with GAAP.
"Non-Compete Agreements" means, collectively, (a) those
certain Employment and Non-Compete Agreements, dated on or about
October 31, 1995, by and between the Company and each of Glenn A.
Welstad and Scott Sabo, (b) that certain Consulting and Non-
Compete Agreement, dated on or about October 31, 1995, by and
between the Company and John R. Coghlan, and (c) any other non-
compete agreement hereafter entered into by and between the
Company and any other officer, employee or consultant of the
Company, together with all renewals, modifications, amendments or
supplements thereto.
"Observer" means any person appointed by Purchaser who is
entitled pursuant to the terms of Section 6.19 to attend meetings
of the Company's Board of Directors or Shareholders as an
observer.
"Other Agreements" means the Senior Subordinated Note, the
Warrant Documents, the Security Documents and all other
agreements, instruments and documents (including, without
limitation, notes, guarantees, powers of attorney, consents,
assignments, contracts, notices, subordination agreements and all
other written matter), and all renewals, modifications and
extensions thereof, whether heretofore, now or hereafter executed
by or on behalf of the Company and delivered to and for the
benefit of Purchaser or any Person participating with Purchaser
in the Senior Subordinated Notes with respect to this Agreement
or any of the transactions contemplated by this Agreement.
"Pension Plan" means any employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is, was or will be
established or maintained by any member of the Controlled Group.
"Permitted Indebtedness" means (a) any Indebtedness in
favor of the Senior Lender not greater than eighty percent (80%)
of the Company's billed Eligible Accounts, (b) any Indebtedness
in favor of Purchaser under this Agreement and/or the Other
Agreements and created pursuant thereto, (c) presently existing
or hereafter arising purchase money Indebtedness incurred by the
Company to finance the acquisition of capital assets by the
Company, subject to the limitations placed on Capital
Expenditures in Section 7.10, (d) any presently existing or
hereafter arising unsecured Indebtedness which is subordinate in
the right of payment of the Senior Subordinated Obligations, and
(e) the other Indebtedness set forth on Schedule 11.1(a) and
approved by Purchaser.
"Permitted Investments" means the following:
(a) securities issued or directly and fully guaranteed
or insured by the United States Government or any agency or
instrumentality thereof (provided that the full faith and credit
of the United States Government is pledged in support thereof),
having maturities of not more than twelve (12) months from the
date of acquisition;
(b) time deposits and certificates of deposit (i) of any
commercial bank incorporated in the United States of recognized
standing having capital and surplus in excess of $100,000,000
with maturities of not more than twelve months from the date of
acquisition or (ii) which are fully insured by the Bank Insurance
Fund with maturities of not more than twelve (12) months from the
date of acquisition;
(c) commercial paper issued by any Person incorporated
in the United States rated at least A-1 or the equivalent thereof
by Standard & Poor's Corporation or at least P-1 or the
equivalent thereof by Moody's Investors Service, Inc. and in each
case maturing not more than twelve (12) months after the date of
acquisition;
(d) investments in money market funds substantially all
of whose assets are comprised of securities of the types
described in clauses (a) through (c) above; or
(e) investments in, or purchases of, one or more
Subsidiaries provided that the aggregate investment in, or
Purchase Price for, any such Subsidiaries does not exceed, when
combined with the Purchase Price of all other Acquisitions
consummated in any calendar year, ten percent (10%) of the
Company's Net Worth (determined as of the first day of such
calendar year).
"Permitted Liens" means (a) Liens in favor of the Senior
Lender under the Senior Loan Agreement in effect on the date
hereof or created pursuant thereto, (b) Liens in favor of
Purchaser under the Security Documents, (c) Liens securing
purchase money Indebtedness incurred to finance the acquisition
of capital assets by the Company, subject to the limitations
placed on Capital Expenditures in Section 7.10 hereof, but only
so long as (i) such Lien attaches only to the asset so financed,
(ii) the Indebtedness secured by such Lien does not exceed one
hundred percent (100%) of the purchase price, including
installation and freight, of the asset so financed and (iii) no
Potential Default or Event of Default has occurred and is
continuing, (d) Liens for property taxes not yet due, (e)
materialmen's, mechanics', worker's, repairmen's, employees' or
other like Liens arising against the Company in the ordinary
course of business, in each case which are either not delinquent
or are being contested in good faith and by appropriate actions
or proceedings conducted with due diligence and for the payment
of which adequate reserves in accordance with GAAP have been
established with respect thereto to the reasonable satisfaction
of Purchaser and (f) Liens disclosed on Schedule 11.1(b) and
approved by Purchaser.
"Person" means any individual, sole proprietorship,
corporation, business trust, unincorporated organization,
association, company, partnership, joint venture, governmental
authority (whether a national, federal, state, county,
municipality or otherwise, and shall include without limitation
any instrumentality, division, agency, body or department
thereof), or other entity.
"Polluting Substances" means all pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes
and shall include, without limitation, any flammable explosives,
radioactive materials, oil, hazardous materials, hazardous or
solid wastes, hazardous or toxic substances or related materials
defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Resource Conservation and
Recovery Act of 1976, the Hazardous and Solid Waste Amendments of
1984, and the Hazardous Materials Transportation Act, as any of
the same are hereafter amended, and in the regulations adopted
and publications promulgated thereto; provided, in the event any
of the foregoing Environmental Laws is amended so as to broaden
the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment
and, provided, further, to the extent that the applicable laws of
any state establish a meaning for "hazardous substance,"
"hazardous waste," "hazardous material," "solid waste," or "toxic
substance" which is broader than that specified in any of the
foregoing Environmental Laws, such broader meaning shall apply.
"Potential Default" means the occurrence of any condition or
event which, with the passage of time or giving of notice or
both, would constitute an Event of Default.
"Preferred Stock" means the Series A Cumulative Preferred
Stock, $1.00 par value, of the Company.
"Principal Amount" is defined in Section 1.2(b).
"Property" means all real property owned, leased or operated
by the Company.
"Purchaser" means Seacoast and the Allied Investors,
together with all of their respective transferees, successors and
assigns of all or any portion of the Senior Subordinated Notes or
the Senior Subordinated Obligations and any nominees on whose
behalf any of the foregoing purchase or otherwise acquire any of
such Indebtedness of the Company, and shall include, but not be
limited to, each and every "Holder" as defined herein. With
respect to any right or action to be taken by Purchaser under
this Agreement (other than under Section 8.2), the term Purchaser
means Holders representing a majority in interest of the Senior
Subordinated Obligations.
"Purchase Price" means, with respect to any purchase of, or
investment in, any assets or stock of any Person (whether by
asset purchase, stock purchase, merger, consolidation or
otherwise), the aggregate purchase price for such assets or
stock, including all (a) cash paid, plus (b) all liabilities
assumed, plus (c) the present value of all future payments to be
paid in connection with such acquisition or investment
(discounted to present value based upon a rate that is mutually
acceptable to the Company and Purchaser at the time of any such
acquisition or investment).
"Reportable Event" means (i) any of the events set forth in
Sections 4043(b) (other than a merger, consolidation or transfer
of assets in which no Pension Plan involved has any unfunded
benefit liabilities), 4068(f) or 4063(a) of ERISA, (ii) any event
requiring any member of the Controlled Group to provide security
under Section 401(a)(29) of the Code, or (iii) any failure to
make payments required by Section 412(m) of the Code.
"Responsible Officer" means the Chairman of the Board,
President, any Vice President, Secretary, Treasurer, Chief
Financial Officer and such other Persons reasonably designated in
writing by Purchaser from time to time.
"Security Agreement" means the Security Agreement dated as
of the Closing Date by and between the Company and Purchaser.
"Security Documents" means all security agreements, pledge
agreements, stock pledge agreements, collateral assignments and
other documents executed in connection with this Agreement and
granting to Purchaser liens and security interests in the
Collateral, second in priority only to the liens and security
interests of the Senior Lender under the Senior Loan Agreement,
and all mortgages, deeds of trust and other documents executed in
connection with this Agreement and granting to Purchaser liens
upon and security interests in the Property, all renewals,
modifications or extensions of such documents, and any such
documents hereafter executed in favor of Purchaser to secure
payment of all or any part of the Senior Subordinated
Obligations, together with all financing statements and other
documents necessary to record or perfect the Liens granted by any
of the foregoing.
"Senior Debt" means, at any given time, the Indebtedness
(whether now outstanding or hereafter incurred) of the Company in
respect of the Senior Loan Agreement, in a principal amount not
to exceed eighty percent (80%) of the Company's billed Eligible
Accounts in revolving loans, plus interest, fees, expenses,
indemnities and all other amounts payable under the Senior Loan
Agreement and any notes, security documents, guaranties or other
loan documents referred to therein or pursuant thereto, secured
by all assets of the Company.
"Senior Lender" means Concord Growth Corporation, a
California corporation, and its successors and assigns, and any
Person who replaces or refinances the Senior Loans under the
terms set forth in Section 7.1(c).
"Senior Loan Agreement" means the Loan Agreement between the
Company and the Senior Lender, dated as of October 31, 1995 and
all documents and instruments delivered pursuant thereto in
connection with the loans and advances made thereunder.
"Senior Loan Documents" means the Senior Loan Agreement and
the agreements, documents and instruments executed in connection
therewith or contemplated thereby, and all amendments thereto.
"Senior Loans" means revolving loans, in the maximum
principal amount of eighty percent (80%) of the Company's billed
Eligible Accounts, made to the Company by the Senior Lender under
the Senior Loan Agreement and any permitted replacements and
refinancings thereof.
"Senior Subordinated Notes" means the term promissory notes
issued by the Company to Purchaser pursuant to this Agreement,
together with all renewals, modifications, extensions,
substitutions and replacements thereof.
"Senior Subordinated Obligations" means and includes any and
all Indebtedness and/or liabilities of the Company to Purchaser
of every kind, nature and description, direct or indirect,
secured or unsecured, joint, several, joint and several, absolute
or contingent, due or to become due, now existing or hereafter
arising, under this Agreement or any Other Agreement (regardless
of how such Indebtedness or liabilities arise or by what
agreement or instrument they may be evidenced or whether
evidenced by any agreement or instrument) and all obligations of
the Company to Purchaser to perform acts or refrain from taking
any action under any of the aforementioned documents, together
with all renewals, modifications, extensions, increases,
substitutions or replacements of any of such Indebtedness.
"Senior Subordination Agreement" means that certain Senior
Subordination Agreement of even date herewith executed by the
Company, the Senior Lender and Purchaser pursuant to which the
relative priorities of the Senior Lender and Purchaser with
respect to the repayment of Senior Debt and the Senior
Subordinated Obligations are established, and all amendments and
modifications thereto.
"Shareholder Agreement" means the Shareholder Agreement
dated as of the Closing Date by and among the Company, the
Purchaser and the shareholders of the Company listed on the
signature pages thereto.
"Significant Subsidiary" has the meaning ascribed to it
under Regulation S-X as adopted by the United States Securities
and Exchange Commission.
"Subsidiary" means any Person of which or in which the
Company and its other Subsidiaries own directly or indirectly
fifty percent (50%) or more of (a) the combined voting power of
all classes having general voting power under ordinary
circumstances to elect a majority of the board of directors or
equivalent body of such Persons, if it is a corporation, (b) the
capital interest or profits interest of such Person, if it is a
partnership, joint venture or similar entity, or (c) the
beneficial interest of such Person if it is a trust, association
or other unincorporated organization.
"Termination Date" means the earliest to occur of (a)
October 30, 2002, (b) the date on which the Senior Subordinated
Notes are accelerated pursuant to Article VIII, or (c) the date
on which the Senior Subordinated Obligations are paid in full.
"Termination Event" means (a) a Reportable Event, (b) the
termination of a Pension Plan which has unfunded benefit
liabilities (including an involuntary termination under Section
4042 of ERISA), (c) the filing of a Notice of Intent to Terminate
a Pension Plan, (d) the initiation of proceedings to terminate a
Pension Plan under Section 4042 of ERISA or (e) the appointment
of a trustee to administer a Pension Plan under Section 4042 of
ERISA.
"Transfer" is defined in Section 12.5 hereof.
"Transferee" means any Person to whom a Transfer is made.
"Warrants" mean the warrants issued by Labor Ready, Inc. to
Purchaser providing for the purchase of up to 454,912 shares of
Labor Ready, Inc.'s common stock, representing ten percent (10%)
of Labor Ready, Inc.'s common stock (on a fully diluted basis),
as the same may be adjusted from time to time pursuant to the
terms and conditions of the Warrant Documents.
"Warrant Documents" means, collectively, (a) the Warrants,
(b) the Warrant Purchase Agreement, and (c) the Shareholder
Agreement.
"Warrant Purchase Agreement" means the Warrant Purchase
Agreement dated as of the Closing Date executed by and between
Labor Ready, Inc. and Purchaser.
Terms which are defined in other Sections of this Agreement shall
have the meanings specified therein. All other terms contained
in this Agreement shall have, when the context so indicates, the
meanings provided for by the Uniform Commercial Code as adopted
and in force in the Commonwealth of Massachusetts, as from time
to time in effect.
11.2 Accounting Principles. Where the character or
amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of
this Agreement, the same shall be done, unless specified
otherwise, in accordance GAAP, except where such principles are
inconsistent with the requirements of this Agreement.
11.3 Directly or Indirectly. Where any provision in
this Agreement refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall
be applicable whether the action in question is taken directly or
indirectly by such Person.
11.4 The Term "Company" or "Companies". All references
to "Company" or "Companies" herein shall refer to and include
each Company separately and all representations contained herein
shall be deemed to be separately made by each of them, and each
of the covenants, agreements and obligations set forth herein
shall be deemed to be the joint and several covenants, agreements
and obligations of them. Any notice, request, consent, report or
other information or agreement delivered to the Purchaser by any
Company shall be deemed to be ratified by, consented to and also
delivered by the other Companies. Each Company recognizes and
agrees that each covenant and agreement of "Company" or
"Companies" under this Agreement and the Other Agreements shall
create a joint and several obligation of the Companies, which may
be enforced against the Companies, jointly, or against each
Company separately. Without limiting the terms of this Agreement
and the Other Agreements, security interests granted under this
Agreement and the Other Agreements in properties, interests,
assets and collateral shall extend to the properties, interests,
assets and collateral of each Company. Similarly, the term
"Senior Subordinated Obligations" shall include, without
limitation, all obligations, liabilities and indebtedness of such
corporations, or any one of them, to the Purchaser, whether such
obligations, liabilities and indebtedness shall be joint,
several, joint and several or individual.
XII. MISCELLANEOUS
12.1 Expenses. The Company agrees to pay (a) all
reasonable out-of-pocket expenses of Purchaser (including
reasonable fees, expenses and disbursements of Purchaser's
counsel and the allocated costs of staff counsel) in connection
with the preparation, negotiation, enforcement, operation and
administration of this Agreement, the Senior Subordinated Notes,
the Other Agreements, or any documents executed in connection
therewith, or any waiver, modification or amendment of any
provision hereof or thereof; and (b) if an Event of Default
occurs, all court costs and costs of collection, including,
without limitation, reasonable fees, expenses and disbursements
of counsel employed in connection with any and all collection
efforts. The attorneys' fees arising from such services,
including those of any appellate proceedings, and all expenses,
costs, charges and other fees incurred by such counsel or
Purchaser in any way or respect arising in connection with or
relating to any of the events or actions described in this
Article XII shall be payable by the Company to Purchaser, on
demand, and shall be additional Senior Subordinated Obligations
secured under this Agreement. Without limiting the generality of
the foregoing, such expenses, costs, charges and fees may
include: recording costs, appraisal costs, paralegal fees, costs
and expenses; accountants' fees, costs and expenses; court costs
and expenses; photocopying and duplicating expenses; court
reporter fees, costs and expenses; long distance telephone
charges; air express charges, telegram charges; facsimile
charges; secretarial overtime charges; and expenses for travel,
lodging and food paid or incurred in connection with the
performance of such legal services. The Company agrees to
indemnify Purchaser from and hold it harmless against any
documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery by
the Company or any other Person of this Agreement, the Other
Agreements, and any documents executed in connection therewith.
12.2 Indemnification. IN ADDITION TO AND NOT IN
LIMITATION OF THE OTHER INDEMNITIES PROVIDED FOR HEREIN OR IN ANY
OTHER AGREEMENTS, THE COMPANY HEREBY INDEMNIFIES AND AGREES TO
HOLD HARMLESS PURCHASER AND ANY OTHER HOLDERS, AND EVERY
AFFILIATE OF ANY OF THE FOREGOING, AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS, FROM ANY CLAIMS, ACTIONS,
DAMAGES, COSTS, ATTORNEYS' FEES AND EXPENSES (INCLUDING ANY OF
THE SAME ARISING OUT OF THE SOLE OR CONTRIBUTORY NEGLIGENCE OF
THE PERSON TO BE INDEMNIFIED) TO WHICH ANY OF THEM MAY BECOME
SUBJECT, INSOFAR AS SUCH LOSSES, LIABILITIES, CLAIMS, ACTIONS,
DAMAGES, COSTS AND EXPENSES ARISE FROM OR RELATE TO THIS
AGREEMENT OR THE OTHER AGREEMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREBY, OR FROM ANY INVESTIGATION, LITIGATION, OR
OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED
INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATING TO ANY OF
THE FOREGOING, OR FROM ANY VIOLATION OR CLAIM OF VIOLATION OF ANY
APPLICABLE ENVIRONMENTAL LAWS WITH RESPECT TO ANY REAL OR
PERSONAL PROPERTY, OR FROM ANY GOVERNMENTAL OR JUDICIAL CLAIM,
ORDER OR JUDGMENT WITH RESPECT TO ANY REAL OR PERSONAL PROPERTY
OF THE COMPANY, OR FROM ANY BREACH OF THE WARRANTIES,
REPRESENTATIONS OR COVENANTS CONTAINED IN THIS AGREEMENT OR THE
OTHER AGREEMENTS. THE FOREGOING INDEMNIFICATION INCLUDES ANY
SUCH CLAIMS, ACTIONS, DAMAGES, COSTS, AND EXPENSES INCURRED BY
REASON OF THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE PERSON TO BE
INDEMNIFIED, BUT EXCLUDES ANY OF THE SAME INCURRED BY REASON OF
SUCH PERSON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
12.3 Notices. Except as otherwise expressly provided
herein, all communications provided for hereunder shall be in
writing and delivered or mailed by the United States mails,
certified mail, return receipt requested, (a) if to Purchaser,
addressed to Purchaser at the address specified on Annex I hereto
or to such other address as Purchaser may in writing designate,
(b) if to any other Holder, addressed to such Holder at such
address as such Holder may in writing designate, and (c) if to
the Company, addressed to the Company at the address set forth
next to its name on the signature pages hereto or to such other
address as the Company may in writing designate. Notices shall
be deemed to have been validly served, given or delivered (and
"the date of such notice" or words of similar effect shall mean
the date) five (5) days after deposit in the United States mails,
certified mail, return receipt requested, with proper postage
prepaid, or upon actual receipt thereof (whether by noncertified
mail, telecopy, telegram, facsimile, express delivery or
otherwise), whichever is earlier.
12.4 Reproduction of Documents. Subject to the
provisions of Section 12.15, this Agreement and all documents
relating hereto, including, without limitation (a) consents,
waivers and modifications which may hereafter be executed, (b)
documents received by Purchaser at the closing of the purchase of
the Senior Subordinated Note, and (c) financial statements,
certificates and other information previously or hereafter
furnished to Purchaser, may be reproduced by Purchaser by any
photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and Purchaser may destroy
any original document so reproduced. The Company agrees and
stipulates that any such reproduction which is legible shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in
the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence; provided that nothing herein
contained shall preclude the Company from objecting to the
admission of any reproduction on the basis that such reproduction
is not accurate, has been altered, is otherwise incomplete or is
otherwise inadmissible.
12.5 Assignment, Sale of Interest. The Company may not
sell, assign or transfer this Agreement, or the Other Agreements
or any portion thereof, including, without limitation, the
Company's rights, title, interests, remedies, powers and/or
duties hereunder or thereunder. The Company hereby consents to
Purchaser's participation, sale, assignment, transfer or other
disposition (collectively, a "Transfer"), at any time or times
hereafter, of this Agreement, or the Other Agreements to which
the Company is a party, or of any portion hereof or thereof,
including, without limitation, Purchaser's rights, title,
interests, remedies, powers and/or duties hereunder or
thereunder. In connection with any Transfer, the Company agrees
to cooperate fully with Purchaser and any potential Transferee.
Such cooperation shall include, but is not limited to,
cooperating with any audits or other due diligence investigation
undertaken by any potential Transferee.
12.6 Successors and Assigns. This Agreement will inure
to the benefit of and be binding upon the parties hereto and
their respective successors and assigns.
12.7 Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
12.8 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one
such counterpart or reproduction thereof permitted by Section
12.3.
12.9 Reliance on and Survival Provisions. All
covenants, representations and warranties made by the Company
herein and in any certificates delivered pursuant hereto, whether
or not in connection with a closing, (a) shall be deemed to be
material and to have been relied upon by Purchaser,
notwithstanding any investigation heretofore or hereafter made by
Purchaser or on Purchaser's behalf, and (b) shall survive the
delivery of this Agreement and the Senior Subordinated Notes
until the Senior Subordinated Notes and all other monetary
obligations owing by the Company to Purchaser under this
Agreement shall have been paid in full.
12.10 Integration and Severability. This Agreement
embodies the entire agreement and understanding between Purchaser
and the Company, and supersedes all prior agreements and
understandings relating to the subject matter hereof. In case
any one or more of the provisions contained in this Agreement or
in any Senior Subordinated Notes, or any application thereof,
shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
contained herein and therein, and any other application thereof,
shall not in any way be affected or impaired thereby.
12.11 Law Governing. THIS AGREEMENT HAS BEEN
SUBSTANTIALLY NEGOTIATED AND IS BEING EXECUTED, DELIVERED, AND
ACCEPTED, AND IS INTENDED TO BE PERFORMED, IN PART IN THE
COMMONWEALTH OF MASSACHUSETTS. ALL OBLIGATIONS, RIGHTS AND
REMEDIES HEREUNDER, SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS. THE SENIOR SUBORDINATED NOTES SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE SPECIFIED THEREIN. PURCHASER RETAINS ALL RIGHTS UNDER
THE LAWS OF THE UNITED STATES OF AMERICA, INCLUDING THOSE
RELATING TO THE CHARGING OF INTEREST.
12.12 Waivers; Modification. NO PROVISION OF THIS
AGREEMENT MAY BE WAIVED, CHANGED OR MODIFIED, OR THE DISCHARGE
THEREOF ACKNOWLEDGED, ORALLY, BUT ONLY BY AN AGREEMENT IN WRITING
SIGNED BY THE PARTY AGAINST WHOM THE ENFORCEMENT OF ANY WAIVER,
CHANGE, MODIFICATION OR DISCHARGE IS SOUGHT.
12.13 Waiver of Jury Trial. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE COMPANY AND PURCHASER HEREBY
IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE SENIOR SUBORDINATED NOTES OR ANY DOCUMENTS ENTERED
INTO IN CONNECTION THEREWITH OR THE TRANSACTIONS CONTEMPLATED
THEREBY OR THE ACTIONS OF PURCHASER IN THE NEGOTIATION,
ADMINISTRATION, OR ENFORCEMENT THEREOF.
12.14 The Act. This Agreement, the Other Agreements and
all transactions contemplated hereby and thereby are subject to
provisions of the Act, and shall be governed thereby to the
extent of any conflict therewith.
12.15 Confidentiality. Each Purchaser and each Holder
agrees to keep confidential any information delivered by the
Company to such Person under this Agreement; provided, however,
that nothing in this Section 12.15 will prevent such Person from
disclosing such information (a) to any Affiliate of such Person
or any actual or potential purchaser, participant, assignee, or
transferee of such Person's rights or obligations hereunder that
agrees to be bound by the terms of this Section 12.15, (b) upon
order of any court or administrative agency, (c) upon the request
or demand of any regulatory agency or authority having
jurisdiction over such Person, (d) that is in the public domain
otherwise than through the breach of this Section 12.5 by any
such Person, (e) that has been obtained from any Person that is
not a party to this Agreement or an Affiliate of any such party
without breach by such Person of a confidentiality obligation
known to such Holder, (f) in connection with the exercise of any
remedy under this Agreement, (g) to the certified public
accountants of such Person, or (h) to the Senior Lender pursuant
to the terms of the Senior Subordination Agreement. The Company
agrees that such Person will be presumed to have met its
obligations under this Section 12.15 to the extent that it
exercises the same degree of care with respect to information
provided by the Company as it exercises with respect to its own
information of similar character.
IN WITNESS WHEREOF, the Company and Purchaser have caused
this Agreement to be executed and delivered by their respective
officers thereunto duly authorized.
COMPANY:
LABOR READY, INC.
By:
Name: Glenn A. Welstad
Its: Chief Executive Officer
LABOR READY OF NEVADA, INC.
By:
Name: Glenn A. Welstad
Its: Chief Executive Officer
LABOR READY FRANCHISE DEVELOPMENT CORP. INC.
By:
Name: Glenn A. Welstad
Its: Chief Executive Officer
Company's Address for Notices:
2156 Pacific Avenue South
Tacoma, Washington 98402
Attn: Glenn A. Welstad
Facsimile: (206) 383-9311
with copies to:
Brad E. Herr, P.S.
2150 North Pines, Suite 202
Spokane, Washington 99206-7624
Attn: Brad E. Herr, Esq.
Facsimile: (509) 928-9338
Preston Gates & Ellis
701 5th Avenue, Suite 5000
Seattle, Washington 98104
Attn: Mark Beatty, Esq.
Facsimile: (206) 623-7022
PURCHASER:
SEACOAST CAPITAL PARTNERS LIMITED PARTNERSHIP
By: Seacoast Capital Corporation,
its general partner
By:
Name: Thomas W. Gorman
Title: Vice President
Amount of Senior Subordinated Note: $5,000,000
ALLIED INVESTMENT CORPORATION
By:
Name: George Stelljes III
Title: Senior Vice President
Amount of Senior Subordinated Note: $2,650,000
ALLIED INVESTMENT CORPORATION II
By:
Name: George Stelljes III
Title: Senior Vice President
Amount of Senior Subordinated Note: $1,300,000
ALLIED CAPITAL CORPORATION II
By:
Name: George Stelljes III
Title: Senior Vice President
Amount of Senior Subordinated Note: $1,050,000