MERIDIAN FINANCIAL CORPORATION
SECURITIES PURCHASE AGREEMENT
Dated as of March 28, 1997
3,000 Shares Series C Convertible Preferred Stock
$3,500,000 10.0% Subordinated Notes
Table of Contents
ARTICLE I. PURCHASE OF THE PURCHASED SECURITIES 1
SECTION 1.01 Purchase and Sale of Preferred Shares 1
SECTION 1.02 Purchase and Sale of Notes 1
SECTION 1.03 Closing 1
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE EXECUTIVE SHAREHOLDERS 2
SECTION 2.01 Organization, Qualifications and Corporate Power
2
SECTION 2.02 Authorization of Agreements, Etc. 2
SECTION 2.03 Validity 3
SECTION 2.04 Approvals, Consents, Etc. 3
SECTION 2.05 Authorized Capital Stock 3
SECTION 2.06 Financial Statements 5
SECTION 2.07 Events Subsequent to the Date of the
December
Balance Sheet 5
SECTION 2.08 Litigation; Compliance with Law 7
SECTION 2.09 Proprietary Information of Third Parties 7
SECTION 2.10 Intellectual Properties. 8
SECTION 2.11 Title to Properties 8
SECTION 2.12 Leasehold Interests 8
SECTION 2.13 Insurance 9
SECTION 2.14 Taxes 9
SECTION 2.15 Lease Agreements 10
SECTION 2.16 Other Agreements 11
SECTION 2.17 Assumptions, Guaranties, Etc. of
Indebtedness of
other Persons 12
SECTION 2.18 Disclosure 13
SECTION 2.19 SEC Documents 13
SECTION 2.20 Brokers 13
SECTION 2.21 Transactions with Affiliates 13
SECTION 2.22 Related Entities 14
SECTION 2.23 Employees 14
SECTION 2.24 U.S. Real Property Holding Corporation 14
SECTION 2.25 Environmental Protection 14
SECTION 2.26 ERISA 15
SECTION 2.27 Illegal Payments 16
SECTION 2.28 Interest in Competitors, Etc 16
SECTION 2.29 Books and Records 16
SECTION 2.30 Federal Reserve Regulations 16
SECTION 2.3 Limitation Regarding Executive Shareholders
16
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS 17
SECTION 3.01 Authorization of Agreements, Etc 17
SECTION 3.02 Validity 17
SECTION 3.03 Investment Representations 17
ARTICLE IV. PRE-CLOSING COVENANTS OF THE COMPANY 18
SECTION 4.01 Access to Information 18
SECTION 4.02 Conduct of Business 18
SECTION 4.03 Negative Covenants 18
SECTION 4.04 Additional Financial Information 19
SECTION 4.05 Consents 19
SECTION 4.06 Consummation of Transactions 19
ARTICLE V. CONDITIONS 19
SECTION 5.01 Conditions to Purchaser's Obligations 19
SECTION 5.02 Conditions to Obligations of the Company
and the
Executive
Shareholders. 21
ARTICLE VI. COVENANTS OF THE COMPANY 21
SECTION 6.01 Financial Statements, Reports, Etc. 21
SECTION 6.02 Right of Participation 23
SECTION 6.03 Corporate Existence 24
SECTION 6.04 Properties, Business, Insurance 24
SECTION 6.05 "Key Person" Insurance 24
SECTION 6.06 Inspection, Consultation and Advice 24
SECTION 6.07 Restrictive Agreements Prohibited 24
SECTION 6.08 Transactions with Affiliates 24
SECTION 6.09 Use of Proceeds 25
SECTION 6.10 Board of Directors Meetings 25
SECTION 6.11 By-laws 25
SECTION 6.12 Compliance with Laws 25
SECTION 6.13 Keeping of Records and Books of Account 25
SECTION 6.14 Change in Business or Plan 25
SECTION 6.15 Disposal of Property 25
SECTION 6.16 Payment of Obligations 26
SECTION 6.17 Dividends and Similar Transactions 26
SECTION 6.18 Rule 144A Information 26
SECTION 6.19 Salary and Bonus Plan 27
SECTION 6.20 Termination of Covenants27
ARTICLE VII. COVENANTS OF THE EXECUTIVE SHAREHOLDERS 27
SECTION 7.01 Transfers of Shares 27
SECTION 7.02 Certain Restrictive Covenants 27
SECTION 7.03 Devotion of Time 30
SECTION 7.04 Related Entities 30
ARTICLE VIII. PURCHASES OF ADDITIONAL NOTES 30
SECTION 8.01 Purchase Request 30
SECTION 8.02 Conditions Precedent 31
ARTICLE IX. MISCELLANEOUS 32
SECTION 9.01 Fees and Expenses 32
SECTION 9.02 Survival of Agreements 32
SECTION 9.03 Parties in Interest 32
SECTION 9.04 Notices 32
SECTION 9.05 Assignment 33
SECTION 9.06 Remedies 33
SECTION 9.07 Waiver 33
SECTION 9.08 Governing Law 33
SECTION 9.09 Entire Agreement 34
SECTION 9.10 Counterparts 34
SECTION 9.11 Amendments 34
SECTION 9.12 Severability 34
SECTION 9.13 Headings 34
SECTION 9.14 Certain Defined Terms 34
SECTION 9.15 Required Vote 35
SECTION 9.16 Obligations Several 35
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT A Terms of Series C Preferred Stock
EXHIBIT B Form of Note
EXHIBIT C Form of Opinion of Counsel to the Company
EXHIBIT D Form of Voting Agreement
EXHIBIT E Form of Registration Rights Agreement
EXHIBIT F Form of Executive Share Agreement
SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Fee Allocation
This SECURITIES PURCHASE AGREEMENT, dated as of March 28,
1997 (this "Agreement"), is among Meridian Financial
Corporation, an Indiana corporation (the "Company"), the
several purchasers named on Schedule I (individually a
"Purchaser" and collectively the "Purchasers"), Michael F.
McCoy ("McCoy") and William L. Wildman ("Wildman"; together
with McCoy, the "Executive Shareholders").
WHEREAS, the Company wishes to issue and sell to the
Purchasers (a) an aggregate of 3,000 shares of Series C
Convertible Preferred Stock, $1,000 liquidation preference,
of the Company (the "Preferred Shares") and (b) an aggregate
principal amount of up to $3,500,000 of 10% subordinated
notes due March 31, 2002 of the Company (the "Notes"); and
WHEREAS, the Purchasers, severally, wish to purchase the
Preferred Shares and the Notes (collectively, the "Purchased
Securities") on the terms and subject to the conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and the
mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE .
PURCHASE OF THE PURCHASED SECURITIES
SECTION .Purchase and Sale of Preferred Shares. Subject to
the terms and
conditions hereof and on the basis of the representations and
warranties set forth herein, the
Company agrees to issue and sell to each Purchaser, and each
Purchaser hereby agrees to
purchase from the Company, the number of Preferred Shares set
forth opposite the name of
such Purchaser under the heading "Number of Preferred Shares
to be Purchased" on
Schedule I, at the aggregate purchase price set forth
opposite the name of such Purchaser
under the heading "Aggregate Purchase Price for Preferred
Shares" on Schedule I. The
Company shall amend its articles of incorporation (the
"Charter") prior to the Closing Date
(as defined in Section 1.03) to authorize for issuance the
Preferred Shares, with the terms
set forth on Exhibit A.
SECTION .Purchase and Sale of Notes. Subject to the terms
and conditions
hereof and on the basis of the representations and warranties
set forth herein, the Company
agrees to issue and sell to each Purchaser, and each
Purchaser hereby agrees to purchase
from the Company, (a) at the Closing (as defined in Section
1.03), the aggregate principal
amount of Notes set forth opposite the name of such Purchaser
under the heading "Closing
Notes" on Schedule I (each, a "Closing Note" and
collectively, the "Closing Notes") and
(b) following the Closing, and subject to the provisions of
Article VIII, the aggregate
principal amount of Notes set forth opposite the name of such
Purchaser under the heading
"Additional Notes" on Schedule I (each, an "Additional Note"
and collectively, the
"Additional Notes"). The Company shall authorize the Notes
for issuance and sale to
Purchasers in accordance with this Agreement. All Notes
shall be dated the date of their
issue and shall be in the form of Exhibit B.
SECTION .Closing. The closing for the purchase and sale of
the Preferred
Shares and the Closing Notes (the "Closing") shall take place
at the offices of Altheimer &
Gray, 10 South Wacker Drive, Suite 4000, Chicago, IL 60606,
at 10:00 a.m., Chicago
time, on March 28, 1997, or at such other location, date and
time as may be agreed upon
between the Purchasers and the Company (such date being
referred to herein as the
"Closing Date"). At the Closing, the Company shall issue and
deliver to each Purchaser (a)
a stock certificate or certificates in definitive form,
registered in the name of such
Purchaser, representing the Preferred Shares being purchased
by such Purchaser at the
Closing and (b) the Closing Notes being purchased by such
Purchaser, executed by the
Company. As payment in full for the Preferred Shares and the
Closing Notes being
purchased by it under this Agreement, against delivery of the
stock certificate or certificates
and Closing Notes as aforesaid, at the Closing each Purchaser
shall transfer to the account
of the Company by wire transfer the amount set forth opposite
the name of such Purchaser
under the heading "Aggregate Closing Date Purchase Price" on
Schedule I.
ARTICLE .
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE EXECUTIVE SHAREHOLDERS
The Company and each Executive Shareholder, jointly and
severally, represent and warrant to the Purchasers that,
except as set forth in the Disclosure Schedule attached as
Schedule II (the "Disclosure Schedule"):
SECTION .Organization, Qualifications and Corporate Power.
()The Company is a corporation duly incorporated and validly
existing under the laws of the State of Indiana and is duly
licensed or qualified to transact business as a foreign
corporation and is in good standing (i) in each jurisdiction
in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires
such licensing or qualification, except where the failure to
be so qualified would not have a material adverse effect on
the Company, and (ii) in each jurisdiction in which either
the principal place of business of any lessee of Leased
Equipment (as defined in Section 2.15) or any Leased
Equipment is located. The Disclosure Schedule sets forth a
list of all jurisdictions in which the Company is qualified
to transact business. The Company has the corporate power
and authority (i) to own and hold its properties and to carry
on its business as now conducted and as proposed to be
conducted, (ii) to execute, deliver and perform its
obligations under this Agreement and each instrument or
document to be executed or delivered by it pursuant to this
Agreement (each, a "Company Ancillary Document"), (iii) to
issue, sell and deliver the Preferred Shares and the Notes
and (iv) to issue and deliver the Common Shares, without par
value, of the Company ("Common Stock") issuable upon
conversion of the Preferred Shares (the "Conversion Shares").
Each of the Executive Shareholders has full capacity to
execute, deliver and perform his obligations under this
Agreement and each instrument or document to be executed or
delivered by him pursuant to this Agreement (each, an
"Executive Shareholder Ancillary Document").
()The Company does not (i) own of record or beneficially,
directly or indirectly, any shares of capital stock or
securities convertible into capital stock of any other
corporation or any participating interest in any partnership,
joint venture or other non-corporate business enterprise or
(ii) control, directly or indirectly, any entity.
SECTION .Authorization of Agreements, Etc.
()The execution and delivery by the Company of this Agreement
and each Company Ancillary Document, the performance by the
Company of its obligations hereunder and thereunder, the
issuance, sale and delivery of the Preferred Shares and the
Notes and the issuance and delivery of the Conversion Shares
have been duly authorized by all requisite corporate action
and will not violate any provision of law, any order of any
court or other agency of government, the Charter or the By-
laws of the Company, as amended (the "By-laws"), or any
provision of any indenture, agreement or other instrument to
which the Company or any of its properties or assets is
bound, or conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under
any such indenture, agreement or other instrument, or result
in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature upon any of
the properties or assets of the Company.
()When issued in accordance with this Agreement, the
Preferred Shares will be validly issued, fully paid and
nonassessable shares of Series C Convertible Preferred Stock
and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through
the Company except as set forth in any instrument or document
to be executed or delivered by the Purchasers pursuant to
this Agreement (each, a "Purchaser Ancillary Document"). The
Conversion Shares have been duly reserved for issuance upon
conversion of the Preferred Shares and, when issued upon
conversion of the Preferred Shares, will be validly issued,
fully paid and nonassessable shares of Common Stock and will
be free and clear of all liens, charges, restrictions, claims
and encumbrances imposed by or through the Company except as
set forth in any Purchaser Ancillary Document. Neither the
issuance, sale or delivery of the Preferred Shares or the
Notes nor the issuance or delivery of the Conversion Shares
is subject to any preemptive right of shareholders of the
Company or to any right of first refusal or other right in
favor of any person.
SECTION .Validity. This Agreement has been duly executed and
delivered by the Company and each of the Executive
Shareholders and constitutes the legal, valid and binding
obligation of the Company and each of the Executive
Shareholders, enforceable against each such party in
accordance with its terms. Each Company Ancillary Document
and Executive Shareholder Ancillary Document, when executed
and delivered in accordance with this Agreement, will
constitute the legal, valid and binding obligation of the
Company or the Executive Shareholders, as the case may be,
enforceable against such party in accordance with its terms.
SECTION .Approvals, Consents, Etc. Subject to the accuracy
of the representations and warranties of the Purchasers set
forth in Article III, no registration or filing with, or
consent or approval of or other action by, any Federal, state
or other governmental agency or instrumentality or other
person is or will be necessary for the valid execution,
delivery and performance by the Company or the Executive
Shareholders of this Agreement, any Company Ancillary
Document or any Executive Shareholder Ancillary Document, the
issuance, sale and delivery of the Preferred Shares or the
Notes or, upon conversion of the Preferred Shares, the
issuance and delivery of the Conversion Shares, other than
(a) filings pursuant to state securities laws (all of which
filings have been made by the Company, other than those which
are required to be made after the Closing and which will be
duly made on a timely basis) in connection with the sale of
the Preferred Shares and the Notes, (b) with respect to the
Registration Rights Agreement (as defined in Section
5.01(i)), the registration of the securities covered thereby
with the Securities and Exchange Commission (the "SEC") and
filings pursuant to state securities laws and (c) a filing
with the Indiana Secretary of State to amend the Charter to
designate the terms of the Preferred Shares..
SECTION .Authorized Capital Stock.
()The authorized capital stock of the Company consists of (i)
10,000 Special Shares, without par value (the "Preferred
Stock"), of which 1,000 shares have been designated Series A
Preferred Stock, 1,500 shares have been designated Series B
Preferred Stock and 3,000 shares have been designated Series
C Convertible Preferred Stock and (ii) 10,000 shares of
Common Stock. Except for the Series B Preferred Stock, all
of which will be redeemed on the Closing Date, no shares of
Common Stock or Preferred Stock have been reacquired by the
Company and are held in its treasury. There are no
restrictions on the transfer of shares of capital stock of
the Company other than those imposed by the Charter and By-
laws, applicable Federal and state securities laws, the
Restrictive Stock Transfer Agreements described in the
Disclosure Schedule executed by certain holders of Common
Stock and/or Series A Preferred Stock, those restrictions
applicable to the Series B Preferred Stock as set forth in
the Charter, and those restrictions on transfer expressly set
forth in this Agreement, the Company Ancillary Documents, the
Purchaser Ancillary Documents and the Executive Shareholder
Ancillary Documents. To the knowledge of the Company and the
Executive Shareholders, other than as provided in the
preceding sentence, there are no agreements, understandings,
trusts or other collaborative arrangements concerning the
voting or transfer of shares of capital stock of the Company.
The shareholders of record and holders of subscriptions,
warrants, options, convertible securities and other rights
(contingent or other) to purchase or otherwise acquire from
the Company equity securities of the Company, and the number
of shares of capital stock and the number of such
subscriptions, warrants, options, convertible securities and
other such rights held by each such holder, are as set forth
in the Disclosure Schedule. The designations, powers,
preferences, rights, qualifications, limitations and
restrictions of each class and series of authorized capital
stock of the Company are as set forth in the Charter, a copy
of which is included in the Disclosure Schedule, and all such
designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and
enforceable and in accordance with all applicable laws. The
Company is not in arrears with respect to dividends payable
under the terms of any series of Preferred Stock. Except as
provided in this Agreement or as set forth in the Disclosure
Schedule, (i) no person owns of record any shares of capital
stock of the Company, (ii) no subscription, warrant, option,
convertible security or other right (contingent or other) to
purchase or otherwise acquire from the Company equity
securities of the Company is authorized or outstanding and
(iii) there is no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible securities or
other such rights or, except for the redemption of the Series
B Preferred Stock and the warrants issued to the holders
thereof, to distribute to holders of any of its equity
securities any evidence of indebtedness or asset in respect
of such equity securities. All of the outstanding securities
of the Company were issued in compliance with all applicable
Federal and state securities laws. The offering of the
shares of Series A Preferred Stock and shares of Common Stock
referenced in the Blue Sky Memorandum dated November 29, 1993
of Baker & Daniels, counsel to the Company, as supplemented
by the Supplemental Blue Sky Memorandum, dated December 17,
1993, a copy of which is included in the Disclosure Schedule
(the "Blue Sky Memorandum"), was conducted as described in
the Blue Sky Memorandum, all facts assumed in the Blue Sky
Memorandum relating to the Company were true as of any
relevant time and, to the knowledge of the Company and the
Executive Shareholders, all facts assumed in the Blue Sky
Memorandum other than those relating to the Company were true
as of any relevant time .
()The Disclosure Schedule contains the form of redemption
agreement (the "Series B Redemption Agreement") to be entered
into between the Company and each holder of Series B
Preferred Stock or related warrants to purchase Common Stock
(the "Series B Holders") with respect to the redemption on or
prior to the Closing of all of the outstanding shares of
Series B Preferred Stock and such warrants. Upon the
redemption by the Company of the Series B Preferred Stock
and related warrants in accordance with the terms of the
Series B Redemption Agreement, (i) all of the outstanding
shares of Series B Preferred Stock and all of such warrants
shall be canceled and shall no longer be outstanding and (ii)
the Company shall have no liability (and no Series B Holder
or any other person shall have any claim of any kind against
the Company) with respect to or arising out of the ownership
at any time of any shares of Series B Preferred Stock or such
warrants.
SECTION .Financial Statements.
()The Company has furnished to the Purchasers: (i) the
audited balance sheet of the Company as of September 30,
1996, and the related audited statements of operations,
shareholders' equity and cash flows of the Company for the
year ended September 30, 1996 (the "Audited Financial
Information") and (ii) the unaudited balance sheet of the
Company as of December 31, 1996, and the related unaudited
statements of earnings (loss) and cash flows of the Company
for the three months ended December 31, 1996 (the "Unaudited
Financial Information"; the Audited Financial Information and
the Unaudited Financial Information being collectively
referred to herein as the "Financial Information"). The
Financial Information has been prepared in accordance with
generally accepted accounting principles consistently applied
and fairly presents the financial position of the Company as
of the respective dates thereof and the results of its
operations and cash
flows for the respective periods covered thereby.
()As of December 31, 1996, to the knowledge of the Company
and the Executive Shareholders, the Company had no contingent
or unasserted liabilities which, in the aggregate, could have
a material adverse effect on the Company or its business,
which were not disclosed in the balance sheet of the Company
included in the Unaudited Financial Information (the
"December Balance Sheet").
SECTION .Events Subsequent to the Date of the December
Balance Sheet. Since December 31, 1996, the Company has only
conducted its business in the usual and ordinary course and
consistent with the past practices of the Company, and,
whether or not in the ordinary course of its business, has
not:
()incurred any material fixed or contingent obligation,
liability or commitment except (i) trade or business
obligations incurred in the ordinary course of the Company's
business, none of which is materially adverse or was entered
into for an inadequate consideration or with any shareholder
or any affiliate of any shareholder, (ii) obligations under
Lease Agreements (as defined in Section 2.15) (x) entered
into in the ordinary course of business and (y) which have
not been entered into with any shareholder of the Company or
any affiliate of any such shareholder, (iii) obligations
under this Agreement and the Company Ancillary Documents and
(iv) the obligation to redeem the Series B Preferred Stock
and related warrants pursuant to the Series B Redemption
Agreements,
()discharged or satisfied any lien or encumbrance or paid any
fixed or contingent obligation, liability or commitment,
except (i) current obligations, liabilities or commitments
reflected or reserved against in the December Balance Sheet
and (ii) current obligations, liabilities or commitments
incurred in the ordinary course of business since December
31, 1996,
()transferred, leased, licensed, sold or otherwise conveyed,
or agreed or committed to convey, any of its material assets
or properties, except (i) equipment of the type leased by the
Company in the ordinary course of business pursuant to Lease
Agreements entered into in the ordinary course of business on
the Standard Forms (as defined in Section 2.15), (ii) Lease
Agreements sold in the ordinary course of business and (iii)
collateral assignments of Lease Agreements and pledges of
other assets to Texas Commerce Bank National Association, as
trustee (the "Trustee"), pursuant to the Indenture of Trust
dated as of December 15, 1993, between the Company and the
Trustee, as amended by the First Supplemental Indenture,
dated as of February 15, 1994, between the Company and the
Trustee (as so amended, the "Bond Indenture"),
()waived, released, canceled or compromised any material
debt, claim or right,
()made or entered into any contracts or commitments to make
any capital expenditures (it being understood that capital
expenditures do not include the purchase of or commitment to
purchase, in the ordinary course of business, equipment to be
leased to third parties pursuant to Lease Agreements),
whether or not in the ordinary course of business, that
requires payment by the Company of (i) in excess of ten
thousand dollars ($10,000) with respect to any single
expenditure (or group of related expenditures) or (ii) in
excess of twenty thousand dollars ($20,000) in the aggregate
for all capital expenditures,
()sold, assigned, transferred or granted any right under or
with respect to any licenses, agreements or Intellectual
Property (as defined in Section 2.10),()made or granted any
general wage or salary increase (including any increase
pursuant to any bonus, pension, profit-sharing or other plan
or commitment), paid or agreed to pay any bonus, engaged any
new employee at an annual rate of compensation in excess of
twenty-five thousand dollars ($25,000) or entered into any
employment agreement with any officer or employee,
()declared, set aside or paid any dividend or other
distribution (whether in cash, shares of capital stock or
other securities, property or any combination thereof) in
respect of the capital stock of the Company, other than
dividends on outstanding shares of Preferred Stock in
accordance with the Charter,
()redeemed, repurchased or otherwise acquired any of its
capital stock or other securities, or, except as contemplated
by this Agreement with respect to shares of Series B
Preferred Stock and the related warrants, entered into any
agreement to do so,
()suffered any material adverse change in, or any event or
events which, individually or in the aggregate, have had or
could reasonably be expected to have a material adverse
effect on its properties, business, condition (financial or
otherwise), results of operations or prospects,
() incurred damage to or destruction of any of its assets by
fire, storm or other like or unlike casualty, whether or not
covered by insurance,
()made any increase in or commitment to increase or adopt any
additional employee benefits, or
()entered into any transaction not in the ordinary course of
business, except transactions (none of which are materially
adverse, or could result in any material liability, to the
Company) relating to foreclosure by the Company under its
mortgage and security interests pertaining to Old Indiana
Limited Liability Company (the "Old Indiana Foreclosure").
SECTION .Litigation; Compliance with Law.
()There is no material claim, action, suit, proceeding,
arbitration, investigation, hearing or notice of hearing,
pending or, to the knowledge of the Company or the Executive
Shareholders, threatened, by or before any court or
governmental or administrative agency or authority or private
arbitration tribunal, by, against or involving the Company or
its properties, assets, business or personnel, nor, to the
knowledge of the Company or the Executive Shareholders, are
there any facts that could give rise to any such claim,
action, suit, proceeding, arbitration, investigation or
hearing, except with respect to the Old Indiana Foreclosure.
Neither the Company nor any of its officers, directors or
employees is a party to, or bound by, any material judgment,
writ, injunction, order, award or decree (or agreement
entered into in any governmental, judicial or arbitration
proceeding) with respect to or affecting the properties,
assets, business or personnel of the Company, except with
respect to the Old Indiana Foreclosure. Neither the Company
nor any of its officers, directors or employees has been
permanently or temporarily enjoined or barred by order,
judgment or decree of any court or other tribunal or any
governmental agency or self-regulatory body from engaging in,
or continuing any conduct or practice in connection with, the
business of the Company.
()The Company has all necessary permits, licenses and other
authorizations required to conduct its business as conducted
and as proposed to be conducted, and the Company has been
operating its business pursuant to and in compliance with the
terms of all such permits, licenses and other authorizations,
except for such permits, licenses and authorizations the
failure of which to have or operate in compliance with would
not have a material adverse effect on the Company. There is
no existing law, rule, regulation or order, and the Company
and the Executive Shareholders are not aware of any proposed
law, rule, regulation or order, whether Federal, state or
local, which would prohibit or restrict the Company from, or
otherwise materially adversely affect the Company in,
conducting its business in any jurisdiction in which it is
now conducting business or in which it proposes to conduct
business.
()The Company is not in violation of, and, to the knowledge
of the Company and the Executive Shareholders, there is no
basis for any claim that the Company is in violation of, any
federal, state, local or foreign law, ordinance, rule,
regulation, order or decree currently in effect or, to the
knowledge of the Company and the Executive Shareholders,
proposed to be adopted, the violation of which would have a
material adverse effect on the Company. The Company has not
received notice from any governmental authority alleging
noncompliance with, or any affirmative obligation to correct,
either immediately or over a period of time, any state of
facts under any law, ordinance, rule, regulation, order or
decree, and, to the knowledge of the Company and the
Executive Shareholders, there is no basis for the allegation
of any such noncompliance.
SECTION .Proprietary Information of Third Parties. To the
knowledge of the Company and the Executive Shareholders, no
third party has claimed or has reason to claim that any
person employed by the Company has (a) violated or may be
violating any of the terms or conditions of his employment,
non-competition or nondisclosure agreement with such third
party, (b) disclosed or may be disclosing or utilized or may
be utilizing any trade secret or proprietary information or
documentation of such third party or (c) interfered or may be
interfering in the employment relationship between such third
party and any of its present or former employees. No third
party has requested information from the Company which
suggests that such a claim might be contemplated. To the
knowledge of the Company or the Executive Shareholders, none
of the execution or delivery of this Agreement, or the
carrying on of the business of the Company as officers,
employees or agents by any officer, director or key employee
of the Company, or the conduct or proposed conduct of the
business of the Company, will conflict with or result in a
breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or
instrument under which any such person is obligated.
SECTION .Intellectual Properties. The Company owns or
possesses adequate licenses or other valid rights to use,
without the making of any payment to others (or the
obligation to grant rights to others in exchange), all of the
Intellectual Property used in the conduct of its businesses.
The conduct of the business of the Company as currently being
conducted or as presently proposed to be conducted does not
and will not infringe, conflict with, misappropriate or
otherwise misuse any rights to Intellectual Property of
others. The validity of and title to the Intellectual
Property owned by or licensed to the Company has not been
questioned in any litigation to which the Company is a party,
nor, to the knowledge of the Company and the Executive
Shareholders, is any such litigation threatened. Neither the
Company nor either Executive Shareholder knows of any
unauthorized use, infringement, misappropriation or other
misuse by others of any Intellectual Property owned by or
licensed to the Company. "Intellectual Property" means (a)
all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements
thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and
reexaminations thereof, (b) all trademarks, service marks,
trade dress, logos, slogans, trade names, and corporate
names, together with all translations, adaptations,
derivations and combinations thereof and including all
goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (d) all
trade secrets and confidential business information
(including ideas, research, know-how, technical data,
customer lists, franchisor data, underwriting procedures and
business and marketing plans and proposals), (e) all computer
software (including data and related documentation), (f) all
other proprietary rights and (g) all copies and tangible
embodiments thereof (in whatever form or medium).
SECTION .Title to Properties. The Company has good, clear
and marketable title to its properties and assets reflected
on the December Balance Sheet or acquired by it since the
date of the December Balance Sheet (other than properties and
assets disposed of in the ordinary course of business since
the date of the December Balance Sheet), and all such
properties and assets are free and clear of mortgages,
pledges, security interests, liens, charges, claims,
restrictions and other encumbrances (including without
limitation, easements and licenses), except for liens for
current taxes not yet due and payable and minor imperfections
of title, if any, not material in nature or amount and not
materially detracting from the value or impairing the use of
the property subject thereto or impairing the operations or
proposed operations of the Company, and except for liens and
encumbrances granted pursuant to the Bond Indenture or to
third party lenders to the Company pursuant to financing
arrangements disclosed in the Disclosure Schedule ("Financing
Liens").
SECTION .Leasehold Interests. Each lease or agreement to
which the Company is a party under which it is a lessee of
any property, real or personal, is a valid and subsisting
agreement, duly authorized and entered into, without any
default of the Company thereunder and, to the knowledge of
the Company and the Executive Shareholders, without any
default thereunder of any other party thereto. No event has
occurred and is continuing which, with due notice or lapse of
time or both, would constitute a default or event of default
by the Company under any such lease or agreement or, to the
knowledge of the Company or the Executive Shareholders, by
any other party thereto. The Company's possession of such
property has not been disturbed and, to the knowledge of the
Company and the Executive Shareholders, no claim has been
asserted against the Company adverse to its rights in such
leasehold interests. The Company does not own any real
property.
SECTION .Insurance.
()The Disclosure Schedule sets forth a list of all insurance
policies and fidelity and surety bonds owned by the Company
or naming the Company as an insured (except for insurance
policies of lessees under Lease Agreements, which policies
name the Company as an additional insured), covering the
physical properties, assets, business and employees of the
Company, and sets forth with respect to each such policy:
the annual premium, expiration date, name and address of
agent, and a brief description of coverage. There are no
disputes with underwriters under any such insurance policies,
and all premiums due and payable thereunder have been paid.
Except as set forth in the Disclosure Schedule: (i) there
are no pending or threatened terminations, non-renewals or
premium increases with respect to any such policies or bonds;
(ii) neither the Company nor the Executive Shareholders has
knowledge of any conditions or circumstances that might
result in such termination or increase; (iii) no insurance
policies, other than workers compensation policies, are
subject to any retrospective premium adjustment; (iv) all
information supplied by the Company in applications for such
policies is true and correct in all material respects, and
the Company has complied with all reporting requirements
under such policies; and (v) the physical properties, assets
and business operations of the Company are in substantial
compliance with all conditions contained in such policies or
bonds.
()There are no material outstanding or unsatisfied
requirements or recommendations by any insurance company that
issued a policy with respect to any of the properties,
assets, business or employees of the Company or by any
governmental authority requiring or recommending any repairs
or other work to be done on or with respect to, or requiring
or recommending any equipment or facilities to be installed
on or in connection with, the properties or assets of the
Company or requiring or recommending any material change in
the business operations of the Company.
SECTION .Taxes. The Company has filed all tax returns,
Federal, state and local, required to be filed by it, and the
Company has paid all taxes shown to be due by such returns as
well as all other taxes, assessments and governmental charges
which have become due or payable, including without
limitation all taxes which the Company is obligated to
withhold from amounts owing to employees, creditors and third
parties, except to the extent any such taxes are being
contested in good faith by the Company and are described in
the Disclosure Schedule. The Company has established
adequate reserves for all taxes accrued but not yet payable.
The Federal income tax returns of the Company have never been
audited by the Internal Revenue Service. No deficiency
assessment with respect to or proposed adjustment of the
Company's Federal, state, county or local taxes is pending
or, to the knowledge of the Company and the Executive
Shareholders, threatened. There is no tax lien, whether
imposed by any Federal, state, county or local taxing
authority, outstanding against the assets, properties or
business of the Company. Neither the Company nor any of its
present or former shareholders has ever filed an election
pursuant to Section 1362 of the Internal Revenue Code of
1986, as amended (the "Code"), that the Company be taxed as
an S corporation.
SECTION .Lease Agreements.
() Attached to the Disclosure Schedule are copies of the
Company's standard forms (the "Standard Forms") of agreements
for the lease of equipment by the Company in the ordinary
course of its business ("Lease Agreements").
()Attached to the Disclosure Schedule is a copy of the
Company's
most recent Active Lease Report, which sets forth a true and
accurate description of each Lease Agreement in effect as of
the date thereof.
()The Company has good title to all Lease Agreements and
equipment that is subject to any Lease Agreement (the "Leased
Equipment"), in each case, free and clear of all mortgages,
liens, encumbrances, security interests, adverse claims,
contracts of sale, restrictions on use or transfer or other
defects of title granted by the Company, except (i) security
interests granted to the Company, (ii) the rights of lessees
of Leased Equipment as set forth on the Standard Forms, (iii)
artisans' or landlords' liens, (iv) defects in title that
individually would not result in a loss and (v) Financing
Liens.
()Each Lease Agreement and all instruments granted to the
Company as security for the performance of any lessee or
obligor under such Lease Agreement (i) were entered into in
bona fide transactions for valuable consideration and (ii) to
the knowledge of the Company and the Executive Shareholders,
constitute the valid and binding obligations of each lessee
or obligor thereunder, enforceable against each such party in
accordance with their respective terms.
()Each Lease Agreement, together with its related documents
retained together with such Lease Agreement in the records of
the Company, constitutes the sole
and entire agreement between the lessee or other obligor
thereunder and the Company
respecting the Leased Equipment subject to such Lease
Agreement.
()The Company has a valid and perfected first priority
security interest in all Leased Equipment, and all filings
that are necessary or prudent to perfect the Company's
security or other interest in Leased Equipment, have been
duly and timely made.
()There has not occurred any default by the Company under any
Lease Agreement, or any event which, with the passage of time
or at the election of the lessee or other obligor thereunder,
would become a default by the Company thereunder.
()To the knowledge of the Company and the Executive
Shareholders, there has not occurred any material default by
any lessee or other obligor under any Lease Agreement. For
purposes of this Section 2.15(h), a "material default" is a
default which would cause the Company, consistent with
prudent business practices, to consider declaring a default
under the applicable Lease Agreement.
() Except as set forth in the Disclosure Schedule, the
Company has not rewritten or amended any Lease Agreement
following (or in contemplation of) any event which
constituted a default or, with the passage of time or at the
election of the Company, would have become a default by the
lessee or other obligor thereunder.
() All payments under Lease Agreements, as shown on the
records of the Company, were made on or about the dates
indicated in such records and were made by the persons shown
as indebted or obligated with respect to such Lease
Agreements.
()To the knowledge of the Company and the Executive
Shareholders, there are no claims or defenses of any lessee
or other obligor with respect to any Lease Agreement that is
in monetary default, including set-offs, counterclaims, right
of cancellation, lack of consideration, fraud, forgery or
alteration.
()The Company is not a party to any Lease Agreement with any
affiliate of the Company or of any director, officer,
employee, agent or shareholder of the Company.
() No consent is required to be obtained by the Company from
any lessee or other obligor with respect to any Lease
Agreement in connection with the execution, delivery and
performance by the Company of this Agreement or the
consummation of the transactions contemplated hereby.
()The Disclosure Schedule sets forth a list of each Lease
Agreement where any amount required to be paid to the Company
by the lessee or other obligor thereunder is past due, in
accordance with the terms of such Lease Agreement, for a
period of more than 30 days.
()The Company does not purchase equipment that is not, or
does not become, at the time of such purchase, subject to a
valid Lease Agreement.
The Company has made available to the Purchasers, prior to
the date of this Agreement, true and complete copies of all
Lease Agreements, and all amendments and exhibits thereto.
SECTION .Other Agreements. The Company is not a party to or
otherwise bound by any written or oral:
()agreement for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in
excess of its normal operating requirements;
()bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or
other plan, agreement or understanding pursuant to which
benefits are provided to any employee of the Company (other
than group insurance plans applicable to employees
generally);
()agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or
security interest on, any asset of the Company, including,
without limitation, any factoring agreement or agreement for
the sale or assignment of Lease Agreements or accounts
receivable;
()Lease Agreement, other than Lease Agreements entered into
in the ordinary course of business on the Standard Forms
(without any material modification of such Standard Forms);
()assignment, license, royalty agreement or other agreement
with respect to any Intellectual Property;
()agreement respecting the terms of employment of any
manager, employee, director, officer, consultant or
management company;
()agreement or commitment for the incurrence of any capital
expenditures or the acquisition or construction of any fixed
asset (excluding Leased Equipment) that requires payment of
more than ten thousand dollars ($10,000) in any one case or
twenty thousand dollars ($20,000) in the aggregate for all
such expenditures;
()agreement or commitment for the purchase or provision of
any products or services from or to any of its present or
former affiliates;
()agreement or commitment with any sales agent or
representative;
()contract or agreement limiting the freedom of the Company
or any of its directors, officers, employees or agents to
engage in or compete in any line of business or with any
person or in any area or to use or disclose any information;
()agreement, statute or regulation giving any person the
right to renegotiate or require a reduction in price or
refund of any payments previously made;
()contract or agreement granting any person any right to
purchase any rights, assets or property of the Company, other
than this Agreement; or
()agreement or commitment with any manufacturer or
distributor of equipment of the type leased by the Company in
the ordinary course of its business.
The Company has delivered or made available to the
Purchasers, prior to the date of this Agreement, true and
complete copies of such contracts, agreements, commitments,
indentures, leases, mortgages, arrangements and other
instruments and all amendments and exhibits thereto (or, if
they be oral, true and complete written summaries thereof)
required to be set forth in the Disclosure Schedule pursuant
to this Section 2.16 (collectively, the "Commitments"). Each
of the Commitments is valid, in full force and effect and
enforceable in accordance with its terms, and the Company
has, in all material respects, fulfilled, or taken all action
reasonably necessary to enable it to fulfill when due, all of
its obligations thereunder. There has not occurred any
default by the Company, or any event which, with the passage
of time or at the election of any person other than the
Company, would become a default under any of the Commitments,
nor has there occurred, to the knowledge of the Company or
the Executive Shareholders, any default by others or any
event which, with the passage of time or at the election of
the Company, would become a default under any of the
Commitments. Neither the Company nor any other party is in
arrears in respect of the performance or satisfaction of the
terms or conditions on its part to be performed or satisfied
under any of the Commitments, and no waiver or indulgence has
been granted by any of the parties thereto.
SECTION .Assumptions, Guaranties, Etc. of Indebtedness of
other Persons. The Company has not assumed, guaranteed,
endorsed or otherwise become directly or contingently liable
on any indebtedness of any other person (including, without
limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to
supply funds to or otherwise invest in the debtor, or
otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
SECTION .Disclosure. Neither this Agreement, the Disclosure
Schedule, any Company Ancillary Document, any Executive
Shareholder Ancillary Document, nor the financial projections
and business plan included in the Disclosure Schedule (such
financial projections and business plan collectively, the
"Business Plan"), contains an untrue statement of a material
fact or omits a material fact necessary to make the
statements contained herein or therein not misleading. There
is no fact which the Company has not disclosed to the
Purchasers and of which the Company or either Executive
Shareholder is aware which materially and adversely affects
or could reasonably be expected to materially and adversely
affect the business, prospects, financial condition,
operations, property or affairs of the Company. The
financial projections and other estimates contained in the
Business Plan were prepared by the Company based on the
Company's experience in the industry and on assumptions of
fact and opinions as to future events which the Company and
the Executive Shareholders, at the date of the issuance of
the Business Plan, believed to be reasonable. As of the date
hereof no facts have come to the attention of the Company or
either Executive Shareholder which would, in its or his
opinion, require the Company to revise or amplify the
assumptions underlying such projections and other estimates
or the conclusions derived therefrom.
SECTION .SEC Documents. The Company has filed all documents
required to be filed by it with the SEC. As of their
respective dates, all documents filed by the Company with the
SEC (the "Company SEC Documents") complied in all material
respects with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as the case may
be, and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial
statements of the Company included in the Company SEC
Documents complied as to form in all material respects with
the applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited
statements, as permitted by Form 10-QSB of the SEC) applied
on a consistent basis during the periods involved and fairly
present the financial position of the Company as at the
respective dates thereof and the results of operations and
cash flows for the respective periods then ended (subject, in
the case of the unaudited statements, to normal year-end
audit adjustments and to any other adjustments described
therein).
SECTION .Brokers. Except for the fee payable pursuant to
Section 9.01(b) and a fee of $150,000 payable to Deloitte &
Touche, LLP (of which $100,000 is payable at the Closing and
$50,000 will be payable on the Purchase Date (as defined in
Section 8.01), if any), the Company has no contract,
arrangement or understanding with any broker, finder or
similar agent with respect to the transactions contemplated
by this Agreement.
SECTION .Transactions with Affiliates. Except for employment
arrangements currently in effect between the Company and its
officers and employees with respect to their employment by
the Company in such capacities, no director, officer,
employee or shareholder of the Company, or member of the
family of any such person, or any corporation, partnership,
trust or other entity in which any such person, or any member
of the family of any such person, has a substantial interest
or is an officer, director, trustee, partner or holder of
more than 5% of the outstanding equity thereof, is a party to
any transaction with the Company, including any contract,
agreement or other arrangement providing for the employment
of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to any such
person or firm.
SECTION .Related Entities. The Disclosure Schedule sets
forth a list of all persons, other than the Company, (a)
which are, directly or indirectly, controlled by either of
the Executive Shareholders or (b) of which either Executive
Shareholder (or both Executive Shareholders together),
directly or indirectly, is the holder of at least 5% of the
outstanding equity interests (a "Related Entity").
SECTION .Employees. No officer or key employee of the Company
has advised the Company (orally or in writing) that he or she
intends to terminate employment with the Company. The
Company has complied in all material respects with all
applicable laws relating to the employment of labor,
including provisions relating to wages, hours, equal
opportunity, collective bargaining and the payment of Social
Security and other taxes, and with the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). The
Company is not a party to any collective bargaining agreement
or contract with, or commitment to, any labor union or
association. The Company has not experienced any material
work stoppage, and there is no work stoppage or other
concerted action, grievance, claim of unfair labor practices
or dispute existing or threatened against the Company. There
is no disputed request for representation or other
representation questions existing or threatened, and no union
organization effort is underway, respecting the employees of
the Company.
SECTION .U.S. Real Property Holding Corporation. The Company
is not now and has never been a "United States real property
holding corporation", as defined in Section 897(c)(2) of the
Code and Section 1.897-2(b) of the Regulations promulgated by
the Internal Revenue Service, and the Company has filed with
the Internal Revenue Service all statements, if any, with its
United States income tax returns which are required under
Section 1.897-2(h) of such Regulations.
SECTION .Environmental Protection. The Company has not
caused or allowed, or contracted with any party for, the
generation, use, transportation, treatment, storage or
disposal of any Hazardous Substances in connection with the
operation of its business or otherwise. The Company, the
operation of its business, and any real property that the
Company leases or otherwise occupies or uses (the "Premises")
are in compliance with all applicable Environmental Laws and
orders or directives of any governmental authorities having
jurisdiction under such Environmental Laws, including,
without limitation, any Environmental Laws or orders or
directives with respect to any cleanup or remediation of any
release or threat of release of Hazardous Substances. The
Company has not received any citation, directive, letter or
other communication, written or oral, or any notice of any
proceeding, claim or lawsuit, from any person arising out of
the ownership or occupation of the Premises, or the conduct
of its operations, and the Company is not aware of any basis
therefor. The Company has obtained and is maintaining in
full force and effect all necessary permits, licenses and
approvals required by all Environmental Laws applicable to
the Premises and the business operations conducted thereon,
and is in compliance with all such permits, licenses and
approvals. The Company has not caused or allowed a release,
or a threat of release, of any Hazardous Substance onto, at
or near the Premises, and, to the knowledge of the Company
and the Executive Shareholders, neither the Premises nor any
property at or near the Premises has ever been subject to a
release, or a threat of release, of any Hazardous Substance.
For the purposes of this Agreement, the term "Environmental
Laws" shall mean any Federal, state or local law or ordinance
or regulation pertaining to the protection of human health or
the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Sections 9601, et seq., the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Sections 11001, et seq., and the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901, et seq.; and the term
"Hazardous Substances" shall include oil and petroleum
products, asbestos, polychlorinated biphenyls, urea
formaldehyde and any other materials classified as hazardous
or toxic under any Environmental Laws.
SECTION .ERISA. Neither the Company nor any entity required
to be aggregated with the Company under Sections 414(b), (c),
(m) or (n) of the Code sponsors, maintains, has any
obligation to contribute to, has any liability under, or is
otherwise a party to, any Benefit Plan. For purposes of this
Agreement, "Benefit Plan" shall mean any plan, fund, program,
policy, arrangement or contract, whether formal or informal,
which is in the nature of an employee pension benefit plan
(as defined in Section 3(2) of ERISA), an employee welfare
benefit plan (as defined in Section 3(1) of ERISA) or a
bonus, deferred compensation, severance, salary continuation,
incentive, insurance or fringe benefit plan, program or
arrangement or any similar plan, program or arrangement.
With respect to each Benefit Plan listed in the Disclosure
Schedule, to the extent applicable:()each such Benefit Plan
has been maintained and operated in all material respects in
compliance with its terms and with all applicable provisions
of ERISA, the Code and all regulations, rulings and other
authority issued thereunder;()all contributions required by
law to have been made under each such Benefit Plan (without
regard to any waivers granted under Section 412 of the Code)
to any fund or trust established thereunder or in connection
therewith have been made by the due date thereof;()there has
not been any failure to make any contributions or to pay any
amounts in accordance with the terms of the Benefit Plans,
ERISA or any other law applicable to the Benefit Plans, and
all contributions and payments with respect to Benefit Plans
with respect to periods prior to December 31, 1996 have been
made or appropriately accrued on the December Balance
Sheet;()each such Benefit Plan intended to qualify under
Section 401(a) of the Code is the subject of a favorable
unrevoked determination letter issued by the Internal Revenue
Service as to its qualified status under the Code, which
determination letter may still be relied upon as to such tax
qualified status, and no circumstances have occurred that
would adversely affect the tax qualified status of any such
Benefit Plan;()the actuarial present value of all accrued
benefits under each such Benefit Plan subject to Title IV of
ERISA did not, as of the latest valuation date of such
Benefit Plan, exceed the then current value of the assets of
such Benefit Plan allocable to such accrued benefits, all as
based upon the actuarial assumptions and methods currently
used for such Benefit Plan;()none of such Benefit Plans that
are "employee welfare benefit plans" as defined in Section
3(1) of ERISA provides for continuing benefits or coverage
for any participant or beneficiary of a participant after
such participant's termination of employment; and()neither
the Company nor any trade or business (whether or not
incorporated) under common control with the Company within
the meaning of Section 4001 of ERISA has, or at any time has
had, any obligation to contribute to any "multiemployer plan"
as defined in Section 3(37) of ERISA or any plan subject to
Section 4063 or 4064 of ERISA.
SECTION .Illegal Payments. There is not now, and there has
never been, any employment by the Company of, or beneficial
ownership in the Company by, any governmental or political
official. Neither the Company nor any of its former or
current officers, directors, employees, agents or
representatives has made, directly or indirectly, with
respect to the Company or its business activities, any (a)
bribes or kickbacks, (b) illegal political contributions, (c)
payments from corporate funds not recorded on the books and
records of the Company, (d) payments from corporate funds
that were falsely recorded on the books and records of the
Company, (e) payments from corporate funds to governmental
officials in their individuals capacities for the purpose of
affecting their action or the action of the government they
represent to obtain favorable treatment in securing business
or licenses or to obtain special concessions or (f) illegal
payments from corporate funds to obtain or retain business.
SECTION .Interest in Competitors, Etc. Neither Executive
Shareholder, directly or indirectly, owns any interest in,
controls or is an employee, officer, director or agent of, or
consultant to, any person that is a competitor, supplier,
customer, landlord or tenant of, or otherwise concerned with
or interested in the Company.
SECTION .Books and Records. The books, records and accounts
of the Company (a) are true and complete, (b) have been
maintained in accordance with good business practices and in
compliance with all laws, ordinances, rules, regulations,
orders and decrees applicable to the Company's business, (c)
accurately present and reflect material transactions to which
the Company is or has been a party and (d) are accurately
reflected in the Financial Information. The minute books of
the Company, as previously made available to the Purchasers
and their counsel, contain accurate records of all official
meetings, and accurately reflect all other corporate
proceedings, of the shareholders and the directors of the
Company.
SECTION .Federal Reserve Regulations. The Company is not
engaged in the business of extending credit for the purpose
of purchasing or carrying margin securities (within the
meaning of Regulation G of the Board of Governors of the
Federal Reserve System), and no part of the proceeds from the
sale of the Preferred Shares or the Notes will be used to
purchase or carry any margin security or to extend credit to
others for the purpose of purchasing or carrying any margin
security or in any other manner which would involve a
violation of any of the regulations of the Board of Governors
of the Federal Reserve System.
SECTION .Limitation Regarding Executive Shareholders. The
representations and warranties in this Agreement and in any
Schedules or Exhibits hereto, to the extent given or made by
the Executive Shareholders, are given or made, in each
instance and whether or not so expressed in such
representations and warranties, on the basis of such
Executive Shareholder's actual or presumed knowledge. An
Executive Shareholder shall be deemed to have presumed
knowledge of any facts and circumstances as to which he would
have had actual knowledge if he had exercised reasonable care
in the performance of his duties on behalf of the Company.
ARTICLE .
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally, but not jointly, represents and
warrants to the Company as follows:
SECTION .Authorization of Agreements, Etc. The execution and
delivery by such Purchaser of this Agreement and each
Purchaser Ancillary Document to be delivered by such
Purchaser and the performance by such Purchaser of its
obligations hereunder and thereunder have been duly
authorized by all requisite action of such Purchaser and will
not violate any provision of law, any order of any court or
other agency of government, the governing documents of such
Purchaser or any provision of any indenture, agreement or
other instrument to which such Purchaser is bound.
SECTION .Validity. This Agreement has been duly executed and
delivered by such Purchaser and constitutes the legal, valid
and binding obligation of such Purchaser, enforceable against
such Purchaser in accordance with its terms. Each Purchaser
Ancillary Document to which such Purchaser is a party, when
executed and delivered in accordance with this Agreement,
will constitute the legal, valid and binding obligation of
such Purchaser, enforceable against such Purchaser in
accordance with its terms.
SECTION .Investment Representations. Such Purchaser (a) is
an "accredited investor" within the meaning of Rule 501
promulgated under the Securities Act and was not organized
for the specific purpose of acquiring the Preferred Shares or
the Notes and is domiciled in the state indicated by the
address of such Purchaser as set forth on Schedule I; (b) is
acquiring the Preferred Shares and the Notes being purchased
by it for its own account for the purpose of investment and
not with a view to or for sale in connection with any
distribution thereof; (c) understands that (i) the Preferred
Shares, the Conversion Shares and the Notes have not been
registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2)
thereof or Rule 505 or 506 promulgated under the Securities
Act, (ii) the Preferred Shares, the Conversion Shares and the
Notes must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or
is exempt from such registration, (iii) the Preferred Shares,
the Conversion Shares and the Notes will bear a legend to
such effect and (iv) the Company will make a notation on its
transfer books to such effect; (d) will, if such Purchaser
sells any Conversion Shares pursuant to Rule 144A promulgated
under the Securities Act, take all necessary steps in order
to perfect the exemption from registration provided thereby,
including (i) obtaining on behalf of the Company information
to enable the Company to establish a reasonable belief that
the purchaser is a qualified institutional buyer and (ii)
advising such purchaser that Rule 144A is being relied upon
with respect to such resale; (e) has total assets in excess
of $5,000,000; and (f) has received and reviewed such
documents and information concerning the Company and has had
the opportunity to conduct such discussions with management
of the Company as such Purchaser deems necessary in
connection with the purchase of the Preferred Shares and
Notes by such Purchaser. Nothing in the foregoing shall be
deemed to modify or limit any representation or warranty made
by the Company or the Executive Shareholders in this
Agreement, any Company Ancillary Document or any Executive
Shareholder Ancillary Document, or to modify or limit the
liability of the Company and the Executive Shareholders for
the inaccuracy of any such representation or warranty.
Without limiting the representations and warranties set forth
in Section 2.18, each Purchaser acknowledges that any
projections contained in the Business Plan reflect only the
Company's management's expectations regarding future events
and that such projections are not guarantees of future
results.
ARTICLE .
PRE-CLOSING COVENANTS OF THE COMPANY
The Company hereby covenants and agrees with the Purchasers
that, between the date of this Agreement and the earlier of
the Closing or the date of termination of this Agreement:
SECTION .Access to Information. The Company shall: (a)
allow the Purchasers and their counsel, accountants,
consultants and other representatives reasonable access
during normal business hours to all properties, personnel,
books, accounts, tax returns, contracts, commitments and
records of the Company; (b) provide the Purchasers with
reasonable access to all material customers of and suppliers
to the Company; (c) assure the full assistance and
cooperation of the directors, officers and employees of, and
accountants, legal counsel and other advisors to, the
Company; and (d) furnish to the Purchasers and their counsel,
accountants, consultants and other representatives all such
additional documents and financial and other information with
respect to the business and affairs of the Company as the
Purchasers or their representatives may from time to time
request. The Company and the Executive Shareholders hereby
agree that no investigation by the Purchasers or their
counsel, accountants, consultants or other representatives
shall affect or limit the scope of the representations and
warranties of the Company or the Executive Shareholders made
in this Agreement, any Company Ancillary Document or any
Executive Shareholder Ancillary Document.
SECTION .Conduct of Business. The Company shall: (a)
operate its business only in the usual, regular and ordinary
manner, consistent with past practices and, to the extent
consistent with such operation, use its best efforts to (i)
preserve its present business organization intact, (ii) keep
available the services of its present officers, employees and
agents, (iii) continue its normal marketing, advertising and
promotional expenditures and (iv) preserve its present
beneficial business relationships with customers, suppliers
and others having business dealings with it; (b) maintain its
books, records and accounts in the usual, regular and
ordinary manner and on a basis consistent with prior years;
(c) duly comply with all applicable laws; and (d) perform all
of its obligations under contracts with respect to its
assets, properties and business without default.
SECTION .Negative Covenants. Except as otherwise provided or
contemplated herein, or as the Purchasers may otherwise
consent in writing, neither the Company nor either Executive
Shareholder shall: (a) enter into any transaction or take
any action that would or is reasonably likely to result in
any of the representations and warranties made by the Company
or the Executive Shareholders in this Agreement, any Company
Ancillary Document or any Executive Shareholder Ancillary
Document not being true and correct (i) after such
transaction has been entered into or consummated or such
action has been taken or (ii) as of the Closing, except for
transactions or actions contemplated by this Agreement or
other actions (none of which shall be materially adverse to
the Company) resulting from the operation of the Company's
business in the ordinary course; (b) perform any act which,
if performed, or not perform any act which, if omitted to be
performed, would prevent or excuse the performance of its or
his obligations under this Agreement, any Company Ancillary
Document or any Executive Shareholder Ancillary Document; or
(c) publicize, advertise or, except as may be required by law
or upon advice of counsel, announce or permit any of its
directors, officers, employees or agents to publicize,
advertise or announce publicly the entering into of this
Agreement, any Company Ancillary Document or any Executive
Shareholder Ancillary Document or the terms of this Agreement
or the transactions contemplated hereby.
SECTION .Additional Financial Information. The Company shall
deliver to the Purchasers, as soon as practicable, copies of
all financial information prepared with respect to the
Company or its business for internal reporting purposes, and
all such financial information shall be prepared on a basis
consistent with prior periods except as specifically set
forth therein.
SECTION .Consents. The Company shall use its best efforts to
obtain all consents required to be set forth in the
Disclosure Schedule pursuant to Section 2.04.
SECTION .Consummation of Transactions. The Company and the
Executive Shareholders shall use their respective reasonable
best efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary to
consummate the transactions contemplated by this Agreement as
soon as practicable.
ARTICLE .
CONDITIONS
SECTION .Conditions to Purchaser's Obligations. The
obligation of each Purchaser to purchase and pay for the
Preferred Shares and the Closing Notes is subject to the
satisfaction, on or before the Closing Date, of each of the
following conditions, each of which may be waived at the
option of such Purchaser.
()Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II, any
Company Ancillary Document and any Executive Shareholder
Ancillary Document shall be true, complete and correct on and
as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of
such date, except for changes contemplated by this Agreement
or other changes (none of which shall be materially adverse
to the Company) resulting from the operation of the Company's
business in the ordinary course.
()Performance. The Company and the Executive Shareholders
shall have performed, in all material respects, all
obligations and agreements and complied with all covenants to
be performed or complied with by them on or before the
Closing Date pursuant to this Agreement, any Company
Ancillary Document or any Executive Shareholder Ancillary
Document.
()Closing Certificates. The Purchasers shall have received
certificates of each of the Executive Shareholders, dated the
Closing Date, in form and substance reasonably satisfactory
to the Purchasers and their counsel (i) certifying that the
conditions set forth in Section 5.01(a) and 5.01(b) have been
satisfied and (ii) certifying that resolutions approving this
Agreement and each Company Ancillary Document and the
transactions contemplated hereby and thereby have been duly
adopted by the Board of Directors of the Company.
()Proceedings Satisfactory. All actions, proceedings,
instruments and documents required to carry out the
transactions contemplated by this Agreement or incidental
hereto, and all other related legal matters, shall be
reasonably satisfactory to Altheimer & Gray, counsel to the
Purchasers, and such counsel shall have been furnished with
such other instruments and documents as they shall have
reasonably requested.
()Opinion of Company's Counsel. The Purchasers shall have
received from Baker & Daniels, counsel for the Company and
the Executive Shareholders, an opinion dated the Closing
Date, with respect to the matters set forth on Exhibit C.
()Review of Business and Legal Matters. The Purchasers and
their accountants and counsel shall have completed a review
of business, accounting and legal matters with respect to the
Company, and nothing shall have come to the attention of the
Purchasers or their counsel or accountants that causes the
Purchasers to conclude that (i) the Financial Information
does not present fairly the financial position and results of
operations of the Company as of their respective dates, (ii)
all material customer or supplier relationships of the
Company as of December 31, 1996 or arising since December 31,
1996, will not be available to the Company on substantially
the same terms following the Closing or (iii) there is any
material breach or inaccuracy in the representations and
warranties of the Company or the Executive Shareholders set
forth in this Agreement, any Company Ancillary Document or
any Executive Shareholder Ancillary Document.
()No Material Adverse Change. Since December 31, 1996, there
shall not have occurred and be continuing, and no event shall
have occurred which (in the judgment of the Purchasers) can
be reasonably expected to result in, any material adverse
change in the properties, business, condition (financial or
otherwise), operations or prospects of the Company.
()Voting Agreement. The Company and the Executive
Shareholders shall have executed and delivered a Voting
Agreement in the form of Exhibit D (the "Voting Agreement").
()Registration Rights Agreement. The Company shall have
executed and delivered a Registration Rights Agreement in the
form of Exhibit E (the "Registration Rights Agreement").
()Key Person Life Insurance. The Company shall have applied
for policies of "key person" life insurance on the lives of
each of the Executive Shareholders, with terms as set forth
in Section 6.05; each Executive Shareholder shall have
complied with all requirements requested by the respective
insurers under such policies; and neither the Company nor
either Executive Shareholder shall have any reason to believe
that such policies will not be issued promptly after the
Closing Date.
() Series B Shareholders. Each of the Series B Holders shall
have executed a binding Series B Redemption Agreement with
the Company.
() Other Approvals. All consents, authorizations and
approvals, waivers or exemptions, and filings and
registrations, required to be obtained from or made with any
person in connection with the execution, delivery and
performance by the Company or the Executive Shareholders of
this Agreement, the Company Ancillary Documents and the
Executive Shareholder Ancillary Documents and the
consummation by the Company and the Executive Shareholders of
the transactions contemplated hereby and thereby shall have
been obtained or made, including all such consents,
authorizations and approvals required to be set forth in the
Disclosure Schedule pursuant to Section 2.04, and all
required filings shall have become effective.
()Fees. The Company shall have paid in accordance with
Section 9.01(a) the fees and expenses of the Purchasers
invoiced at the Closing; provided, however, that such fees
and expenses may be paid by the Company out of the proceeds
to the Company of the sale of the Preferred Shares and the
Notes.
SECTION .Conditions to Obligations of the Company and the
Executive Shareholders. The obligations of the Company and
the Executive Shareholders to consummate the transactions
contemplated hereby are subject to the satisfaction, on or
before the Closing Date, of each of the following conditions,
each of which may be waived at the option of the Company or
such Executive Shareholder.
()Representations and Warranties to be True and Correct. The
representations and warranties contained in Article III and
any Purchaser Ancillary Document shall be true, complete and
correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on
and as of such date.
()Performance. The Purchasers shall have performed, in all
material respects, all obligations and agreements and
complied with all covenants to be performed or complied with
by them on or before the Closing Date pursuant to this
Agreement or any Purchaser Ancillary Document.
()Closing Certificates. The Company shall have received
certificates of each of the Purchasers, dated the Closing
Date, in form and substance reasonably satisfactory to the
Company and its counsel certifying that the conditions set
forth in Section 5.02(a) and 5.02(b) have been satisfied.
()Proceedings Satisfactory. All actions, proceedings,
instruments and documents required to carry out the
transactions contemplated by this Agreement or incidental
hereto, and all other related legal matters, shall be
reasonably satisfactory to Baker & Daniels, counsel to the
Company and the Executive Shareholders, and such counsel
shall have been furnished with such other instruments and
documents as they shall have reasonably requested.
()Voting Agreement. The Purchasers shall have executed and
delivered the Voting Agreement.
() Series B Shareholders. Each of the Series B Holders shall
have executed a binding Series B Redemption Agreement with
the Company.
()Executive Share Agreement. The Purchasers shall have
executed and delivered an Executive Share Agreement in the
form of Exhibit F.
ARTICLE .
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers
that:
SECTION .Financial Statements, Reports, Etc. The Company
shall furnish to each holder of Preferred Shares or Notes as
reflected in the books and records of the
Company:
()within 90 days after the end of each fiscal year of the
Company, a consolidated balance sheet of the Company as of
the end of such fiscal year and the related consolidated
statements of income, shareholders' equity and cash flows for
the fiscal year then ended, prepared in accordance with
generally accepted accounting principles and certified by a
firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company;
()within 30 days after the end of each calendar month in each
fiscal year of the Company, an unaudited consolidated balance
sheet of the Company and the related unaudited consolidated
statements of income, shareholders' equity and cash flows,
prepared in accordance with generally accepted accounting
principles and certified by the Chief Financial Officer of
the Company, such consolidated balance sheet to be as of the
end of such month and such consolidated statements of income,
shareholders' equity and cash flows to be for such month and
for the period from the beginning of the fiscal year to the
end of such month, in each case with comparative statements
for the prior fiscal year;
()at the time of delivery of each annual financial statement
pursuant to Section 6.01(a), a certificate executed by the
Chief Financial Officer of the Company stating that such
officer has caused this Agreement, the Series C Convertible
Preferred Stock and the Notes to be reviewed and has no
knowledge of any default by the Company in the performance or
observance of any of the provisions of this Agreement, the
Series C Convertible Preferred Stock or the Notes or, if such
officer has such knowledge, specifying such default and the
nature thereof;
()at the time of delivery of each monthly financial statement
pursuant to Section 6.01(b), a management narrative report
explaining all significant variances from forecasts and all
significant current developments in staffing, marketing,
sales and operations;
()no later than 30 days prior to the start of each fiscal
year of the Company, consolidated capital and operating
expense budgets of the Company and consolidated cash flow and
income and loss projections for the Company and its
subsidiaries in respect of such fiscal year, all itemized in
reasonable detail and prepared on a monthly basis, and,
promptly after preparation, any revisions to any of the
foregoing;
()promptly following receipt by the Company, each audit
response letter, accountant's management letter and other
written reports submitted to the Company by its independent
public accountants in connection with an annual or interim
audit of the books of the Company or any of its subsidiaries;
()immediately upon its knowledge thereof, notice of all
actions, suits, claims, proceedings, investigations and
inquiries of the type described in Section 2.08(a) and notice
of any other event or occurrence that could materially
adversely affect the Company or any of its subsidiaries;
()promptly upon sending, making available or filing the same,
all press releases, reports and financial statements that the
Company sends or makes available to its shareholders or
directors or files with the SEC;
()copies of all notices, reports, minutes and consents to or
of the Board of Directors of the Company or any committee
thereof at the time and in the manner as they are provided to
the Board of Directors or any committee, but in no event
later than seven days prior to any scheduled meeting of the
Board of Directors or such committee; and
()promptly, from time to time, such other information
regarding the business, prospects, financial condition,
operations, property or affairs of the Company and its
subsidiaries as such holder reasonably may request.
SECTION .Right of Participation. The Company shall, prior to
any proposed issuance by the Company of any of its equity
securities (or securities that are convertible, exercisable
or exchangeable into or for (whether directly or indirectly)
equity securities of the Company), offer to each Purchaser by
written notice the right, for a period of 30 days, to
purchase for cash (at a purchase price equal to the price or
other consideration for which such securities are to be
issued) a number of such securities so that, after giving
effect to such issuance (and the conversion, exercise and
exchange into or for (whether directly or indirectly) equity
securities of the Company of all such securities that are so
convertible, exercisable or exchangeable), such Purchaser
will continue to maintain its same proportionate equity
ownership in the Company as of the date of such notice
(treating each Purchaser, for the purpose of such
computation, as the holder of the number of shares of Common
Stock held by such Purchaser on the date such offer is made
and the number of shares of Common Stock which would be
issuable to such Purchaser upon conversion, exercise and
exchange of all securities (including but not limited to the
Preferred Shares) held by such Purchaser on the date such
offer is made that are convertible, exercisable or
exchangeable into or for (whether directly or indirectly)
equity securities of the Company, and assuming the like
conversion, exercise and exchange of all such other
securities held by other persons); provided, however, that
the participation rights of the Purchasers pursuant to this
Section 6.02 shall not apply to securities issued (a) upon
conversion of any of the Preferred Shares, (b) as a stock
dividend or upon any subdivision of shares of Common Stock,
provided that the securities issued pursuant to such stock
dividend or subdivision are limited to additional shares of
Common Stock, (c) solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its
subsidiaries of all or substantially all of the stock or
assets of any other entity, (d) pursuant to a firm commitment
public offering or (e) pursuant to the exercise of options to
purchase Common Stock granted to directors, officers,
employees or consultants of the Company pursuant to a stock
option plan approved by the affirmative vote of the holders
of at least a majority of the outstanding shares of Series C
Convertible Preferred Stock. The Company's written notice to
the Purchasers shall describe the securities proposed to be
issued by the Company and specify the number, price and any
other terms of the offer. Each Purchaser may accept the
Company's offer as to the full number of securities offered
to it or any lesser number, by written notice thereof given
by it to the Company prior to the expiration of the aforesaid
30 day period, in which event the Company shall promptly sell
and such Purchaser shall buy, upon the terms specified, the
number of securities agreed to be purchased by such
Purchaser. The Company shall be free at any time prior to 90
days after the date of its notice of offer to the Purchasers,
to offer and sell to any third party or parties the remainder
of such securities proposed to be issued by the Company, at a
price and on terms no less favorable to the Company than
those specified in such notice of offer to the Purchasers.
The Company shall not sell such securities as shall not have
been purchased within such 90-day period without again
complying with this Section 6.02.
SECTION .Corporate Existence. The Company shall maintain its
corporate existence, rights and franchises in full force and
effect, except to the extent the Company determines that the
preservation of any such right or franchise is no longer
desirable in the conduct of the Company's business, and
subject to the Company's right to engage in a merger or
similar transaction otherwise approved in accordance with
this Agreement and all applicable legal requirements.
SECTION .Properties, Business, Insurance. The Company shall
maintain and cause each of its subsidiaries to maintain as to
their respective properties and business, with financially
sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such
amounts as is customary for companies similarly situated.
SECTION ."Key Person" Insurance. As promptly as practicable
after the Closing Date, the Company shall purchase, and
thereafter the Company shall maintain in effect, "key person"
life insurance policies, payable to the Company, on the lives
of each of the Executive Shareholders (so long as they remain
employees of the Company), in the amounts of $4,500,000 for
McCoy and $2,000,000 for Wildman. The Company shall not
cause or permit any assignment or change in beneficiary and
shall not borrow against any such policy. If requested by
Purchasers holding at least a majority of the outstanding
Preferred Shares, the Company will add one designee of such
Purchasers as a notice party for each such policy (if
permitted) and shall request that the issuer of each policy
provide such designee with ten days' notice before such
policy is terminated (for failure to pay premiums or
otherwise) or assigned or before any change is made in the
beneficiary thereof.
SECTION .Inspection, Consultation and Advice. The Company
shall permit and cause each of its subsidiaries to permit
each Purchaser and its designees to visit and inspect any of
the properties of the Company and its subsidiaries, examine
their books and take copies and extracts therefrom and
discuss the affairs, finances and accounts of the Company and
its subsidiaries with their respective officers, employees
and public accountants (and the Company hereby authorizes
said accountants to discuss with such Purchaser and such
designees such affairs, finances and accounts), all at
reasonable times and upon reasonable notice and upon the
execution by any such Purchaser (or its designee) of any
appropriate confidentiality agreement reasonably requested by
the Company; provided, however, that nothing herein shall
require the Company to violate the terms of any
confidentiality or similar agreement to which it is a party
and which has been approved by the Board of Directors of the
Company.
SECTION .Restrictive Agreements Prohibited. Neither the
Company nor any of its subsidiaries shall become a party to
any agreement which by its terms restricts the Company's
performance of its obligations under this Agreement, any
Company Ancillary Document or the Charter.
SECTION .Transactions with Affiliates. Except as otherwise
approved by the Board of Directors of the Company and the
holders of two-thirds of the Preferred Shares then
outstanding, neither the Company nor any of its subsidiaries
shall knowingly enter into any transaction with any director,
officer, employee or holder of more than 5% of the
outstanding shares of any class or series of capital stock of
the Company or any of its subsidiaries, member of the family
of any such person, or any corporation, partnership, trust or
other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee,
partner or holder of more than 5% of the outstanding equity
thereof, except for transactions on customary terms related
to such person's employment.
SECTION .Use of Proceeds. The Company shall use the proceeds
of the Senior Financing (as defined in Section 8.02(e)) in
accordance with the terms thereof, and shall use the proceeds
from the sale of the Preferred Shares and the Notes solely
for the financing of restaurant equipment leases in
accordance with the Business Plan, for the redemption of the
outstanding shares of Series B Preferred Stock and the
related warrants, for payment of fees and expenses incurred
in connection with the transactions contemplated by this
Agreement and for working capital.
SECTION .Board of Directors Meetings. The Company shall use
its best efforts to ensure that meetings of its Board of
Directors are held at least once during any period of six
consecutive weeks unless otherwise approved by the Board of
Directors of the Company.
SECTION .By-laws. The Company shall at all times cause its
By-laws to provide that (a) any director shall have the right
to call a meeting of the Board of Directors, any two
directors shall have the right to call a meeting of the
shareholders and any holder or holders of at least 25% of the
outstanding shares of Series C Convertible Preferred Stock
shall have the right to call a meeting of the shareholders
and (b) the number of directors fixed in accordance therewith
shall in no event conflict with any of the terms or
provisions of the Voting Agreement. Beginning as promptly as
practicable following the Closing Date, the Company shall at
all times maintain provisions in its By-laws or Charter
indemnifying all directors against liability and absolving
all directors from liability to the Company and its
shareholders to the maximum extent permitted under the laws
of the State of Indiana.
SECTION .Compliance with Laws. The Company shall comply, and
cause each subsidiary to comply, with all applicable laws,
rules, regulations and orders, noncompliance with which could
materially adversely affect its business or condition,
financial or otherwise.
SECTION .Keeping of Records and Books of Account. The
Company shall keep, and cause each subsidiary to keep,
adequate records and books of account, in which complete
entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all
financial transactions of the Company and such subsidiary,
and in which, for each fiscal year, all proper reserves for
depreciation, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
SECTION .Change in Business or Plan. Without the consent of
the holders of two- thirds of the Preferred Shares then
outstanding, the Company shall not make, or permit any
subsidiary to make, any material change in the nature of its
business as set forth in the Business Plan.
SECTION .Disposal of Property. Without the consent of the
holders of two-thirds of the Preferred Shares then
outstanding, the Company shall not, and shall not permit any
subsidiary to, sell, lease, assign, transfer or otherwise
dispose of any of its property, assets and rights, other than
in the ordinary course of business consistent with the
Business Plan.
SECTION .Payment of Obligations. The Company shall pay,
discharge or otherwise satisfy at or before maturity or
before they become delinquent, as the case may be, all of its
obligations of whatever nature, except where (a) the amount
or validity thereof is currently being contested in good
faith by appropriate proceedings, (b) reserves in conformity
with generally accepted accounting principles with respect
thereto have been provided on the books of the Company or its
subsidiaries, as the case may be, or (c) the Company shall
have posted any bond or other security required by applicable
law against the payment thereof.
SECTION .Dividends and Similar Transactions. Without the
consent of the holders of two-thirds of the Preferred Shares
then outstanding, the Company will not declare or pay any
dividends or make any other payments on its capital stock,
redeem, repurchase or retire any of its capital stock, issue
any equity security ranking, as to payment upon liquidation,
senior to or on a parity with the Preferred Shares or having
any right to vote (other than as required by law) (a "Senior
Security"), grant or issue any warrant, right or option
pertaining to, or other security convertible into, any Senior
Security, or make any distribution to its shareholders,
except (a) the payment of dividends or other distributions on
shares of Common Stock solely in the form of additional
shares of Common Stock, (b) the issuance of Conversion Shares
upon the conversion of Preferred Shares, (c) the redemption
of Preferred Shares in accordance with the terms of the
Preferred Shares, (d) the issuance of shares of Common Stock
pursuant to a stock option plan approved by the affirmative
vote of the holders of a majority of the outstanding
Preferred Shares, (e) the payment or regular quarterly
dividends on shares of Series A Preferred Stock in accordance
with the terms of the Charter as in effect on the date of
this Agreement, (f) the redemption of the Series B Preferred
Stock and the related warrants in accordance with the Series
B Redemption Agreements, (g) the acquisition of any assets or
businesses for consideration consisting in whole or in part
of capital stock of the Company, on terms approved by the
Board of Directors of the Company, and (h) a public offering
of capital stock of the Company pursuant to demand rights as
provided in the Registration Rights Agreement or with the
approval of the Board of Directors of the Company.
SECTION .Rule 144A Information. The Company shall, at all
times during which it is neither subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act nor
exempt from reporting pursuant to Rule 12g3-2(b) under the
Exchange Act, provide in writing, upon the written request of
any Purchaser or a prospective buyer of Preferred Shares or
Conversion Shares from any Purchaser, all information
required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the SEC under the Securities Act ("Rule 144A
Information"). Upon the written request of any Purchaser, the
Company shall cooperate with and assist such Purchaser or any
member of the National Association of Securities Dealers,
Inc. PORTAL system in applying to designate and thereafter
maintain the eligibility of the Preferred Shares or
Conversion Shares, as the case may be, for trading through
PORTAL (if such shares otherwise qualify for trading through
PORTAL). The Company's obligations under this Section 6.18
shall at all times be contingent upon the relevant
Purchaser's obtaining from the prospective buyer of Preferred
Shares or Conversion Shares a written agreement to take all
reasonable precautions to safeguard the Rule 144A Information
from disclosure to anyone other than a person who will assist
such buyer in evaluating the purchase of any Preferred Shares
or Conversion Shares. The covenants set forth in this
Sections 6.18 shall terminate and be of no further force or
effect as to each of the Purchasers when such Purchaser no
longer holds any shares of capital stock of the Company.
SECTION .Salary and Bonus Plan. The Company shall, as
promptly as practicable after the Closing Date, establish
salaries and a cash bonus plan consistent with the terms of
Item 18(c) of that certain Term Sheet dated January 14, 1997
with respect to the transactions contemplated by this
Agreement.
SECTION .Termination of Covenants. The covenants set forth
in this Article VI (other than those contained in Section
6.07) shall terminate and be of no further force and effect
as to any Purchaser at such time as such Purchaser no longer
holds any shares of capital stock of the Company or any Notes
or the earlier completion of a firm commitment underwritten
public offering of the Company's equity securities.
ARTICLE .
COVENANTS OF THE EXECUTIVE SHAREHOLDERS
SECTION .Transfers of Shares. Without the consent of the
holders of two-thirds of the Preferred Shares then
outstanding, neither of the Executive Shareholders shall
transfer, sell, assign, pledge, encumber or otherwise dispose
of ("Transfer") any interest in any securities of the Company
held by such Executive Shareholder at any time that any Notes
or Preferred Shares are outstanding, except that an Executive
Shareholder may Transfer securities of the Company: (a) to
any member of such Executive Shareholder's Family Group
solely for estate planning purposes, provided that in the
aggregate such Transfers are limited to no more than 50% of
the shares of Common Stock held by such Executive Shareholder
on the date of this Agreement, (b) to the personal
representative of such Executive Shareholder or a Permitted
Transferee (as defined below) who is deceased or adjudicated
incompetent or (c) upon termination of a trust or
custodianship which is a Permitted Transferee, by the trustee
of such trust or custodian of such custodianship to the
person or persons who, in accordance with the provisions of
such trust or custodianship, are entitled to receive the
securities held in trust or custody (collectively, the
"Permitted Transferees"); provided that (i) the restrictions
contained in this Section 7.01 shall continue to be
applicable to the securities after any such Transfer and (ii)
the Permitted Transferees of such securities shall have
agreed in writing to be bound by all of the provisions of
this Section 7.01. "Family Group" means the spouse and
descendants (whether natural or adopted) of an Executive
Shareholder (collectively, "Relatives"), any custodian of a
custodianship for and on behalf of a Relative who is a minor
and any trustee of a trust solely for the benefit of one or
more of the foregoing. Upon termination of any Executive
Shareholder's employment with the Company (for any reason)
and the expiration of any period during which such Executive
Shareholder is restricted from competing with the Company
pursuant to section 7.02, such Executive Shareholder shall no
longer be subject to the restrictions contained in this
Section 7.01.
SECTION .Certain Restrictive Covenants.
()Each of the Executive Shareholders acknowledges and agrees
that (i) through his continuing services to the Company and
its subsidiaries, he will learn valuable trade secrets and
other proprietary information relating to their respective
businesses, (ii) his services to the Company are unique in
nature, (iii) the Company and its subsidiaries would be
irreparably damaged if such Executive Shareholder were to
provide services to any person in violation of the
restrictions contained in this Agreement and (iv) the
Purchasers would not have entered into this Agreement or
agreed to consummate the transactions contemplated hereby but
for the agreements of the Executive Shareholders contained in
this Section 7.02. Accordingly, as an inducement to the
Purchasers to enter into this Agreement, each Executive
Shareholder agrees that at all times during which he is
employed by the Company or any of its subsidiaries and
continuing for an additional period of 24 months following
the date of termination of such employment (the period of
such Executive Shareholder's employment with the Company and
such additional period being referred to herein collectively
as the "Restricted Period"), he shall not:
()engage or participate in, as an employee, owner, partner,
shareholder, officer, director, member, advisor, consultant,
agent or (without limitation by the specific enumeration of
the foregoing) otherwise, or permit his name to be used by or
render services of any type for, any Competing Business;
provided, however, that nothing in this Agreement shall
prevent an Executive Shareholder from acquiring or owning, as
a passive investment, up to 1% of the outstanding voting
securities of an entity engaged in a Competing Business which
are publicly traded in any recognized national securities
market;
()take any action which could reasonably be expected to
divert from the Company or any subsidiary any opportunity
which would be within the scope of the Company's or such
subsidiary's business;
()solicit or attempt to solicit any person who is or has been
(x) a customer of the Company or any subsidiary at any time
on or prior to the date of termination of the Executive
Shareholder's employment to purchase any product or service
which may be provided by a Competing Business or (y) a
customer, supplier or other business relation of the Company
or any subsidiary conducting business with the Company or
such Subsidiary at any time on or prior to the date of
termination of the Executive Shareholder's employment to
cease doing business with the Company or any such subsidiary;
or
()solicit any officers, employees, representatives or agents
of the Company or any subsidiary to terminate their
association with the Company or any subsidiary. As used
herein, a "Competing Business" shall mean a business which
is, in whole or in part, directly or indirectly, engaged,
anywhere in the United States, in the business of leasing
restaurant equipment.
()Each Executive Shareholder recognizes that he will generate
and be exposed to Confidential Information. Accordingly, as
an inducement for the Company and the Purchasers to enter
into this Agreement, each Executive Shareholder agrees that
during the Restricted Period, such Executive Shareholder and
each of his affiliates shall hold in strictest confidence and
shall not, other than as required by law, without the prior
written consent of the Company, use for his own benefit or
that of any third party or disclose to any person, except the
Company and its subsidiaries, any Confidential Information,
provided that with respect to Confidential Information that
is protectable as a trade secret under applicable law, each
Executive Shareholder agrees that the foregoing restriction
shall apply for the longest period permitted by such
applicable law. Notwithstanding the foregoing, it shall not
be deemed a breach of this Agreement in the event that an
Executive Shareholder discloses or uses Confidential
Information (1) in connection with the performance of his
duties in the course of his employment with the Company or
any subsidiary, if such disclosure is made by such Executive
Shareholder reasonably and in good faith, or (2) in
accordance with the reasonable advice of counsel, as required
by law, provided that such Executive Shareholder gives
notice to the Company or any subsidiary of such required
disclosure as far in advance as practical. "Confidential
Information" shall mean all information, and all documents
and other tangible items which record information, relating
to the businesses conducted by the Company or any subsidiary,
whether or not protectable as a trade secret under applicable
law, and which has been or is from time to time known or
disclosed to an Executive Shareholder, including, without
limitation, the following especially sensitive types of
information: (i) future expansion plans, marketing plans,
advertising programs and strategies; (ii) training manuals,
pricing models, lessee or franchisor data or information,
research in progress, and the like; (iii) the identity,
purchase and payment patterns of, and special relations with
customers; (iv) the identity, net prices and credit terms of,
and special relations with suppliers; (v) sales and other
financial information; and (vi) proprietary software and
business records. Information shall not be deemed to be
"Confidential Information" which is or becomes generally
known to the industry or the public other than (x) as a
result of an Executive Shareholder's breach of this Agreement
or (y) as a result of a breach by any other person of a
legal, contractual or fiduciary obligation not to disclose
such information, where an Executive Shareholder has reason
to know such a breach has occurred.
()Each Executive Shareholder and each of their respective
affiliates shall promptly following a request therefor from
the Company return to the Company, without retaining copies,
all tangible items which are or which contain Confidential
Information.
()Each Executive Shareholder acknowledges that in his
capacity as an executive of the Company or any of its
subsidiaries he may be involved in the development of trade
secrets, Confidential Information and other intellectual
property relating to the business of the Company or its
subsidiaries. Each Executive Shareholder acknowledges that
all such intellectual property conceived, made, authored or
developed during such Executive Shareholder's employment with
the Company or any subsidiary is the exclusive property of
the Company or such subsidiary. Each Executive Shareholder
hereby waives any rights he may have in or to such
intellectual property, and hereby assigns to the Company or
such subsidiary, as the case may be, all right, title and
interest in and to such intellectual property. At the
Company's request and at no expense to the Executive
Shareholder, each Executive Shareholder shall execute and
deliver all such papers, including, without limitation, any
assignment documents, and shall provide such cooperation as
may be necessary or reasonably desirable, or as the Company
may reasonably request, in order to enable the Company or any
subsidiary to secure and exercise its rights to such
intellectual property.
()Each Executive Shareholder agrees that any violation by him
of this Section 7.02 would be highly injurious to the Company
and would cause irreparable harm to the Company and its
subsidiaries. By reason of the foregoing, each Executive
Shareholder consents and agrees that if he violates any
provision of this Section 7.02, the Company shall be
entitled, in addition to any other rights and remedies that
it may have, to apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief
(without the requirement of posting of a bond or other
security) in order to enforce, or prevent any continuing
violation of, the provisions of this Section 7.02. Each
Executive Shareholder acknowledges that the limitations set
forth in this Section 7.02 are reasonable and are properly
required for the protection of the Company. Each Executive
Shareholder acknowledges that this Section 7.02 shall survive
termination of such Executive Shareholder's employment and
shall be tolled during the period of any breach.
(f)The Company agrees that if an Executive Shareholder's
employment is terminated either (i) by the Company without
Cause or (ii) in the case of McCoy, by McCoy following and
arising out of a breach by the Company of any of its
obligations under the Employment Agreement dated December 15,
1994 between the Company and McCoy (the "Employment
Agreement"), which breach is not cured within 30 days after
notice thereof by McCoy to the Company, the Company will pay
to such Executive Shareholder an amount equal to (i) such
Executive Shareholder's base salary for the Company's most
recent fiscal year ended prior to the date of such
termination less (ii) any severance or similar payment
payable by the Company or any of its subsidiaries to such
Executive Shareholder pursuant to any agreement entered into
with such Executive Shareholder after the date of this
Agreement (such amount shall be paid ratably when and as
such base salary would have been required to be paid or in
accordance with the Company's past practices) . As used
herein, "Cause" with respect to an Executive Shareholder
shall mean any of the following: (i) the conviction,
admission or plea of no contest by such Executive Shareholder
with respect to any crime, whether or not involving the
Company, which constitutes a felony in the jurisdiction
involved; (ii) the embezzlement or misappropriation of
property of the Company or any of its subsidiaries or
affiliates, or any other act involving fraud with respect to
the Company or any of its subsidiaries or affiliates; (iii)
any substance abuse by such Executive Shareholder that
interferes with such Executive Shareholder's ability to
discharge his duties to the Company; (iv) a breach by such
Executive Shareholder of any of the provisions of this
Section 7.02; or (v) the failure by such Executive
Shareholder (following reasonable notice and an opportunity
to cure) to perform such duties as may be delegated to him by
the Board of Directors.
SECTION .Devotion of Time. At all times during which an
Executive Shareholder is employed by the Company, (a) such
Executive Shareholder shall faithfully and diligently perform
such services and assume such duties and responsibilities as
may from time to time be assigned to him by the Board of
Directors of the Company and (b) each Executive Shareholder
will devote his full business time and attention to the
business and affairs of the Company and the performance of
his duties to the Company (other than (i) immaterial amounts
of time devoted to charitable and, in the case of McCoy,
sports officiating activities, (ii) service on the boards of
directors (or equivalent governing bodies) of other entities
with the approval of the Board of Directors of the Company,
which approval will not be unreasonably withheld if such
entities do not compete with the Company and if such
Executive Shareholder does not own any material equity
interest therein, and (iii) in the case of McCoy, service as
an official at sporting events which would require more than
an immaterial amount of time, if approved by the Board of
Directors of the Company.
SECTION .Related Entities. Each Executive Shareholder shall
immediately notify the Purchasers upon acquiring control of,
or an interest in, a Related Entity.
ARTICLE .
PURCHASES OF ADDITIONAL NOTES
SECTION .Purchase Request. At any time during the period
beginning on the Closing Date and ending on the first
anniversary of the Closing Date, the Company may request that
the Purchasers purchase all of the Additional Notes by
delivery of a written notice to each of the Purchasers (a
"Purchase Request") setting forth (a) the date, which shall
be not less than ten business days following the date of such
Purchase Request, on which the closing of the purchase of the
Additional Notes is requested to be held (the "Purchase
Date"), and (b) wire transfer instructions designating an
account of the Company into which the purchase price for the
Additional Notes is to be paid. Subject to the provisions of
Section 8.02, on the Purchase Date (i) each Purchaser shall
purchase the initial principal amount of Additional Notes set
forth opposite the name of such Purchaser on Schedule I by
payment on the Purchase Date of the purchase price for the
Additional Notes to the account designated in the Purchase
Request, and (ii) upon receipt of such payment, the Company
shall immediately issue and deliver to each Purchaser such
Additional Notes.
SECTION .Conditions Precedent. The Purchasers shall not be
required to purchase the Additional Notes pursuant to this
Article VIII unless:
()on the Purchase Date, the Company has furnished to the
Purchasers:
()a certificate, in form and substance satisfactory to the
Purchasers, signed by a duly authorized officer on behalf of
the Company, stating that on the Purchase Date (x) there has
been no material adverse change in the condition, financial
or otherwise, of the Company or any of its subsidiaries since
the Closing Date, (y) the Company and the Executive
Shareholders are not in default of any then-outstanding Note
(as determined pursuant to such Note) or in breach of this
Agreement, any Company Ancillary Document or the Charter; and
(z) each of the Executive Shareholders is employed by the
Company in a management capacity; and
()such other documents as the Purchasers or their counsel may
have reasonably requested;
()the weighted average spread on the Lease Agreements entered
into by the Company after the Closing Date and prior to the
Purchase date (excluding any Lease Agreements sold to third
parties or owned by the Company as of the Purchase Date and
in good faith anticipated to be sold to third parties) shall
not be less than 800 basis points. For purposes hereof, the
spread on any Lease Agreement shall be the difference between
(i) the yield on such Lease Agreement (including, without
duplication, for purposes of calculating such yield, fees and
payments collected at the inception of the applicable lease
term, as well as any "balloon" payments or similar payments
at the end of the applicable lease term) as determined by the
Company in good faith, in accordance with industry practices,
and (ii) the coupon rate of interest for prime rate
borrowings of the Company under the Senior Financing (as
defined in Section 8.02(e)) as of the date such Lease
Agreement was entered into by the Company (or, if the Senior
Financing is not consummated as of such date, such rate of
interest as would have been in effect (based on the terms of
the Commitment, dated March 13, 1997, for the Senior
Financing) had the Senior Financing been consummated as of
such date);
()no more than 5% of payments under Lease Agreements
outstanding as of the close of business on the business day
immediately prior to the Purchase Date is more than 45 days
past due;
()the average monthly volume of Lease Agreements during the
four full calendar months immediately preceding the month in
which the Purchase Date occurs (or, if shorter, during the
period elapsed between the Closing Date and the Purchase
Date) (based on the original value of the underlying Leased
Equipment) is no less than $1.2 million;
()the Company shall have entered into definitive
documentation for senior debt financing (the "Senior
Financing") of at least $20 million (the "Target Amount") on
terms acceptable to the Purchasers and such Senior Financing
shall be available to the Company on the Purchase Date
pursuant to such documentation; and
()the Company shall have purchased the policies of "key-
person" life insurance required by Section 6.05 and such
policies shall, on the Purchase Date, be in full force and
effect.
ARTICLE .
MISCELLANEOUS
SECTION .Fees and Expenses.
() The Company will pay the reasonable expenses of the
Purchasers in connection with the transactions contemplated
hereby, whether or not such transactions are consummated, and
in connection with any subsequent amendment, waiver, consent
or enforcement of the provisions hereof or any Purchaser
Ancillary Document.
()In consideration of the assistance of the Purchasers in
arranging the Senior Financing (whether or not in the Target
Amount), on or before December 31, 1997, the Company shall
pay to the Purchasers a fee of the lesser of (i) one percent
(1%) of the Senior Financing and (ii) $250,000, which fee
shall be allocated among the Purchasers as set forth on
Schedule III, such fee to be fully refundable to the Company
in the event the Senior Financing is not closed. The amount
of the fee payable pursuant to this Section 9.01(b) shall be
reduced on a pro rata basis among the Purchasers by any
amounts payable to Salvatore F. Mulia in connection with
arranging the Senior Financing or any portion thereof.
SECTION .Survival of Agreements. All covenants, agreements,
representations and warranties of the parties hereto made in
this Agreement, any Company Ancillary Document, any Executive
Shareholder Ancillary Document or any Purchaser Ancillary
Document shall survive the execution and delivery of this
Agreement, the issuance, sale and delivery of the Preferred
Shares and the Notes, and the issuance and delivery of the
Conversion Shares, and all statements made by any party in
this Agreement, any Company Ancillary Document, any Executive
Shareholder Ancillary Document or any Purchaser Ancillary
Document shall be deemed to constitute representations and
warranties made by the party making such statements.
SECTION .Parties in Interest. All representations, covenants
and agreements contained in this Agreement by or on behalf of
any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties
hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants
and agreements benefiting the Purchasers shall inure to the
benefit of any and all subsequent holders from time to time
of Preferred Shares, Notes or Conversion Shares.
SECTION .Notices. All notices and other communications which
are required or permitted to be given under this Agreement
shall be in writing and shall be delivered personally, mailed
by certified or registered mail, return receipt requested,
sent by reputable overnight courier or sent by confirmed
telecopier, addressed as follows:
()if to the Company, at 8250 Haverstick Road, Suite 110,
Indianapolis, Indiana 46240-2401, Attention: President, with
a copy (which shall not constitute notice to the Company) to
Daniel L. Boeglin, Esq., Baker & Daniels, 300 North Meridian
Street, Suite 2700, Indianapolis, IN 46204;
()if to any Executive Shareholder, at the address of such
Executive Shareholder as disclosed by the books and records
of the Company, with a copy (which shall not constitute
notice to any of the Executive Shareholders) to Daniel L.
Boeglin, Esq., Baker & Daniels, 300 North Meridian Street,
Suite 2700, Indianapolis, IN 46204; and
()if to any Purchaser, at the address of such Purchaser set
forth in Schedule I, with a copy (which shall not constitute
notice to any of the Purchasers) to Peter M. Howard, Esq.,
Altheimer & Gray, 10 South Wacker Drive, Suite 4000, Chicago,
IL 60606;
or to such other address and/or such other addressee as any
of the above shall have specified by notice hereunder. Each
notice or other communication which shall be delivered
personally, mailed or telecopied in the manner described
above shall be deemed sufficiently given, served, sent,
received or delivered for all purposes at such time as it is
delivered to the addressee (with the return receipt, the
delivery receipt or the affidavit of messenger being deemed
conclusive, but not exclusive, evidence of such delivery) or
at such time as delivery is refused by the addressee upon
presentation.
SECTION .Assignment. Neither the Company nor the Executive
Shareholders may assign any of the rights or obligations
hereunder without the express written consent of each of the
Purchasers. Prior to any firm commitment underwritten public
offering of the Company's equity securities, no Purchaser may
Transfer any Preferred Shares, Conversion Shares or Notes
without the prior written approval of McCoy (for so long as
McCoy is employed by the Company in an executive capacity),
which approval shall not be unreasonably withheld or delayed.
SECTION .Remedies. If any party to this Agreement obtains a
judgment against any party hereto by reason of any breach of
this Agreement or the failure of such other party to comply
with the provisions hereof, a reasonable attorneys' fee as
fixed by the court shall be included in such judgment. No
remedy conferred upon any party to this Agreement is intended
to be exclusive of any other remedy herein or by law provided
or permitted, but each such remedy shall be cumulative or
shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute.
SECTION .Waiver. None of the terms of this Agreement shall
be deemed to have been waived by any party hereto, unless
such waiver is in writing and signed by that party; provided,
however, that the holders of (a) 75% in principal amount of
the Notes then outstanding and (b) 75% of the Preferred
Shares then outstanding may waive any breach by the Company
or an Executive Shareholder of this Agreement. No action
taken pursuant to this Agreement, including any investigation
by or on behalf of any party hereto, shall be deemed to
constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto
of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other provision of
this Agreement or of any further breach of the provision so
waived or of any other provision of this Agreement. No
extension of time for the performance of any obligation or
act hereunder shall be deemed an extension of time for the
performance of any other obligation or act. The waiver by
any party of any of the conditions precedent to its
obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement.
SECTION .Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Indiana, without giving effect to its conflicts of law rules.
SECTION .Entire Agreement. This Agreement, including the
Schedules and Exhibits hereto, the Company Ancillary
Documents, the Executive Shareholder Ancillary Documents and
the Purchaser Ancillary Documents constitutes the sole and
entire agreement of the parties with respect to the subject
matter hereof. All Schedules and Exhibits hereto are hereby
incorporated herein by reference.
SECTION .Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be effective only
upon delivery and thereafter shall be deemed to be an
original, and all of which shall be taken to be one and the
same instrument with the same effect as if each of the
parties hereto had signed the same signature page. Any
signature page of this Agreement may be detached from any
counterpart of this Agreement without impairing the legal
effect of any signature thereon and may be attached to
another counterpart of this Agreement identical in form
hereto and having attached to it one or more additional
signature pages.
SECTION .Amendments. This Agreement may not be amended,
modified or changed in any respect without the written
consent of the Company and the approval of the holders of (a)
75% in principal amount of the Notes then outstanding and (b)
75% of the Preferred Shares then outstanding, unless a
greater percentage is required by any provision hereof.
SECTION .Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any
provision of this Agreement shall be unenforceable or invalid
under applicable law, such provision shall be ineffective
only to the extent of such unenforceability or invalidity,
and the remaining provisions of this Agreement shall continue
to be binding and in full force and effect.
SECTION .Headings. The section and other headings contained
in this Agreement are for convenience only and shall not be
deemed to limit, characterize or interpret any provision of
this Agreement.
SECTION .Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and
plural forms of the terms defined):
()"person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization,
government agency or any agency or political subdivision
thereof, or other entity;
()"subsidiary" shall mean, as to the Company, any corporation
of which more than 50% of the outstanding stock having
ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether or not
at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time directly
or indirectly owned by the Company, or by one or more of its
subsidiaries, or by the Company and one or more of its
subsidiaries;
()"affiliate" shall mean, with respect to any person, a
person who controls such person, who is controlled by such
person or who is under common control with such person. and
()"material" shall mean, with respect to any item or matter
with respect to the Company, that such item or matter is (or
could result in) a liability to the Company of $10,000 or
more. The Company and the Executive Shareholders represent
and warrant to the Purchasers that the aggregate potential
liability to the Company of all items and matters which are
known by the Company or the Executive Shareholders but which
are not reflected in the Disclosure Schedule by application
of the foregoing definition could not be reasonably expected
to exceed $50,000.
SECTION .Required Vote. Whenever in this Agreement, a matter
requires the consent or vote of the holders of a specified
percentage of Preferred Shares, such matter shall require the
consent or vote of holders of such specified percentage of
Conversion Shares, with holders of Preferred Shares then
outstanding being deemed to own that number of Conversion
Shares into which such Preferred Shares are then convertible
pursuant to the terms of the Preferred Shares.
SECTION .Obligations Several. The obligations of each
Purchaser hereunder shall be several and not joint and no
Purchaser shall be liable or responsible for the acts of any
other Purchaser.
IN WITNESS WHEREOF, the Company, the Executive Shareholders
and the Purchasers have executed this Agreement as of the day
and year first above written.
MERIDIAN FINANCIAL
CORPORATION
By:
Title:
PURCHASERS:
INROADS CAPITAL PARTNERS,
L.P.
By:INROADS GENERAL
PARTNERS, L.P., its general partner
By:
Title:
MESIROW CAPITAL PARTNERS
VII, an
Illinois Limited Partnership
By:MESIROW FINANCIAL
SERVICES, INC., its general partner
By:
Title:
EDGEWATER PRIVATE EQUITY
FUND II, L.P.
By:GORDON MANAGEMENT,
INC.,
its general partner
By:
Title:
EXECUTIVE SHAREHOLDERS:
Michael F. McCoy
William L. Wildman
SCHEDULE I
Purchasers
Name and
Address of Purchaser
Number of
Preferred Shares
to be Purchased
Aggregate
Purchase Price
for Preferred
Shares
Closing
Notes
Aggregate
Closing Date
Purchase Price
Additional
Notes
Inroads Capital Partners, L.P.
1603 Orrington Avenue
Suite 2050
Evanston, IL 60201
1,384.61538
$1,384,615.38
$230,769.24
$1,615,384.62
$1,384,615.38
Mesirow Capital Partners VII,
an Illinois Limited Partnership
350 North Clark Street
Chicago, IL 60610
807.69231
$807,692.31
$134,615.38
$942,307.69
$807,692.31
Edgewater Private Equity Fund II, L.P.
666 Grand Avenue
Suite 2002
Des Moines, IA 50309
807.69231
$807,692.31
$134,615.38
$942,307.69
$807,692.31
3,000.0000
$3,000,000.00
$500,000.00
$3,500,000.00
$3,000,000.00
SCHEDULE II
Disclosure Schedule
SCHEDULE III
Fee Allocation
Inroads Capital Partners, L.P.65.0%
Mesirow Capital Partners VII, an17.5%
Illinois Limited Partnership
Edgewater Private Equity Fund II, L.P.17.5%