EXHIBIT 10.8
SECURITITES PURCHASE AGREEMENT
PERISCOPE I SPORTSWEAR, INC.
1407 Broadway, Suite 620
New York. New York 10018
Glenn Sands
C/o Periscope I Sportswear, Inc.
1407 Broadway, Suite 620.
New York, New York 10018
May 17. 1996
BancBoston Ventures Inc.
100 Federal Street
Boston, Massachusetts 02110
Ladies and Gentlemen:
Each of the undersigned, Periscope I Sportswear, Inc., a New York
corporation (the "Company") and Glenn Sands ("Sands"), hereby agrees with you as
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follows:
1. DEFINITIONS.
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For all purposes of this Agreement the following terms shall have the
meanings set forth herein or elsewhere in the provisions hereof:
Acquisition. Acquisition shall mean (i) the redemption by the Company of
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all of the Company's outstanding Common Stock issued to Marian Sands for
$11,380,000, (ii) the distribution by the Company of $6,000,000 to Sands in
respect of his outstanding Common Stock, (iii) the purchase by you and the
Investors of certain shares of Common Stock from Sands, and (iv) the acquisition
by Periscope LLC of all of the assets of the Company, in each case pursuant to
the applicable Acquisition Documents.
Acquisition Documents. Acquisition Documents shall mean, collectively, the
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Redemption Agreement, the Investor Stock Purchase Agreements, the Operating
Agreement, the Consulting Agreement, the Non-Competition Agreement, the
Employment Agreement and all other agreements and documents required to be
entered into or delivered pursuant thereto or in connection with the
Acquisition.
Affiliate. Affiliate shall mean any Person directly or indirectly
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controlling. controlled[ by or under direct or indirect common control with the
Company (or other specified Person) and shall include any Person who is a member
of the Managing Group, or a director or beneficial
holder of at least 10% of any class of the then outstanding capital stock (or
other shares of beneficial interest) of the Company (or other specified Person)
and Family Members of any such Person; provided, however, that BBV shall not be
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an Affiliate of the Company or any of its Subsidiaries for the purposes of this
Agreement.
Bank Affiliate. See Section 15.1.
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Bank Holding Company Act. See Section 15.1.
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BBV. BBV shall mean BancBoston Ventures Inc., a Massachusetts corporation.
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Call Closing Date. See Section 11.3.
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Call Notice. See Section 11.3.
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Capital Transaction. Capital Transaction shall mean any of the following:
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(i) one or more mergers, consolidations, liquidations, sales of more than 50% of
the assets of the Company or any of its Subsidiaries or other similar corporate
actions pursuant to which the Company or the holders of Common Stock receive
cash. securities or other property; (ii) at least a majority of the Common Stock
of the Company or any of its Subsidiaries is sold; or (iii) a registration
statement with respect to the Common Stock of the Company shall be filed under
the Securities Act.
Change of Control. Change of Control shall mean Sands shall cease to
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control, with the power to vote, at least 51% of the outstanding shares of
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Common Stock on a fully-diluted basis.
Charter. Charter shall include the articles or certificate of
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incorporation. operating: agreement, statute, constitution, joint venture or
partnership agreement or articles or other organizational document of any Person
other than an individual, each as from time to time amended or modified.
Closing. See Section 2.3.
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Closing Date. See Section 2.3.
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Code. Code shall mean the Internal Revenue Code of 1986, any successor
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statute of similar import, and the rules and regulations thereunder,
collectively and as from time to time amended and in effect.
Commission. Commission shall mean the Securities and Exchange Commission.
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Common Stock. Common Stock shall mean, the common stock of the Company, par
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value $.01 per share, and in addition, any capital stock or other securities
into which or for which Common Stock shall have been converted or exchanged
pursuant to any recapitalization, reorganization or merger of the Company.
Company. See preamble hereto.
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Consolidated or consolidated. Consolidated or consolidated shall mean, with
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reference to any term defined herein, that term as applied to the accounts of
the Company, and all of its Subsidiaries, if any, consolidated in accordance
with generally accepted accounting principles.
Consulting Agreement. Consulting Agreement shall mean the Consulting
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Agreement dated May 15, 1996, between the Company and Marian Sands.
Default. Default shall mean an event or condition which with the passage of
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time or giving of notice, or both, would become an Event of Default.
Default Rate. See Section 3.6(b).
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EBITDA. EBITDA, for any period, shall mean an amount equal to the sum of
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(a) the consolidated Net Earnings of the Company and its Subsidiaries during
such period, plus (b) all amounts deducted in the computation thereof on account
of (i) Interest Charges, (ii) amortization of intangibles and depreciation and
(iii) federal and state income taxes.
Employment Agreement. Employment Agreement shall mean the Employment
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Agreement, dated as of the date hereof, between Periscope LLC and Sands.
Events of Default. See Section 10.1.
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Family Members. Family Members shall mean, as applied to any individual,
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any spouse, child, spouse of a child, brother or sister of the individual, and
each trust created for the benefit of one or more of such Persons and each
custodian of a property of one or more such Persons.
Financing Agreements. Financing Agreements shall include this Agreement,
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the Securities, the Stockholder Agreement, the Registration Rights Agreement,
and any and every other present or future instrument or agreement from time to
time entered into between the Company and you or any other holder of the
Securities which relates to this Agreement or is stated to be a Financing
Agreement, and all statements, reports or certificates delivered by or on behalf
of the Company to you or any other holder of the Securities in connection
herewith or therewith.
Formula Value. See Section 11.5(b).
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Generally Accepted Accounting Principles. Generally Accepted Accounting
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Principles shall mean accounting principles which are (a) consistent with the
principles promulgated or adopted by the Financial Accounting Standards Board
and its predecessors, in effect for the fiscal year of the Company ended
December 31. 1995. (b) applied on a basis consistent with prior periods, and (c)
such that a certified public accountant would, insofar as the use of accounting
principles is pertinent, be in a position to deliver an unqualified opinion as
to financial statements in which such principles have been properly applied.
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Indebtedness for Borrowed Money. Indebtedness for Borrowed Money shall mean
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(a) all indebtedness of the Company and its Subsidiaries for borrowed money,
whether current or funded, or secured or unsecured, (b) all indebtedness of the
Company and its Subsidiaries for the deferred purchase price of property or
services represented by a note or other security, (c) all indebtedness of the
Company and its Subsidiaries created or arising under any conditional sale or
other title retention agreement with respect to property acquired by the Company
or its Subsidiaries (even though the rights and remedies of the seller or lender
under each agreement in the event of' default., are limited to repossession or
sale of such property), (d) all indebtedness of the Company and its Subsidiaries
secured by a purchase money mortgage; or other lien to secure all or part of the
purchase price of property subject to such mortgage or lien, (e) all obligations
under leases which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases in respect of which
the Company or its Subsidiaries are liable as lessee, (f) any liability of the
Company or its Subsidiaries in respect of banker's acceptances or letters of
credit, and (g) all indebtedness referred to in clause (a), (b), (c), (d), (e)
or (f) above which is directly or indirectly guaranteed by the Company or any of
its 'Subsidiaries or which the Company or any of its Subsidiaries has agreed
(continently or otherwise) to purchase or otherwise acquire or in respect of
which it has otherwise assured a creditor against loss.
Interest Charges. Interest Charges shall mean for any period, the expenses
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of the Company and its Subsidiaries for such period for interest on Indebtedness
for Borrowed Money (including the current portion thereof) and for commitment
fees, agency fees, facility fees, balance deficiency fees, and similar expenses
in connection with Indebtedness for Borrowed Money.
Investor Stock Purchase Agreements. Investor Stock Purchase Agreements mean
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the Stock Purchase Agreements, dated as of the date hereof, between Sands and
each of the Investors.
Investors. Investors shall mean Jay Botchman. Michael Covino and Sylvester
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Miniter.
Major Holder. Major Holder shall mean the holder or holders at the relevant
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time (excluding the Company) of (a) in the case of the Notes, at least 20% of
the then outstanding principal amount of the Notes, or (b) in the case of the
Purchased Common Stock, of at least 20% of the total number of then outstanding
shares of Purchased Common Stock.
Majority Holders. Majority Holders shall mean the holder or holders at the
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relevant 'time (excluding the Company) of (a) in the case of the Notes, 51% or
more in outstanding principal amount of the Notes, or (b) in the case of the
Purchased Common Stock, 51% or more of the number of shares of the then
outstanding shares of Purchased Common Stock.
Managing Group. Managing Group shall mean Sands.
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Maximum Rate. See Section 3.6(c).
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Net Earnings. Net Earnings for any period shall mean the consolidated net
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income from operations of the Company and its Subsidiaries during such period
determined in accordance with Generally Accepted Accounting Principles, but
excluding therefrom all extraordinary items of income or loss and excluding any
effects from changes in Generally Accepted Accounting Principles after the date
hereof.
Non-Competition Agreement. Non-Competition Agreement shall mean the Non-
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Competition Agreement, dated May 15, 1996, among the Company, Periscope LLC and
Marian Sands.
Notes. Notes shall mean the $3,000,000 Note of the Company issued pursuant
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to Section 2.1 hereof and any other Notes transferred to any other holders
pursuant to Section 16 hereof.
Operating Agreement. Operating Agreement shall mean the Operating
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Agreement, of even date herewith, between the Company, Periscope LLC and
Periscope II Sportswear, Inc., a Delaware corporation.
Periscope LLC. Periscope LLC shall mean Periscope Sportswear LLC, a
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Delaware limited liability company.
Permitted Transferee. Permitted Transferee shall mean any Affiliate of any
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holder of Securities, any commercial bank, insurance company or other financial
institution or Affiliate thereof, any reputable corporate or institutional
investor, or any other Person reasonably acceptable to the Company.
Person. Person shall mean an individual, partnership, corporation,
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association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision thereof.
Public Sale. Public Sale shall mean any sale of Common Stock to the public
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(a) pursuant to a public offering registered under the Securities Act or (b) to
the public through a broker or market-maker pursuant to the provisions of Rule
144 (or any successor' rule) adopted under the Securities Act or (c) pursuant to
any other public offering not required to be registered under the Securities
Act.
Purchased Common Stock. See Section 2.2.
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Purchased Securities. See Section 2.2.
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Put Closing Date. See Section I 1.2.
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Put Notice. See Section 11.1.
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Put Notice Date. See Section 11.1.
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Redemption Agreement. Redemption Agreement shall mean the Stock Purchase
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Agreement, dated May 15, 1996, between the Company and Marian Sands.
Registration Agreement. Registration Rights Agreement shall mean the
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Registration Rights Agreement, dated as of the date hereof, among the Company,
BBV and the other initial stockholders of the Company, in the form of Exhibit B
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hereto.
Related Agreements. Related Agreements shall mean, collectively, the
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Financing Agreements, the Charter of the Company and each of its Subsidiaries,
the Acquisition Documents and the Senior Loan Documents.
Repurchase Price. See Section 11.5(a).
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Rescission Notice. See Section 11.4.
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Sands. See preamble.
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Securities. Securities shall mean the Notes and the shares of Purchased
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Common Stock.
Securities Act. Securities Act shall mean the Securities Act of 1933, as
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amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Senior Lender. Senior Lender shall mean The First National Bank of Boston.
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Senior Loan Agreement. Senior Loan Agreement shall mean the Term Loan
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Agreement. dated May 15, 1996, among the Company and the Senior Lender.
Senior Loan Documents. Senior Loan Documents shall mean the Senior Loan
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Agreement and the other "Loan Documents" as such term is defined in the Senior
Loan Agreement.
Shareholders Agreement. See Section 4.17.
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Stockholder Agreement. Stockholder Agreement shall mean the Stockholder
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Agreement. dated the date hereof among the Company, BBV and the other
stockholders of the Company, in the form of Exhibit C hereto.
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Subsidiary. Subsidiary shall mean any Person of which the Company or other
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specified Person now or hereafter shall at the time own directly or indirectly
through a Subsidiary at least a majority of the outstanding capital stock (or
other shares of beneficial interest) entitled to vote generally.
Transaction Costs. See Section 4.13.
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Transfer Notice. See Section 16.2.
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Unrepurchased Securities. See Section 11.4.
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All terms of an accounting character not specifically defined herein shall
have the meanings assigned thereto under Generally Accepted Accounting
Principles. Except as otherwise specifically provided herein, references to any
agreement, instrument or document in this Agreement refer to such agreement,
instrument or document as originally executed or as subsequently amended,
extended, renewed or supplemented in accordance with the provisions of this
Agreement.
2. SALE AND PURCHASE OF PURCHASED SECURITIES FROM THE COMPANY AND SANDS.
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2.1. Sale and Purchase of Notes. On the Closing Date, the Company agrees
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to issue and sell to you and, subject to all of the terms and conditions hereof
and in reliance on the representations and warranties set forth or referred to
herein, you agree to purchase the Promissory Note of the Company, in the
principal amount of $3,000,000, in the form of Exhibit A hereto. The purchase
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price for the Note shall be $3,000,000.
2.2. Sale and Purchase of Common Stock. On the Closing Date. Sands agrees
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to sell. convey, transfer, assign and deliver to BBV and, subject to all of the
terms and conditions hereof and in reliance on the representations and
warranties set forth or referred to herein, BBV shall purchase from Sands 14
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shares of Common Stock (the "Purchased Common Stock," and collectively with the
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Notes, the "Purchased Securities"). The purchase price for the Purchased Common
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Stock shall be $2,000,000.
2.2 Closing. The closing of the purchase and sale of the Purchased
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Securities (the "Closing") will take place at the offices of Kramer, Levin,
Naftalis & Frankel, at 10:00 a.m. on May 17, 1996, or at such other time, date
and place as the parties hereto may agree upon (the Closing Date"). At the
Closing, (i) the Company will deliver to you the Note against payment by you of
$3,000.000 in immediately available funds and (ii) Sands shall deliver or cause
to be delivered to you certificates representing the Purchased Common Stock,
either duly endorsed to BBV on the reverse side thereof or accompanied by a
stock power duly signed in blank, with all revenue stamps necessary, to transfer
such shares and the certificates representing such shares affixed and canceled
and all taxes on such transfer, if any, fully paid, all at Sands' expense,
against payment by you of $2,000,000 in immediately available funds. The
Purchased Common Stock shall be delivered to BBV free and clear of all liens.
security interests, options, charges, beneficial interests, claims, restrictions
and encumbrances of every kind (and any agreement to create any of the
foregoing). Sands agrees that he will cure any deficiencies with respect to the
endorsement of the certificates representing the Purchased Common Stock owned by
him or with respect to the stock powers accompanying such shares of Purchased
Common Stock. Each of the Notes will be issued by the Company to you or any
nominee specified by you on or before the Closing Date and registered in your
name or the name of such specified nominee in the records of the Company. The
Company will, on the Closing Date and upon delivery to it by BBV of the shares
representing such Purchased Common Stock. reissue the Purchased Common Stock in
your name or the name of any nominee specified by you and will register such
shares in your name or the name of such specified nominee in the records of the
Company.
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2.4. Use of Proceeds. The proceeds from the sale of the Purchased
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Securities hereunder will be used solely to finance in part the Acquisition
(including the payment of Transaction Costs). The Company further agrees that it
will not use any part of the proceeds from the sale of the Purchased Securities
to purchase or carry any "margin security" or "margin stock", as such terms are
defined in any regulation, rule or interpretation of the Board of Governors of
the Federal Reserve System.
3. PRINCIPAL AND INTEREST PAYMENTS ON NOTES.
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3.1. Mandatory Principal Repayment. The Company agrees to repay the
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principal amount of the Notes in one installment in the amount of all unpaid
principal of the Notes on the fifth anniversary of the Closing Date.
3.2. Optional Prepayments. The Company, upon not less than one nor more
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than 30 days' prior written notice to the holders of any of the Notes of the
date and amount of optional prepayment, may prepay from time to time all or any
portion (in integral multiples of $100,000) of the principal amount of the
Notes. The principal amount of any Notes designated for prepayment in any notice
of optional prepayment permitted by this Section 3.2 shall become due and
payable on the date fixed for prepayment in such notice, together with all
accrued and unpaid interest thereon.
3.3. Application of Payments and Prepayments. Each repayment or prepayment
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of less than the entire unpaid principal amount of all outstanding Notes shall
be applied pro rata to all outstanding Notes, according to the respective unpaid
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principal amounts thereof.
3.4. Presentation or Surrender of Notes. The Company may, as a condition
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to making any prepayment of a Note, require the holder thereof to present such
Note at the place specified in the Note for payment of the principal thereof,
for notation thereon of the amount and date of such prepayment, or, if such Note
is prepaid in full, to surrender the same to the Company.
3.5. No Reborrowing or Other Prepayments. Except as expressly permitted by
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Section 3.2, none of the principal of the Notes may be prepaid. No amount repaid
or prepaid pursuant to Section 3.1 or 3.2 may be reborrowed under the Notes.
3.6. Interest Payments. (a) Subject to Section 3.6(b) hereof, the unpaid
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principal amount of the Notes outstanding from time to time shall bear interest
from the Closing Date until and including the maturity of the Notes, at a rate
equal to 7% per annum. Interest on the Notes shall be calculated on the basis of
the actual number of days elapsed and a 360 day year, and shall be payable
monthly in arrears on the first day of each calendar month, commencing on the
first such date to occur after the Closing Date, and at the maturity of the
Notes.
(b) Overdue principal and (to the extent permitted by applicable law)
overdue interest on the Notes shall bear interest at a rate equal to 11.5% per
annum (the "Default Rate"), payable on demand and compounded monthly, until such
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overdue amounts are paid in full.
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(c) It is not intended by the holders of the Notes, and nothing contained
in this Agreement or any Note shall be deemed, to establish or require the
payment of a rate of interest in excess of the maximum rate permitted by
applicable federal, state or other law (the "Maximum Rate") and, to prevent such
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an occurrence, any agreement which may now or hereafter be in effect between the
Company and the holders of the Notes regarding the payment of fees or interest
to such holders is hereby limited by the provisions of this Section 3.6(c). If,
in any month, the effective interest rate applicable to the principal
outstanding under the Notes, absent the Maximum Rate limitation contained
herein, would have exceeded the Maximum Rate, then the effective interest rate
applicable to the Notes for that month shall be the Maximum Rate, and if in any
subsequent month, the effective interest rate would otherwise be less than the
Maximum Rate, then the effective interest rate applicable to the Notes for such
month shall be increased to the Maximum Rate until such time as the amount of
interest paid hereunder equals the amount of interest which would have been paid
in respect of the Notes if the same had not been limited by the Maximum Rate. In
the event that upon payment in full of the principal outstanding under the
Notes, the total amount of interest paid or accrued in respect of the Notes
under the terms of this Agreement is less than the total amount of interest
which would have been paid or accrued in respect of the Notes had the interest
not been limited hereby to the Maximum Rate, then the Company shall, to the
extent permitted by such applicable federal, state or other law, pay to each of
the holders of the Notes an amount equal to the excess, if any, of (i) the
lesser of (A) the amount of interest which would have been charged in respect of
the Notes if the Maximum Rate had, at all times, been in effect with respect to
the Notes and (B) the amount of interest which would have accrued in respect of
the Notes had the effective interest rate applicable with respect to the Notes
at all times not been limited hereunder by the Maximum Rate over (ii) the amount
of interest actually paid or accrued in respect of the Notes held by such holder
under this Agreement. In the event that the holders of the Notes receive,
collect or apply as interest any sum in excess of the Maximum Rate, such excess
amount shall be applied in accordance with Section 3.3 hereof to the reduction
of principal outstanding under the Notes and if no such principal is then.
outstanding, such excess or part thereof remaining, shall be paid to the
Company.
4.A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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In order to induce you to enter into this Agreement and to purchase the
Purchased Securities, the Company hereby represents and warrants that both
before and immediately after giving effect to the Closing and the Acquisition:
4.1. Incorporation of Certain Representations and Warranties. Each of the
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representations and warranties of the Company set forth in Sections 4.1(a) and
4.3-4.18 of the Senior Loan Agreement, as such provisions are in effect on the
date hereof, together (for the purposes of such representations and warranties)
with the definitions of the defined terms used therein as in effect on the date
hereof, are hereby incorporated herein by reference as fully as if set forth
herein at length.
4.2. Authorization. The execution, delivery and performance by the
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Company of this Agreement and by each of the Company and its Subsidiaries of
each Related Agreement to which such Person is a party, and the issuance and
sale by the Company of the Notes hereunder
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(a) are within such Person's corporate (or other) power and authority, (b) have
been duly authorized by all necessary corporate (or other) proceedings, and (c)
do not conflict with or result in any breach of any provision of or the creation
of any lien upon any of the property of the Company or any of its Subsidiaries
or require any consent or approval pursuant to the Charter or bylaws of the
Company or any of its Subsidiaries or any law, regulation, order, judgment,
writ. injunction, license, permit, agreement or instrument.
4.3. Enforceabililty. The execution and delivery by the Company of this
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Agreement and by each of the Company and its Subsidiaries of each of the Related
Agreements to which such Person is a party, and the issuance and sale by the
Company of the Notes hereunder, will result in legally binding obligations of
such Person enforceable against such Person in accordance with the respective
terms and provisions hereof and thereof, except to the extent that (a) such
enforceability is. limited by bankruptcy, insolvency, reorganization, moratorium
or other laws relating. to or affecting generally the enforcement of creditors'
rights, (b) the availability of the remedy of specific performance or injunctive
or other equitable relief is subject to the discretion of the court before which
any proceeding therefor may be brought and (c) the enforceability of the
indemnities and contribution provisions contained in the Registration Rights
Agreement may be limited under federal securities laws.
4.4. Government Approvals. Except as set forth in Schedule 4,4 hereto, the
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execution, delivery and performance by the Company of this Agreement and by each
of the Company and its Subsidiaries of each Related Agreement to which such
Person is a party, and, the issuance and sale of the Securities hereunder, do
not require the approval or consent of. or any filing with. any governmental
authority or agency.
4.5. Capitalization. (a) Capital Stock. At Closing, the authorized
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capital stock of the Company consists solely of 200 shares of Common Stock. On
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the Closing Date, after giving effect to the Acquisition, and the transactions
contemplated hereby and by the Related Agreements, the Company will have no
outstanding capital stock other than 40 shares of Common Stock. all of which
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will be owned as set forth in Schedule 4.5(a) hereto and will be duly
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authorized, validly issued, fully paid and non-assessable.
(b) Options, Etc. Except as disclosed on Schedule 4.5(b) hereto, the
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Company has no outstanding rights (either preemptive or other) or options to
subscribe for or purchase from the Company and no warrants or other agreements
providing for or requiring the issuance by the Company of, any capital stock or
any securities convertible into or exchangeable for its capital stock.
4.6. Conduct of Business. Prior to and at the Closing Date. the Company
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will not have conducted any business or incurred any liabilities other than
those arising in connection with its organization and the transactions
contemplated hereby and by the Related Agreements.
4.7. Related Agreements. You have heretofore or simultaneously herewith
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been furnished with complete and correct copies of all of the Related
Agreements. This Agreement and the Related Agreements are the only material
agreements relating to the Acquisition and the transactions contemplated hereby
to which the Company or any of its Subsidiaries is a party.
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Neither the Company nor any of its Subsidiaries is in default on any of its
obligations under this Agreement or any Related Agreement to which such Person
is a party and, to the best knowledge of the Company, no other party to any
Related Agreement is in default thereunder.
4.8. Solvency. Prior to, upon and immediately after consummation of the
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Acquisition and the transactions contemplated hereby and by the Related
Agreements, each of the Company and its Subsidiaries is solvent, has tangible
and intangible assets having a fair value in excess of the amount required to
pay its probable liabilities on its existing debts as they become absolute and
matured, and has access to adequate capital for the conduct of its business and
the ability to pay its debts from time to time incurred in connection therewith
as such debts mature.
4.9. Litigation. There is no litigation, at law or in equity, or any
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proceeding before any court, board or other governmental or administrative
agency or any arbitrator pending or, to the knowledge of the Company, threatened
which questions the validity of any of the transactions contemplated by this
Agreement or any Related Agreement.
4.10. Defaults. No Default or Event of Default exists on the date hereof.
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Neither the Company nor any of its Subsidiaries is in default under any
provisions of its Charter or by-laws or under any provisions of any franchise,
contract, agreement, lease or other instrument to which it is a party or by
which it or its property is bound or in violation of any law, judgment, decree
or governmental order, rule or regulation.
4.11. Representations and Warranties under Related Agreements. All
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representations and warranties made by the Company or any of its Subsidiaries in
any of the Related Agreements or in the certificates delivered in connection
therewith are true and correct as of the date hereof with the same force and
effect as though made on and as of the date hereof, and such representations,
and warranties are hereby confirmed to you and made representations and
warranties of the Company hereunder as fully as if set forth herein. To the best
knowledge of the Company, all representations and warranties made in this
Agreement or the Related Agreements by or on behalf of any party thereto other
than the Company or any of its Subsidiaries are true and correct in all material
respects.
4.12. Disclosure. No representation, warranty or statement made in this
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Agreement, any Related Agreement, or any agreement, certificate, statement or
document furnished by or on behalf of the Company or any of its Subsidiaries in
connection herewith or therewith contains any untrue statement of material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading.
4.13. Transaction Costs. Except as set forth on Schedule 4.13, there are
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no Transaction Costs, as defined below, that will be payable by the Company with
respect to the Acquisition, the transactions contemplated hereby and by the
Related Agreements, or the offer, issue and sale of the Purchased Securities.
The term "Transaction Costs" shall mean all of the costs, fees and expenses
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payable by the Company and accrued through the date hereof in connection with
the Acquisition and the transactions contemplated hereby and by the Related
Agreements, as set forth in Schedule 4.13, including, without limitation,
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broker's, finder's or placement fees or
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commissions, attorneys' fees and fees of other professionals, but excluding any
amounts payable under the Employment Agreement, the Consulting Agreement, the
Redemption Agreement or the Non-Competition Agreement.
4.14. Small Business Concern. The Company meets the criteria established
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under the Small Business Act for classification as a "small business concern"
within the meaning of the Small Business Act, 15 U.S.C. (S)662(5).
4B. REPRESENTATIONS AND WARRANTIES OF SANDS. In order to induce you to
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enter into this Agreement and to purchase the Purchased Securities, Sands hereby
represents and warrants to you as follows:
4.15. Approvals. Etc. Sands has full right, power and authority to enter
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into this Agreement and to sell, assign, transfer and deliver the Purchased
Common Stock to be sold by him hereunder.
4.16. Authorization: No Conflict. This Agreement has been duly executed
---------------------------
and delivered by Sands, and this Agreement constitutes the legal, valid and
binding agreement of Sands, enforceable in accordance with its terms: the
performance of this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the terms or
provisions of or constitute a default under any indenture, mortgage or deed of
trust, voting trust agreement, note agreement, lease or other agreement or
instrument to which Sands is a party or by which Sands or his properties are
bound, or under any law, rule or regulation or order of any court or
governmental agency or body applicable to Sands or his property.
4.17. Good Title. Sands has, and immediately prior to the Closing Sands
-----------
will have, good and valid title to the Purchased Common Stock to be sold by
Sands hereunder, free and clear of all liens, security interest, options,
charges, beneficial interests, restrictions, claims and encumbrances of every
kind (and any agreement to create any of the foregoing) other than pursuant to a
certain shareholders agreement dated as of December 20, 1988 among Marion Sands,
Sands, and the Company (the "Shareholders Agreement"), which Shareholders
-----------------------
Agreement shall be terminated on the Closing Date. Sands does not, and
immediately prior to the Closing will not, have any liability or be subject to
any other potential assessment on or in respect of the Purchased Common Stock.
Sands is not a party to or otherwise bound by any agreement, instrument or
commitment for the purchase or repurchase of capital stock. of the Company or
entitled to the benefit of any option, first refusal or other elective privilege
to purchase capital stock of the Company, other than pursuant to the
Shareholders Agreement.
4.18. Litigation. There are no actions, suits, proceedings or
-----------
investigations pending or, to the knowledge of Sands, threatened against Sands
which question or challenge the validity of this Agreement or any action to be
taken hereunder or which would impair the ability of Sands to perform any of
Sands' obligations hereunder.
4.19. Disclosure. The representations and warranties by Sands set forth in
-----------
this Section 4B and in any written statement or certificate furnished or to be
furnished to the Company by
12
Sands in accordance with the provisions of this Agreement do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained herein or therein, in the context in
which made, not misleading in any material respect.
5. INVESTMENT REPRESENTATION.
--------------------------
5.1. Purchase for Investment. You represent and warrant to Sands and the
-------------------------
Company that you are (i) an "accredited investor" as defined in Rule 501
promulgated under the Securities Act, and (ii) acquiring the Purchased
Securities for investment and not with a view to selling or otherwise
distributing the Purchased Securities; provided, however, that the disposition
-------------------
of your property shall at all times be and remain in your control, subject to
the provisions of Section 16 hereof.
5.2. Legend. So long as the Stockholder Agreement is in full force and
-------
effect, each Note will have imprinted on it the following legend:
A Holder of this Note has certain obligations under that certain
Stockholder Agreement, dated May 17, 1996, among the maker of this
Note and certain stockholders of the Company. A copy of the
Stockholder Agreement is on file at the Company's principal
offices. Upon written request to the Company's Secretary, a copy of
the Stockholder Agreement will be provided without charge to
appropriately interested persons.
6. CONDITIONS TO PURCHASE.
-----------------------
Your obligation to purchase the Purchased Securities pursuant to this
Agreement is subject to compliance by the Company and Sands with their
agreements herein contained, and to the satisfaction, on or prior to the Closing
Date, of the following conditions:
6.1. Related Agreements. Each of the Related Agreements shall have been
------------------
executed and delivered in a form satisfactory to you, and each of the Related
Agreements shall be in full force and effect and no term or condition thereof
shall have been amended, modified or waived except with your prior written
consent. All covenants, agreements and conditions contained in the Related
Agreements which are to be performed or complied with on or prior to the Closing
Date shall have been performed or complied (or waived with your prior written
consent) with in all material respects.
6.2. Charter Documents; Good Standing Certificate. You shall have
--------------------------------------------
received from each of the Company and its Subsidiaries a copy, certified by a
duly authorized officer of such Person to be true and complete as of the Closing
Date, of the Charter and the by-laws of each of such Persons; and a certificate,
dated not more than ten (10) days prior to the Closing Date, of the Secretary of
State or other appropriate official of each state in which each of the Company
and its Subsidiaries is incorporated or qualified to do business, as to such
Person's good standing or qualification to do business in such state, as the
case may be.
13
6.3. Proof of Corporate Action. You shall have received from each of the
--------------------------
Company and its Subsidiaries copies, certified by a duly authorized officer
thereof to be true and complete as of the Closing Date, of the records of all
corporate or other action taken to authorize the execution, delivery and
performance of this Agreement and each of the Related Agreements to which such
Person is or is to become a party.
6.4. Incumbency Certificate. You shall have received from each of the
-----------------------
Company and its Subsidiaries an incumbency certificate, dated the Closing Date,
signed by a duly authorized officer thereof and giving the name and bearing a
specimen signature of each individual who shall be authorized to sign, in the
name and on behalf of such Person, this Agreement and each of the Related
Agreements to which such Person is or is to become a party, and to give notices
and to take other action on behalf of such Person under each of such documents.
6.5. Representations and Warranties; Officers' Certificates. The
-------------------------------------------------------
representations and warranties contained or incorporated by reference herein
shall be true and correct after completion of the Acquisition on and as of the
Closing Date; no event or condition shall have occurred or would result from the
issuance of any of the Securities which would be a Default or an Event of
Default on and as of the Closing Date, and Sands, the Company and each of its
Subsidiaries shall have performed and complied with all conditions and
agreements required to be performed or complied with by them prior to the
Closing; and you shall have received on the Closing Date certificates to these
effects signed by an authorized officer of the Company and by Sands.
6.6. Legality; Governmental Authorization. The purchase of the Purchased
------------------------------------
Securities shall not be prohibited by any law or governmental order or
regulation, and shall not subject you to any penalty, special tax, or other
onerous condition. All necessary consents, approvals, licenses, permits, orders
and authorizations of, or registrations, declarations and filings with, any
governmental or administrative agency or of or with any other Person, with
respect to any of the transactions contemplated by this Agreement or any of the
Related Agreements shall have been duly obtained or made and shall be in full
force and effect.
6.7. Senior Debt Financing. The Company shall have obtained financing, on
----------------------
terms and conditions satisfactory to you, from the Senior Lender pursuant to the
Senior Loan Documents providing a term loan of $15,000,000.
6.8. Completion of Acquisition. The Company shall have completed the
--------------------------
Acquisition pursuant to the Acquisition Documents and the other transactions
contemplated by the Acquisition Documents on terms satisfactory to you in all
respects.
6.9. Payment of Certain Fees and Disbursements. Your special counsel shall
-----------------------------------------
have received payment in full for all legal fees charged and all costs and
expenses incurred by such counsel through the Closing Date in connection with
the transactions contemplated by this Agreement and the Related Agreements. All
of the other fees. expenses and disbursements incurred by you or your
accountants and other consultants in connection with your due diligence
investigation of the Company and its Subsidiaries shall have been paid in full
by the Company.
14
6.10. No Material Change. Except as set forth on Schedule 6.10 hereto,
------------------- --------------
there shall not have been, or threatened to be after giving effect to the
Acquisition, any material damage to or loss or destruction of any properties
owned or leased by the Company or any of its Subsidiaries (whether or not
covered by insurance) or any material adverse change in the business, assets or
financial condition of the Company and its Subsidiaries or imposition of any
laws, rules or regulations which would materially adversely affect the business,
assets or financial condition of the Company and any of its Subsidiaries.
6.11. No Litigation. No restraining order or injunction shall prevent the
-------------
transactions contemplated by this Agreement and no action, suit or proceeding
shall be pending or threatened before any court or administrative body in which
it will be, or is, sought to restrain or prohibit or to obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
6.12. SBIC Documentation. The Company shall have executed and delivered to
------------------
you all documents required by you in connection with the investment contemplated
hereby under the rules and regulations applicable to you by virtue of your
status as a "small business investment company".
6.13. Closing Fee. You shall have received from the Company payment in
------------
full of a closing fee in the amount of $30,000.
6.14. Release. The Company shall have received from Sands a complete
---------
release of all claims against the Company for any matter or thing occurring
prior to or at the Closing Date, including any claims with respect to the
transactions contemplated hereby, in any capacity. Such release shall not
include a release by Sands of any claims for reimbursement of expenses incurred
in the ordinary course of business and payable by the Company to Sands
consistent with past practices.
6.15. Termination of Shareholder Agreement. You shall have received
------------------------------------
evidence, in form and substance satisfactory to you that the Shareholders
Agreement, dated as of December 20, 1988 among Marian Sands, Sands and the
Company shall have been terminated.
6.16. General. All instruments and legal, governmental, administrative and
-------
corporate proceedings in connection with the transactions contemplated by this
Agreement and the Related Agreements shall be satisfactory in form and substance
to you, and you shall have received copies of all documents, including, without
limitation, records of corporate or other proceedings, consents, licenses,
approvals. permits and orders which you may have requested in connection
therewith.
7. COVENANTS APPLICABLE TO THE COMPANY WHILE NOTES ARE OUTSTANDING.
----------------------------------------------------------------
The Company covenants that, until all of the indebtedness of the Company
with respect to the Notes has been paid in full, the Company will comply and
will cause each of its
15
Subsidiaries to comply with the following provisions unless otherwise consented
to in writing by the Majority Holders of the Notes.
7.1. Punctual Payment. The Company will duly and punctually pay or cause
-----------------
to be paid all principal and interest payable with respect to the Notes in
accordance with the terms thereof.
7.2. Further Assurances. Each of the Company and its Subsidiaries will
-------------------
cooperate with you and execute such further instruments and documents as you
shall reasonably request to carry out to your satisfaction the transactions
contemplated by this Agreement and the Related Agreements.
7.3. Notices. The Company will promptly notify you in writing of the
--------
occurrence of any Default or Event of Default or if any Person shall give any
notice or take any other action in respect of a claimed default (whether or not
constituting a Default or an Event of Default) under the Related Agreements.
7.4. Incorporation of Certain Covenants. The Company and its Subsidiaries
-----------------------------------
will comply with all of the covenants and provisions, as originally in effect,
applicable to them and set forth in Sections 5.2 through 5.10 of the Senior Loan
Agreement. Sections 6.1 through 6.11 of the Senior Loan Agreement; and Section 7
of the Senior Loan Agreement, all of which covenants and provisions, together
(for the purposes of such covenants and provisions) with the definitions of the
defined terms used therein (provided, that all references to the "Lender"
-----------
contained therein shall be deemed references to each Major Holder), are hereby
incorporated herein by reference as fully as if set forth herein at length. The
obligations of the Company and its Subsidiaries to you under this Section 7.4
shall not be affected by any amendment or modification of the terms of the
Senior Loan Agreement, by any payment on or discharge of the indebtedness
outstanding thereunder, by any termination thereof, or by any approval. consent,
opinion, or waiver given pursuant thereto.
7.5. Dilution Protection. At all times prior to a Qualified Public
--------------------
Offering (as such term is defined in the Stockholder Agreement), neither the
Company nor any of its Subsidiaries will after the Closing Date (a) issue, sell,
give away, transfer, pledge. mortgage, assign or otherwise dispose of, (b) grant
any rights (either preemptive or other) or options to subscribe for or purchase,
or (c) enter into any agreements, or issue any warrants, providing for the
issuance of any of. its capital stock or any stock or securities convertible
into or exchangeable for any of its capital stock. Neither the Company nor any
of its Subsidiaries will authorize any additional class or series of capital
stock or increase the number of shares of authorized capital stock from that set
forth in Section 4.5(a) hereof, except to the extent it would not violate the
immediately preceding sentence.
8. [INTENTIONALLY OMITTED]
9. COVENANTS APPLICABLE WHILE ANY SECURITIES ARE OUTSTANDING.
----------------------------------------------------------
The Company hereby agrees that, so long as any Securities are outstanding,
it will comply with and it will cause its Subsidiaries to comply with the
following provisions:
16
9.1. Delivery of Financial Information. Contemporaneously with the
----------------------------------
delivery thereof, the Company will deliver to each Major Holder copies of all
material of a financial nature delivered to the Senior Lender under the Senior
Loan Agreement. Without limiting the foregoing, the Company will deliver to each
Major Holder copies of all information as and when required to be delivered to
the Senior Lender pursuant to Sections 5.4(a), (b), (c), (e) and (f) of the
Senior Loan Agreement as in effect on the date hereof, and this obligation shall
survive any payment of all outstanding indebtedness under the Senior Loan
Agreement and any termination of the Senior Loan Agreement.
9.2. Notice of Litigation, Defaults, Etc. The Company will promptly give
------------------------------------
notice to each Major Holder of any litigation or any administrative proceeding
to which the Company or any of its Subsidiaries may hereafter become a party
which may result in any material adverse change in the business, assets, or
financial condition of the Company or its Subsidiaries. Forthwith upon. any
officer of the Company obtaining knowledge of any Default or Event of Default
hereunder, any default or event of default under any Related Agreement, or any
agreement relating to any Indebtedness for Borrowed Money, the Company will
furnish a notice specifying the nature and period of existence thereof and in
the case of a Default or Event of Default hereunder, what action the Company or
any of its Subsidiaries has taken, is taking or proposes to take with respect
thereto. Promptly after the receipt thereof, the Company will provide copies of
any reports as to adequacies in accounting controls submitted by independent
accountants with respect to the Company and its Subsidiaries.
9.3. Rights to Attend Meetings.
--------------------------
(a) Board Meetings. The Company will call and hold a meeting of its
--------------
board of directors at least once each fiscal quarter. The Company will give one
representative designated by the Majority Holders of the Notes and one
representative designated by the Majority Holders of the Purchased Common Stock
at least five business days' prior written notice of the time, place and subject
matter of any proposed meeting (or action by written consent) of the board of
directors of the Company (except written consents executed solely in connection
--------
with the establishment of bank accounts or other purely administrative matters),
such notice in all cases to include true and complete copies of all documents
furnished to any director in connection with such meeting or consent, and an
invitation to attend any such meeting. Such representatives, or their respective
officers and authorized representatives, will be entitled to attend as an
observer at any such meeting or, if a meeting is held by telephone conference,
to participate therein for the purpose of listening thereto.
(b) Annual Meetings. Within 60 days after the annual financial
---------------
statements required by Section 9.1 hereof are furnished and on not less than 30
days' prior written notice, the Company will hold an annual meeting of its
stockholders at which the principal executive, financial and operations officers
of the Company will present a review of, and will discuss with those in
attendance, in reasonable detail, the general affairs, management, financial
condition, results of operations and business prospects of the Company. The
Company will give each Major Holder at least 30 days' advance written notice of
such meeting and will allow each Major Holder to attend such meeting.
17
9.4. Other Information. The Company will deliver to each Person entitled
------------------
to receive notice pursuant to Section 9.3(a) of quarterly board meetings copies
of all papers which may be distributed from time to time to the directors and
stockholders of the Company at such time as such papers are so distributed to
them. In addition, from time to time upon your request or upon the request of
any representative designated by the Majority Holders of the Notes, or by the
Majority Holders of Purchased Common Stock. the Company will furnish to any
authorized officer or representative of such Person such information regarding
the business, affairs, prospects and financial condition of the Company and its
Subsidiaries as such officer or representative may reasonably request. Each such
officer or representative shall have the right during normal business hours to
examine the books and records of the Company and its Subsidiaries to make
copies, notes and abstracts therefrom, and to make an independent examination of
the books and records of the Company and its Subsidiaries.
9.5 Confidentiality. Each Major Holder will hold in confidence all
---------------
proprietary information of the Company and its Subsidiaries provided or made
available to such Major Holder pursuant to this Section 9 until such time as
such information has become publicly available other than as a consequence of
any breach by a Major Holder of its confidentiality obligations hereunder.
9.6. Amendment of Related Agreements, Etc. Neither the Company nor any of
------------------------------------
its Subsidiaries shall agree to any amendment or modification of, or grant any
waiver or fail to enforce any of its rights pursuant to, (i) any of the Related
Agreements other than the Senior Loan Documents or (ii) any of the Senior Loan
Documents which could have a material adverse effect on the holders of the Notes
or the Purchased Common Stock or on any of their rights hereunder, including
without limitation, any terms of such documents relating to the maturity,
amortization, interest or fees with respect to the Notes or any terms relating
to the Purchased Common Stock.
9.7. Charter Amendments. The Charter of the Company and its Subsidiaries
-------------------
shall not be amended or modified.
9.8 Transactions With Affiliates. Neither the Company nor any of its
-----------------------------
Subsidiaries will engage in any transaction with any Affiliate on terms more
favorable to such Affiliate than would have been obtainable on an arms-length
basis in the ordinary course of business other than payments made pursuant to
the terms of any Related Agreement as in effect on the Closing Date.
10. DEFAULTS.
---------
10.1. Events of Default. Holders of the Securities will be entitled to
-----------------
,exercise the remedies provided by Section 10.2 hereof in accordance with the
terms thereof if' any one or more of the following events ("Events of Default")
-----------------
shall occur:
(a) the Company shall fail to make any payment of interest or principal on
any of the Notes as the same shall become due, whether at maturity or by
acceleration or otherwise; or
18
(b) the Company shall fail to pay when due the Repurchase Price for' any
Purchased Common Stock pursuant to Section 11 hereof; or
(c) the Company or any of its Subsidiaries shall fail to perform or observe
any of the covenants applicable to it set forth in Sections 7 or 9 hereof: or
(d) the Company or any of its Subsidiaries shall fail to perform or observe
any covenant, agreement or provision set forth in this Agreement or any
covenant, agreement, or provision to be performed or observed by it under any
Financing Agreements, other than those provisions set forth in Sections 10.1(a),
(b) and (c) above, and such failure shall not be rectified or cured to your
satisfaction within thirty (30) days after written notice from you; or
(e) any representation or warranty made by Sands, the Company or any of its
Subsidiaries to you in connection with this Agreement or any other Financing
Agreement or any amendment to this Agreement or any other Financing Agreement
shall prove to have been false in any material respect on the date as of which
it was made; or
(f) the Company or any of its Subsidiaries shall fail (i) to make any
required payment on any Indebtedness for Borrowed Money in excess of $100.000,
or (ii) to perform or observe any of the covenants or provisions required to be
performed or observed by it pursuant to any of the Related Agreements. and, in
the case of each of (i) and (ii), (x) such failure shall continue, without
having been duly cured, waived or consented to, beyond the period of grace, if
any, therein specified and so as to permit the acceleration thereof, if any
acceleration is provided for therein, or (y) any security interest in or other
lien on any property securing any such indebtedness shall be enforced through
judicial proceedings or foreclosure or repossession of collateral; or
(g) a final judgment which in the aggregate with other outstanding final
judgments against the Company or any of its Subsidiaries exceeds $100,000 shall
be rendered against the Company or any of its Subsidiaries if, within 30 days
after entry thereof, such judgment shall not have been satisfied and discharged
or stayed pending appeal or bonded, or within 30 days after expiration of such
stay such judgment shall not have been discharged; or
(h) the Company or any of its Subsidiaries shall:
(i) commence a voluntary case under Title 11 of the United States
Code as from time to time in effect, or authorize, by appropriate proceedings of
its board of directors or other governing body, the commencement of such a
voluntary case;
(ii) have filed against it a petition commencing an involuntary
case under said Title 11 and such petition shall not have been dismissed or
stayed within 60 days:
(iii) seek relief as a debtor under any applicable law, other than
said Title 11. of any jurisdiction relating to the liquidation or reorganization
of debtors or to the modification or alteration of the rights of creditors, or
consent to or acquiesce in such relief:
19
(iv) have entered against it an order by a court of competent
jurisdiction (x) finding it to be bankrupt, or insolvent, (y) ordering or
approving its liquidation, reorganization or any modification or alteration of
the rights of its creditors, or (z) assuming custody of. or appointing a
receiver or other custodian for. all or a substantial part of its property;
(v) make an assignment for the benefit of, or enter into a
composition with, its creditors, or appoint or consent to the appointment of a
receiver or other custodian for all or a substantial part of its property; or
(i) the Company or any of its Subsidiaries shall fail to maintain in
full force and effect any federal, state or local license, permit or operating
right material to the operation of its business; or
(j) a Change of Control shall occur; or
(k) the employment of Sands as chief executive and chief operating
officer or-the Company shall be terminated for any reason.
10.2. Remedies. Upon the occurrence and continuance of any Event of
--------
Default. in each and every such case,
(a) the Majority Holders of the Notes may proceed to protect
and enforce its or their rights by suit in equity, action at law and/or
other appropriate proceedings either for specific performance of any
covenant, provision or condition contained or incorporated by reference in
this Agreement or in the Notes, or in aid of the exercise of any power
granted in this Agreement or in the Notes, and (unless there shall have
occurred an Event of Default under Section 10.1(h) hereof, in which case
the unpaid balance of the Notes shall automatically become due and payable)
may, by notice to the Company, declare all or any part of the unpaid
principal amount of the Notes then outstanding to be forthwith due and
payable, and thereupon such unpaid principal amount or part thereof,
together with interest accrued thereon and all other sums. if any, payable
under this Agreement or the Notes shall become so due and payable without
presentation, presentment, protest or further demand or notice of any kind,
all of which are hereby expressly waived, and such holder or holders may
proceed to enforce payment of such, amount or part thereof in such manner
as it or they may elect: and
(b) the Majority Holders of the Purchased Common Stock may
proceed to protect and enforce its or their rights by suit in equity,
action at law and/or other appropriate proceeding for specific performance
of any covenant. provision or condition contained or incorporated by
reference in this Agreement or in any Related Agreement, or in aid of the
exercise of any power granted in this Agreement or any Related Agreement,
and if any such Event of Default occurs at any time after the giving of a
Put Notice to the Company pursuant to Section 11 hereof but before payment
of the Repurchase Price therefor is made. declare all or part of such
Repurchase Price due and payable (unless there shall have occurred an Event
of Default under Section 10.1(h)
20
hereof, in which case such Repurchase Price shall be automatically due and
payable), without presentation, presentment, protest or further demand or
notice of any kind. all of which are expressly waived, and any such holder
or holders may proceed to enforce payment of such amount or part thereof in
such manner as it or they may elect.
10.3. Waivers. Each of the Company and its Subsidiaries hereby
---------
waives, to the extent not prohibited by applicable law, (a) all presentments,
demands for performance and notices of nonperformance (except to the extent
specifically required by the provisions hereof), (b) any requirement of
diligence or promptness on the part of any holder of Securities in the
enforcement of its rights under the provisions of this Agreement, the Company's
Charter, or any Financing Agreement, and (c) any and all notices of every kind
and description which may be required to be given by any statute or rule of law.
10.4. Course of Dealing. No course of dealing between the Company or
-----------------
any of its Subsidiaries on the one hand, and you or any holder of Securities, on
the other hand. shall operate as a waiver of any of your or its rights under
this Agreement, the Company's Charter. or any Financing Agreement. No delay or
omission in exercising any right under this Agreement, the Company's Charter, or
any Financing Agreement shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any other occasion.
11. REPURCHASE OF PURCHASED COMMON STOCK.
----------------------- -------------
11.1. Right to Put Purchased Common Stock. At any time and from time
------------------------------------
to time on or after the fifth anniversary of the Closing Date, or on such
earlier date as may be determined under Section 10.2(b) hereof, you may, by
notice to the Company (a "Put Notice"), elect to sell to the Company (and the
---------------
Company hereby agrees to repurchase from you), at the Repurchase Price specified
in Section 11.5 hereof, such number of shares of Purchased Common Stock as are
specified in the Put Notice. The date on which any Put Notice is given to the
Company in accordance with this Section 11.1 is referred to herein as the "Put
----
Notice Date." Your rights under this Section 11 to require the Company to
- --------------
repurchase from you Purchased Common Stock shall terminate upon the closing of
the Company's initial public offering.
11.2. Put Closing. The put closing shall take place at the offices of
------------
the Company at I0:00 a.m. local time on a date (a) twelve (12) months after the
Put Notice Date or (b) at such other time and place as you and the Company may
agree upon (a "Put Closing Date"). At the put closing you will deliver to the
-----------------
Company a certificate or certificates evidencing the Purchased Common Stock then
to be purchased by the Company (properly endorsed or accompanied by stock
powers) against payment of the Repurchase Price to you in the manner specified
in Section 11.4 hereof (together with a certificate or certificates evidencing
any shares of Purchased Common Stock presented to the Company but not then being
purchased by the Company). Except to the extent prohibited by applicable law,
prior to the Put Closing Date, the Company will provide you with all available
information that may be material to the exercise of your rights under this
Section 11, including any plans or proposals for any mergers, sales of assets,
acquisitions and substantial sales of stock.
21
11.3. Right to Call Purchased Common Stock; Call Closing. At any time
---------------------------------------------------
after the seventh anniversary of the Closing Date, the Company may, by notice to
you (the "Call Notice"), elect to purchase from you (and you hereby agree to
------
sell to the Company), at the Repurchase Price, all but not less than all of the
shares of Purchased Common Stock as are then outstanding on a date specified in
such notice, which shall be not fewer than 30 nor more than 60 days after the
date of the Call Notice. The call closing under this Section 11.3 shall take
place at the offices of the Company at 10:00 a.m. local time on the date so
specified, or at such other time and place as the Company and you may agree upon
(the "Call Closing Date"). At the call closing, you will deliver to the Company
------------------
a certificate or certificates evidencing the Purchased Common Stock to be
repurchased by the Company pursuant to such call (properly endorsed or
accompanied by stock powers)against payment of the Repurchase Price to you in
the manner specified in Section 11.4 hereof. The Company's rights under this
Section 11.3 to repurchase from you Purchased Common Stock shall terminate upon
the closing of the Company's initial public offering.
11.4. Payment. The Company shall pay the Repurchase Price at any
--------
closing under Section 11.2 or 11.3 hereof out of funds legally available
therefor in cash or immediately available funds. In the event that any portion
of the Repurchase Price is not paid as a result of any insufficiency of legally
available funds or otherwise, you shall retain all your rights hereunder and
under and in connection with the Purchased Common Stock, as to that number of
shares of Purchased Common Stock as such unpaid portion represents (the
"Unrepurchased Securities"), until such time as the unpaid portion of the
- ---------------
Repurchase Price and interest thereon, determined as set forth below, shall be
paid to you in full; and you shall, at any time prior to payment of the
Repurchase Price for any Unrepurchased Securities, be entitled, by notice to the
Company (the "Rescission Notice"), to rescind your put of such Unrepurchased
------------------
Securities pursuant to Section 11.1. Unless and until the Company receives a
Rescission Notice, the unpaid portion of the Repurchase Price allocable to the
Unrepurchased Securities shall remain an obligation of the Company and shall be
paid by the Company, in cash or immediately available funds, as soon as there
are funds legally available therefor. Interest shall accrue on any unpaid
portion of the Repurchase Price at the annual rate of 7 % from the date which is
thirty (30) days after the Put Notice Date until the Put Closing Date. Interest
shall accrue on any unpaid portion of the Repurchase Price at the Default Rate
from and after the date fixed for any closing under Section 11.2 or 11.3 hereof.
11.5. Repurchase Price for Purchased Common Stock.
--------------------------------------------
(a) Repurchase Price. The repurchase price (the "Repurchase
----------------- ----------
Price") shall be an amount per share of Common Stock to be repurchased equal to
- -------
the quotient obtained by dividing (A) the Formula Value of the Company's common
stock equity, calculated as of the date of the related Put Notice or Call Notice
given under Section 11.1 or 11.3 hereof, respectively, by (B) the aggregate
number of shares of Common Stock outstanding as of such date.
(b) Formula Value. The Formula Value of the Company's common
-------------- --------------
stock equity at any particular date of determination shall be an amount
calculated by (i) multiplying by the number 7 the Company's EBITDA for the
period of four consecutive fiscal quarters of the Company ended most recently
prior to such date and for which financial statements of the type required to be
delivered pursuant to Section 9.1 hereof are available (ii) subtracting from the
22
product obtained pursuant to clause (i) the total amount of the Company's
consolidated Indebtedness for Borrowed Money outstanding on such date, and (iii)
adding to the amount obtained pursuant to clause (ii) the sum of the aggregate
cash balances of the Company and its Subsidiaries on such date and the total
value of all cash equivalents owned by the Company and its Subsidiaries on such
date.
11.6. Additional Payments Upon Merger, Etc. If at any time within six
------------------------------------
(6) months after any Put Closing Date or Call Closing Date with respect to the
repurchase of any Purchased Common Stock, the Company or any of its Subsidiaries
shall become party to any Capital Transaction or the Company or any of its
Subsidiaries or their respective stockholders enter into any agreement or letter
of intent contemplating any Capital Transaction, the Company shall,
simultaneously with the consummation of such Capital Transaction or at such
later time as any payment is received by the Company or any of its stockholders
in respect of such Capital Transaction, make an additional payment to you in an
amount per share of Purchased Common Stock repurchased from you pursuant to
Section 11.2 or 11.3 hereof equal to the excess, if any, of the value per share
of the cash, securities and other property that you would have received (or that
the Company received in which you would have had a beneficial interest as a
stockholder of the Company) had your Purchased Common Stock not been previously
repurchased pursuant to Section 11.2 or 11.3 hereof, over the payment received
by you with respect to each such share pursuant to Section 11.2 or 11.3 hereof.
Each payment to you pursuant to this Section 11.6 shall be made either in cash
or in the form of consideration received by the holders of common equity of the
Company (or the Company).
12. SUBSEQUENT HOLDERS OF SECURITIES.
---------------------------------
Whether or not any express assignment has been made in this Agreement.
the provisions of this Agreement and the Financing Agreements that are for your
benefit as the holder of any Securities are also for the benefit of, and
enforceable by, all subsequent holders of Securities.
13. REGISTRATION RIGHTS.
--------------------
You shall have certain registration rights with respect to the shares
of Purchased Common Stock as set forth in the Registration Rights Agreement.
14. REGISTRATION AND TRANSFER OF SECURITIES.
---------------------------------------
14.1. Registration, Transfer and Exchange of Notes.
---------------------------------------------
(a) The Company shall keep at its principal office a register in
which shall be entered the names and addresses of the registered holders of the
Notes issued by it and particulars of the respective Notes held by them and of
all transfers of such Notes. References to the "holder" or "holder of record" of
any Note shall mean the payee thereof unless the payee shall have presented such
Note to the Company for transfer and the ,transferee shall have been entered in
said register as a subsequent holder, in which case the terms shall mean such
23
subsequent holder. The ownership of any of the Notes shall be proven by such
register and the Company may conclusively rely upon such register.
(b) The holder of any of the Notes may at any time and from time to
time prior to maturity or redemption thereof surrender any Note held by it for
exchange or (subject to compliance with the applicable provisions of Section 16
hereof) transfer at said office of the Company. Within a reasonable time
thereafter and without expense (other than transfer taxes, if any) to such
holder, the Company shall issue, at its expense, in exchange therefor another
Note or Notes, dated the date to which interest has been paid on the surrendered
Note. for the same aggregate principal amount as the unpaid principal amount of
the Note or Notes so surrendered, having the same maturity and rate of interest,
containing the same provisions and subject to the same terms and conditions as
the Note or Notes so surrendered. Each such new Note shall be in the
denominations and registered in the name of such person or persons as the holder
of such surrendered Note or Notes may designate in writing, and such exchange
shall be made in a manner such that no additional or lesser amount of principal
or interest shall result. The Company will pay shipping and insurance charges,
from and to each holder's principal office, involved in the exchange or transfer
of any Note.
(c) Each Note issued hereunder, whether originally or in
substitution for, or upon transfer or exchange of any Note shall be registered
on the date of execution thereof by the Company. The registered holder of record
shall be deemed to be the owner of the Note for all purposes of this Agreement.
All notices given hereunder to the holder of record shall be deemed validly
given if given in the manner specified in Section 19 hereof.
14.2. Transfer and Exchange of Common Stock.
--------------------------------------
(a) The Company shall keep at its principal office a register in
which shall be entered the names and addresses of the holders of the Purchased
Common Stock and the particulars (including without limitation the class
thereof) of the respective Purchased Common Stock held by them and of all
transfers of shares of Purchased Common Stock. References to the "holder" or
"holder of record" of any Purchased Common Stock shall mean the holder thereof
unless the holder shall have presented the stock certificates evidencing same to
the Company for transfer and the transferee shall have been entered in said
register as a subsequent holder, in which case the terms shall mean such
subsequent holder. The ownership of any of the Purchased Common Stock shall be
proven by such register and the Company may conclusively rely upon such
register.
(b) Upon surrender at such office of any certificate representing
shares of Purchased Common Stock for registration of exchange or (subject to
compliance with the applicable provisions of Section 16 hereof) transfer or
conversion, the Company shall issue, at its expense, one or more new
certificates, in such denomination or denominations as may be requested, for
shares of such class of Purchased Common Stock as may be requested, and
registered as such holder may request. Any certificate representing shares of
Purchased Common Stock surrendered for registration of transfer shall be duly
endorsed, or accompanied by a written instrument of transfer duly executed by
the holder of such certificate or his attorney duly authorized in writing. The
Company will pay shipping and insurance charges, from and to each
24
holder's principal office, upon any transfer, exchange or conversion provided
for in this Section 14.2.
(c) Each stock certificate evidencing Purchased Common Stock,
whether originally or in substitution for, or upon transfer, conversion or
exchange of. any Purchased Common Stock shall be registered on the date of
execution thereof by the Company. The registered holder of record shall be
deemed to be the owner of the Purchased Common Stock for all purposes of this
Agreement. All notices given hereunder to the holder of record shall be deemed
validly given if given in the manner specified in Section 19 hereof.
14.4. Replacement of Securities. Upon receipt of evidence reasonably
--------------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Security and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity bond in such reasonable amount as the Company may determine (or,
in the case of any Security held by you or another institutional holder, an
unsecured indemnity agreement from you or such other holder reasonably
satisfactory to the Company) or, in the case of any such mutilation, upon the
surrender of such Security for cancellation to the Company at its principal
office, the Company, at its own expense, will execute and deliver, in lieu
thereof, a new Security of like tenor, dated in the case of a Note so that there
will be no loss of interest. Any Security in lieu of which any such new Security
has been so executed and delivered by the Company shall not be deemed to be
outstanding for any purpose of this Agreement.
15. REGULATORY RESTRICTIONS.
------------------------
15.1. Bank Holding Company Act. No Person which is a bank holding company
-------------------------
or a subsidiary of a bank holding company (a "Bank Affiliate") as defined in the
--------------
Bank Holding Company Act of 1956, as amended, or other applicable banking laws
of the United States of America and the rules and regulations promulgated
thereunder (the "Bank Holding Company Act") shall acquire Common Stock, if,
---------------------------
after giving effect to such acquisition, the Bank Affiliate, together with its
Affiliates, would own more than five percent (5%) of the outstanding voting
securities the Company. Notwithstanding the foregoing, shares of Common Stock
may be acquired or held by BBV or any other Bank Affiliate which is a Small
Business Investment Company consistent with and subject to the limitations
contained in the Small Business Act and. to the extent not inconsistent with the
Bank Holding Company Act. in the event that:
(a) the Company shall vote to merge or consolidate with or into any
other Person and after giving effect to such merger or consolidation the Bank
Affiliate would not own more than five percent (5%) of the outstanding voting
securities of the surviving corporation: or
(b) said holder exercises its registration rights pursuant to the
Registration Rights Agreement and the registration statement resulting therefrom
is effective.
15.2. Small Business Act. No Person which is a Small Business Investment
-------------------
Company as defined in the Small Business Act shall exercise "put" rights as a
holder of Purchased Common Stock hereunder if the exercise thereof shall violate
any of the rules or regulations promulgated under the Small Business Act.
25
15.3. Statement of Compliance. For purposes of this Agreement, a written
-----------------------
statement of BBV or any of its Affiliates acquiring Common Stock, delivered to
the Company upon acquisition of any shares of Common Stock, to the effect that
BBV or its Affiliate. as the case may be, is legally entitled to exercise its
rights to purchase securities of the Company and that such exercise will not
violate or contravene any law or regulation or any judgment, decree or order of
any governmental authority then applicable to BBV or such Affiliate, as the case
may be, shall be conclusive and binding upon the Company and shall absolutely
obligate and bind the Company to deliver, in accordance with the other terms and
provisions hereof, certificates or other appropriate instruments representing
the securities so purchased.
16. RESTRICTIONS ON TRANSFER.
------------------------
16.1. General Restriction. The Securities shall be transferable (a) only
-------------------
upon the satisfaction .of the conditions set forth below in this Section 16 and
(b) only to Permitted Transferees. In addition, BBV may not transfer any Notes
if, after giving effect to such transfer, BBV and its Affiliates would hold less
than 51% of the aggregate outstanding principal amount of the outstanding Notes.
The restrictions of the preceding sentence shall not be applicable if any
Default or Event of Default is continuing hereunder.
16.2. Notice of Transfer. Prior to any transfer of any Securities, the holder
------------------
thereof shall be required to give written notice to the Company describing in
reasonable detail the manner and terms of the proposed transfer and the identity
of the proposed transferee (the "Transfer Notice"), accompanied by (a) an
----------------
opinion of Bingham, Dana & Gould addressed to the Company, or other counsel
reasonably acceptable to the Company, that such transfer may be effected without
registration of such Securities under the Securities Act, and (b) the written
agreement of the proposed transferee to be bound by all of the provisions hereof
and of the Financing Agreements. applicable to holders of such Securities
hereunder or thereunder.
16.3. Restrictive Legends. Except as otherwise permitted by this Section 16.
-------------------
each Security shall bear the legend specified for such Security in Schedule 16.3
-------------
hereto.
` 16.4. Termination of Restrictions. The restrictions imposed by this Section
----------------------------
16 upon the transferability of Securities shall terminate as to any particular
Securities when such Securities shall have been effectively registered under the
Securities Act or sold pursuant to a Public Sale. Whenever any of such
restrictions shall terminate as to any Securities, the holder thereof shall be
entitled to receive from the Company, at the Company's expense, new Securities
without such legends.
17. EXPENSES; INDEMNITY.
--------------------
(a) The Company hereby agrees to pay on demand all reasonable out-of-
pocket expenses incurred by you, in connection with the transactions
contemplated by this Agreement and the Related Agreements and in connection with
any amendments or waivers (whether or not the same become effective) hereof or
thereof and all reasonable out-of-pocket expenses incurred by you or any holder
of any Security issued hereunder in connection with the
26
enforcement of any rights hereunder, under any other Related Agreement or with
respect to any Security, including without limitation (i) the cost and expenses
of preparing and duplicating this Agreement, each other Financing Agreement and
Related Agreement and the Securities; (ii) the cost of delivering to your
principal offices, insured to your satisfaction, the Securities sold to you
hereunder and any Securities delivered to you in exchange therefor or upon any
exercise, conversion or substitution thereof; (iii) the fees, expenses and
disbursements of BBV's special counsel in connection with the transactions
contemplated by this Agreement and the Related Agreements and any amendments,
modifications. approvals, consents or waivers hereunder or thereunder; (iv) the
fees, expenses and disbursements of your accountants and other consultants, in
connection with your due diligence investigation of the Company; (v) all taxes
(other than taxes determined with respect to income), including any recording
fees and filing fees and documentary stamp and similar taxes at any time payable
in respect of this Agreement, any other Related Agreement or the issuance of any
of the Securities; (vi) the reasonable fees and disbursements of counsel for any
holder of Securities in connection with all opinions rendered by such counsel
pursuant to Section 16 hereof and (vii) all reasonable out-of-pocket expenses
(including without limitation reasonable attorneys' fees and costs, whether or
not such attorneys are your employees, all costs associated with any rights of
board attendance, observation or inspection and travel and lodging expenses
related thereto, and reasonable consulting, accounting, appraisal, investment
banking and similar professional fees and charges) incurred by you in connection
with (A) the exercise, enforcement or preservation of rights under this
Agreement or any of the Related Agreements against the Company or any of its
Subsidiaries or the administration thereof whether before or after the
occurrence of a Default or Event of Default (including engineering, appraiser
environmental consulting and investment banking charges) and (B) any litigation,
proceeding or dispute whether arising hereunder or otherwise, in any way related
to your relationship with the Company or its Subsidiaries.
(b) The Company hereby further agrees to indemnify, exonerate and hold
you and your stockholders, officers, directors, employees and agents free and
harmless from and against any and all actions, causes of action, suits, losses,
liabilities. damages and expenses (including, without limitation, .reasonable
attorneys' fees and disbursements), incurred in any capacity by any of the
indemnitees as a result of or relating to (A) any transaction financed or to be
financed in whole or in part directly or indirectly with proceeds from the sale
of any of the Securities, or (B) the execution. delivery, performance or
enforcement of this Agreement (including, without limitation, any failure by the
Company to comply with any of its covenants hereunder), the Related Agreements
or any instrument contemplated hereby or thereby, except, in each such case. for
any such liabilities arising from any indemnitee's breach of this Agreement,
gross negligence or willful misconduct.
(c) The Company hereby indemnifies you against and agrees that it will
hold you harmless from any claim, demand or liability for any broker's, finder's
or placement fees or lender's incentive fees alleged to have been incurred by it
in connection with the transactions contemplated by this Agreement or the
Related Agreements.
(d) Except to the extent otherwise expressly provided herein, the
Company shall pay on demand interest at a rate per annum equal to the lesser of
the maximum rate of
27
interest permitted by law or 11.5 % (in each case, compounded monthly) on all
overdue amounts payable under this Agreement until such amounts shall be paid
in full.
(e) The obligations of the Company under this Section 17 shall survive
payment or transfer of the Securities and the termination of this Agreement.
18. INDEMNIFICATION BY SANDS WITH RESPECT TO THE PURCHASED COMMON STOCK.
--------------------------------------------------------------------
Sands agrees to indemnify, defend and hold BBV (and its successors and
assigns) harmless against and with respect to any and all claims, demands,
causes of action, proceedings, damages, losses, liabilities, fines, penalties,
deficiencies, judgments, costs and expenses (including, without limitation,
reasonable counsel fees incurred in litigation or otherwise) against BBV (and
its successors and assigns), arising out of any material misrepresentation by
Sands in this Agreement or any breach of warranty or nonfulfillment by him of
any agreement by him in Section 2.3 hereof.
19. NOTICES.
-------
Any notice or other communication in connection with this Agreement. any
other Financing Agreement or the Securities shall be deemed to be delivered if
in writing (or in the form of a telex or telecopy) addressed as provided below
(a) when actually delivered, telexed or telecopied to said address or (b) in the
case of a letter. three business days shall have elapsed after the same shall
have been deposited in the United States mails, postage prepaid and registered
or certified:
If to the Company, then to its address set forth on page 1 hereof, to the
attention of the President or at such other address as such person shall have
specified by notice actually received by the addresser.
If to BBV, then to its address set forth on page 1 hereof, to the attention
of Robert F. Duggan, Managing Director, or at such other address as BBV shall
have specified by notice actually received by the addresser, with a copy to
Frederick F. Eisenbiegler, Esq., Bingham, Dana & Gould, 150 Federal Street,
Boston, Massachusetts 02110.
If to any other holder of record of any Security, to it at its address set
forth in the applicable register referred to in Section 14 hereof.
20. SURVIVAL AND TERMINATION OF COVENANTS.
--------------------------------------
All covenants, agreements, representations and warranties made herein or in
any other document referred to herein or delivered to you pursuant hereto shall
be deemed to have been relied on by you, and shall survive the execution and
delivery to you hereof and of the Securities.
28
21. AMENDMENTS AND WAIVERS.
----------------------
Any term of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only with the written consent of the
Company and the Majority Holders of the Notes and the Majority Holders of the
Purchased Common Stock, respectively, with respect to any provision of this
Agreement which by its terms operates for the benefit of such respective
holders. Any term of the Notes may be amended and the observance of any term of
the Notes may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company and
the Majority Holders of the Notes with respect to whom such amendment or waiver
is made. Notwithstanding the foregoing, (a) without the prior written consent of
each holder of Purchased Common Stock with respect to whom such amendment or
waiver is made, no such amendment or waiver shall extend the scheduled date of
any required repurchase of such respective Securities held by such holder or
reduce the repurchase price payable thereon, (b) without the prior written
consent of each holder of Notes with respect to whom such amendment or waiver is
made. no such amendment or waiver shall extend the fixed maturity or reduce the
principal amount of, or reduce the rate or extend the time of payment of
interest on. or reduce the amount or extend the time of payment of any principal
or premium payable on any prepayment of, any Note with respect to whom such
amendment or waiver is made, (c) without the written consent of the aforesaid
percentage of Securities reduce the aforesaid percentage of Securities the
holders of which are required to consent to any such amendment or waiver, (d)
without the written consent of the percentage of the holders of each Security
required to exercise the remedies provided in Section 10.2 hereof, increase such
required percentage, and (e) without the written consent of Sands, no such
amendment or waiver shall increase the obligations of Sands under this
Agreement. Any amendment or waiver effected in accordance with this Section 21
shall be binding upon each holder of any Security, the Company and Sands.
22. CONSENT TO JURISDICTION.
------------------------
EACH OF THE COMPANY AND SANDS HEREBY AGREES TO SUBMIT TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS IN AND OF THE COMMONWEALTH OF MASSACHUSETTS AND THE
STATE OF NEW YORK, AND CONSENTS THAT SERVICE OF PROCESS WITH RESPECT TO ALL
COURTS IN AND OF THE COMMONWEALTH OF MASSACHUSETTS AND THE STATE OF NEW YORK MAY
BE MADE BY REGISTERED MAIL TO IT AT THE ADDRESS SET FORTH ON PAGE 1 HEREOF.
23. RIGHT TO PUBLICIZE.
-------------------
Each of the Company and Sands hereby acknowledges that BBV will have the
right to publicize its investment in the Company as contemplated hereby by means
of a tombstone advertisement or other customary advertisement in newspapers and
other periodicals.
29
24. WAIVER OF JURY TRIAL.
--------------------
EACH OF THE COMPANY AND SANDS HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE
TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING EXISTING UNDER OR RELATING TO
THIS AGREEMENT, THE SECURITIES OR ANY OF THE OTHER FINANCING AGREEMENTS.
25. MISCELLANEOUS.
-------------
This Agreement and the other Financing Agreements set forth the entire
understanding of the parties hereto with respect to the transactions
contemplated hereby and supersede any prior written or oral understandings with
respect thereto. The invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of any other term or
provision hereof. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof. THIS
AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND MAY BE EXECUTED
IN ANY NUMBER OF COUNTERPARTS WHICH TOGETHER SHALL CONSTITUTE ONE INSTRUMENT AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF
LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE DOMESTIC
SUBSTANTIVE LAWS OF ANY OTHER STATE, AND SHALL BIND AND INURE TO THE BENEFIT OF
THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
If the foregoing corresponds with your understanding of our agreement, kindly
sign this letter and the accompanying copies thereof in the appropriate space
below and return one counterpart of the same to the Company, at the address
first listed above.
Very truly yours,
PERISCOPE I SPORTSWEAR, INC,
By: /s/ Glenn Sands, President
--------------------------
Accepted and agreed to:
BANCBOSTON VENTURES INC.
By: /s/ Cynthia K. Duda
-------------------
Title: Director
30