Exhibit 10.2.1
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_________________
SECURITIES PURCHASE AGREEMENT
_________________
between
NUMATICS, INCORPORATED
and
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
Dated
As of January 3, 1996
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TABLE OF CONTENTS
Page
1. Transactions and Definitions........................................... 1
2. The Securities......................................................... 1
2.1. Notes............................................................ 1
2.2. Warrants......................................................... 2
2.3. Investor Securities Defined...................................... 2
3. Sale and Purchase of Securities........................................ 2
3.1. Agreement to Sell and Purchase................................... 2
3.2. Closing.......................................................... 2
3.3. Use of Proceeds.................................................. 3
3.4. Specifically Prohibited Applications of Proceeds................. 3
4. Representations and Warranties......................................... 3
4.1. Organization, Standing, Subsidiaries, etc........................ 3
4.2. Capitalization................................................... 4
4.3. Reports, Financial Statements and Other Documents................ 5
4.4. Changes in Condition............................................. 9
4.5. Incorporation by Reference....................................... 9
4.6. No Legal Obstacle to Agreement................................... 9
4.7. Foreign Trade Regulations; Government Regulations; Margin Stock.. 10
4.8. Litigation....................................................... 10
4.9. Solvency......................................................... 11
4.10. Disclosure....................................................... 11
5. Investment Representations............................................. 11
5.1. Accredited Investor.............................................. 11
5.2. Experience....................................................... 11
5.3. Investment....................................................... 11
6. Conditions to Purchase................................................. 12
6.1. Related Agreements............................................... 12
6.2. Legal Opinions................................................... 12
6.3. Representations and Warranties; Officers' Certificate............ 12
6.4. Subsidiary Guarantee Agreements.................................. 12
6.5. Security Agreements.............................................. 12
6.6. Employment and Noncompetition Agreements......................... 12
6.7. Tag-Along and Drag-Along Agreement............................... 13
6.8. Registration Agreement........................................... 13
6.9. Solvency Opinion................................................. 13
6.10. Key Man Insurance................................................ 13
6.11. Proper Proceedings............................................... 13
6.12. Legality; Governmental Authorization............................. 13
6.13. Payment of Transaction Costs..................................... 13
6.14. General.......................................................... 13
7. Repurchase of Warrants and Common Stock................................ 14
8. Covenants Applicable While Any Investor Securities Are Outstanding..... 14
8.1. Charter Amendments............................................... 14
8.2. Right to Attend Board Meetings................................... 14
8.3. Financial Statements............................................. 15
8.4. Conduct of Business.............................................. 17
8.5. Transactions with Affiliates..................................... 17
8.6. Limitations on Issuance of Equity Securities..................... 18
8.7. Equity Participation Rights...................................... 18
8.8. Registration Statements.......................................... 21
8.9. Repurchase....................................................... 22
8.10. Certain Tax and other Valuation Matters.......................... 22
9. Covenants Applicable While Any Notes Are Outstanding................... 22
9.1. Incorporation of Certain Covenants............................... 22
9.2. Amendments to Certain Agreements................................. 23
9.3. Fiscal Year...................................................... 24
9.4. Restrictions on Indebtedness..................................... 24
9.5. Restrictions on Guarantees....................................... 25
9.6. Restrictions on Liens............................................ 25
9.7. Restrictions on Distributions.................................... 27
9.8. Debt Incurrence Test............................................. 27
9.9. Execution of Guarantee Agreements and Security Agreements
by Guarantee Subsidiaries........................................ 28
9.10. Key Man Insurance................................................ 28
10. Defaults............................................................... 28
10.1. Events of Default; Remedies...................................... 28
10.2. Annulment of Defaults............................................ 32
10.3. Waivers.......................................................... 32
10.4. Course of Dealing................................................ 32
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11. Payment on Investor Securities; Transfer; Replacement.................. 32
11.1. Home Office Payment............................................. 32
11.2. Registration, Transfer and Exchange of Notes.................... 32
11.3. Transfer, Exchange, Exercise and Conversion of Warrants......... 33
11.4. Transfer and Exchange of the Capital Stock...................... 33
11.5. Replacement of Lost Securities.................................. 34
12. Restrictions on Transfer............................................... 34
12.1. Restrictive Legend.............................................. 34
12.2. Notice of Proposed Transfer; Opinions of Counsel................ 35
12.3. Termination of Restrictions..................................... 35
12.4. Special Restriction............................................. 35
13. Definitions............................................................ 36
13.1. Terms Defined Elsewhere......................................... 36
13.2. Action.......................................................... 37
13.3. Adjusted Net Operating Income................................... 37
13.4. Affiliate....................................................... 37
13.5. Applicable Percentage........................................... 37
13.6. Business Day.................................................... 37
13.7. By-laws......................................................... 38
13.8. Capitalized Lease............................................... 38
13.9. Charter......................................................... 38
13.10. Code............................................................ 38
13.11. Commission...................................................... 38
13.12. Consolidated.................................................... 38
13.13. Contractual Obligation.......................................... 38
13.14. Default......................................................... 38
13.15. Distribution.................................................... 38
13.16. Exchange Act.................................................... 39
13.17. Equity Securities............................................... 39
13.18. Foreign Trade Regulations....................................... 39
13.19. Generally Accepted Accounting Principles........................ 39
13.20. Governmental Authority.......................................... 39
13.21. Guarantee....................................................... 39
13.22. Guarantee Subsidiary............................................ 40
13.23. Indebtedness.................................................... 40
13.24. Initial Yield to Maturity....................................... 40
13.25. Investment...................................................... 40
13.26. Legal Requirement............................................... 41
13.27. Lien............................................................ 41
13.28. Material Adverse Change; Material Adverse Effect............... . 41
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13.29. Members of the Immediate Family................................ 41
13.30. Net Operating Income........................................... 41
13.31. Person......................................................... 42
13.32. Pro Forma Net Operating Income................................. 42
13.33. Public Sale.................................................... 42
13.34. Required Holders............................................... 42
13.35. Securities Act................................................. 42
13.36. Senior Indebtedness............................................ 42
13.37. Significant Subsidiary......................................... 42
13.38. Stockholder.................................................... 42
13.39. Subject Entity................................................. 43
13.40. Subordinated Indebtedness...................................... 43
13.41. Subsidiary..................................................... 43
13.42. Wholly Owned Subsidiary........................................ 43
13.43. Yield to Maturity.............................................. 43
14. Expenses, Etc.......................................................... 43
15. Notices................................................................ 44
16. Survival of Covenants.................................................. 45
17. Amendments and Waivers................................................. 45
18. Waiver of Jury Trial................................................... 45
19. Service of Process..................................................... 45
20. Miscellaneous.......................................................... 46
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SCHEDULES AND EXHIBITS
Schedule I Home Office Payments
Exhibit 2.1 Form Of Senior Subordinated Note
Exhibit A to Exhibit 2.1 Form of PIK Note
Exhibit 2.2 Form of Warrant
Exhibit 4.1.2 Charter of the Company
Exhibit 4.1.3A Stockholders as of Date of Agreement
Exhibit 4.1.3B Stockholders Immediately After Closing
Exhibit 4.1.4A Subsidiaries
Exhibit 4.1.4B Other Investments
Exhibit 4.2.1A Other Agreements Related to Equity Securities as
of Date of Agreement
Exhibit 4.2.1B Other Agreements Related to Equity Securities
Immediately After Closing
Exhibit 4.2.2 Ownership of Subsidiaries
Exhibit 4.3.1 Exceptions to Financial Information
Exhibit 4.4 Transactions Outside of Ordinary Course
Exhibit 6.4 Form of Guarantee Agreement
Exhibit 6.5 Form of Intercreditor Agreement
Exhibit 6.7 Form of Tag-Along and Drag-Along Agreement
Exhibit 6.8 Form of Registration Agreement
Exhibit 7 Put/Call Rights
Exhibit 8.5.1 Transactions Not at Arm's Length
Exhibit 8.5.3 Compensation of Employee Stockholders
Exhibit 9.4.1 Existing Indebtedness
Exhibit 9.6.2 Existing Liens
Exhibit 12.4 Competitors
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NUMATICS, INCORPORATED
1450 North Milford Road
Highland, Michigan 48357
Telecopier Number: (810) 887-2142
As of January 3, 1996
Harvard Private Capital Holdings, Inc.
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Attention: Michael R. Eisenson
Telecopier Number: (617) 523-1063
Ladies and Gentlemen:
In connection with the purchase and sale of securities provided for herein,
the undersigned Numatics, Incorporated, a corporation duly organized and validly
existing under the laws of the State of Michigan (the "Company"), hereby agrees
with you as follows:
1. Transactions and Definitions. Subject to all of the terms and conditions
of this Agreement and in reliance on the representations and warranties set
forth or incorporated by reference herein, the Company proposes to issue and
sell to you the Investor Securities described herein, and to apply the proceeds
therefrom solely as specified in Section 3.3 hereof. Certain terms are used in
this Agreement as specifically defined herein. These definitions are set forth
or referred to in Section 13 hereof.
2. The Securities.
2.1. Notes.
2.1.1. Senior Subordinated Notes. The Company has authorized the
issuance and sale to you of its senior subordinated notes, each in
substantially the form of Exhibit 2.1 hereto (each such note, together with
any note or notes issued in exchange therefor, being referred to herein
individually as a "Senior Subordinated Note" and collectively as the
"Senior Subordinated Notes"), in the aggregate stated principal amount of
$30,000,000 for an aggregate purchase price equal to $26,597,862.
2.1.2. PIK Notes. The Company has authorized the issuance and sale
to the holders from time to time of the Notes of payment-in-kind notes,
each in substantially the
form of Exhibit A to Exhibit 2.1 hereto (each such note, together with any
note or notes issued in exchange therefor, being referred to herein
individually as a "PIK Note" and collectively as the "PIK Notes"), on the
terms and conditions stated in the Notes.
2.1.3. Notes. Each of the Senior Subordinated Notes and the PIK
Notes, together with each of any Put Notes issued pursuant to Section 7.2
of Exhibit 7 hereto, are referred to herein individually as a "Note" and
collectively as the "Notes".
2.2. Warrants. The Company has authorized the issuance and sale to you
of warrants, each in substantially the form of Exhibit 2.2 hereto, for the
purchase of an aggregate of 1,276.60 shares of the Company's Class A Common
Stock, par value $0.01 per share ("Class A Common Stock"), at a per share
exercise price of $0.01 (each such warrant, together with any warrant or
warrants issued in exchange therefor, being referred to herein as a "Warrant"
and collectively as the "Warrants") for an aggregate purchase price of
$3,102,138.
2.3. Investor Securities Defined. The Senior Subordinated Notes and the
Warrants being issued to you hereunder, together with (i) any securities issued
with respect thereto, upon exercise, conversion or transfer thereof or in
exchange therefor, including without limitation the PIK Notes, the Put Notes and
the shares of Class A Common Stock issued or issuable upon exercise or
conversion of the Warrants, and (ii) any securities issued with respect to, upon
exercise, conversion or transfer of or in exchange for the securities described
in the immediately preceding clause (i) or this clause (ii), are collectively
referred to herein as "Investor Securities"; provided, however, that any such
securities sold in a Public Sale shall cease to be Investor Securities for all
purposes hereof.
3. Sale and Purchase of Securities.
3.1. Agreement to Sell and Purchase. Based on your representations and
warranties contained in Section 5 hereof, the Company hereby agrees to issue and
sell to you, and, subject to all of the terms and conditions hereof and in
reliance on the representations and warranties of the Company set forth or
incorporated by reference or otherwise referred to herein, you hereby agree to
purchase from the Company, at the Closing, the Senior Subordinated Notes and the
Warrants, at the respective purchase prices specified in Sections 2.1.1 and 2.2
hereof.
3.2. Closing. The closing of the purchase and sale of the Senior
Subordinated Notes and the Warrants (the "Closing") shall take place at 11:00
a.m., Boston, Massachusetts time, at the offices of Ropes & Gray, One
International Place, Boston, Massachusetts on January 3, 1996 or at such other
time and place as the Company and you may agree upon (the date on which the
Closing occurs being herein referred to as the "Closing Date"). At the Closing,
the Company will, unless otherwise requested, deliver to you a single note
evidencing the aggregate principal amount of Senior Subordinated Notes to be
issued to you by the Company hereunder and a single warrant evidencing the
aggregate number of warrants to be issued to you by the Company hereunder, each
registered in your name, against payment of the purchase price therefor by wire
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transfer of immediately available funds to a single account of the Company
specified by notice from the Company to you not less than three Business Days
prior to the Closing Date.
3.3. Use of Proceeds. The Company covenants that it will apply the
proceeds of the Investor Securities to be issued and sold by it to you at the
Closing for the repurchase of its capital stock pursuant to the Related
Agreements referred to in Section 4.3.2.2 hereof, to refinance certain
indebtedness, to satisfy its working capital needs and those of its
Subsidiaries, and for general corporate purposes.
3.4. Specifically Prohibited Applications of Proceeds. In no event shall
the Company, directly or indirectly, apply any part of the proceeds from the
issuance and sale hereunder of the Investor Securities (i) to any transaction
prohibited by the Foreign Trade Regulations, or (ii) for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of any regulation, interpretation or ruling of the Board of
Governors of the Federal Reserve System, all as from time to time in effect
("Margin Stock"), or refunding any Indebtedness incurred for such purpose.
4. Representations and Warranties. In order to induce you to enter into this
Agreement and to purchase the Investor Securities to be purchased by you
hereunder, the Company hereby represents and warrants that:
4.1. Organization, Standing, Subsidiaries, etc.
4.1.1. The Company. The Company is a duly organized and validly
existing corporation in good standing under the laws of the State of
Michigan, with all necessary corporate power and authority to execute,
deliver and perform this Agreement and each other Related Agreement to
which it is or will be a party, to issue, sell and perform the Investor
Securities, and to carry on the business now conducted or currently
proposed to be conducted by it. The Company has taken all corporate action
necessary to authorize this Agreement, the other Related Agreements to
which it is or will be a party and the issuance of the Investor Securities
and to make each such document the legal, valid, binding and enforceable
obligation it purports to be. This Agreement, each other Related Agreement
to which the Company is or will be a party and the Investor Securities have
been (or, as applicable, will have been at or prior to the Closing, or, in
the case of the PIK Notes, will be at or prior to the time they are
received in payment of interest on the Senior Subordinated Notes) duly
executed and delivered by the Company.
4.1.2. Charter. Attached hereto as Exhibit 4.1.2 is a correct and
complete copy of the Charter of the Company as in effect at the execution
hereof and as it will be in effect at the Closing.
4.1.3. Stockholders. As of the date of this Agreement, the only
Stockholders are those listed on Exhibit 4.1.3A hereto. Immediately after
the Closing and giving effect
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to the application of the proceeds of the sale of the Investor Securities
to be sold to you at the Closing, the only Stockholders will be those
listed on Exhibit 4.1.3B hereto.
4.1.4. Subsidiaries; Investments. The Company has no Subsidiaries
other than those listed on Exhibit 4.1.4A hereto. Each Subsidiary is a duly
organized and validly existing corporation in good standing under the laws
of its state of incorporation, with all necessary corporate power and
authority to execute, deliver and perform each Related Agreement to which
it is or will be a party and to carry on the business now conducted or
currently proposed to be conducted by it. Each Subsidiary has taken all
corporate action necessary to authorize each Related Agreement, if any, to
which it is or will be a party, and to make each such document the legal,
valid, binding and enforceable obligation it purports to be. Each Related
Agreement, if any, to which any Subsidiary is or will be a party has been
(or, as applicable, will have been at or prior to the Closing) duly
executed and delivered by such Subsidiary. No Subject Entity has any
Investment in any Person other than a Subsidiary, other than those
described on Exhibit 4.1.4B hereto.
4.1.5. Qualification. Each Subject Entity is duly qualified to do
business as a foreign corporation and is in good standing as such in each
jurisdiction in which it is required to be so qualified and is duly
authorized, qualified and licensed under all laws, regulations, ordinances
or orders of public authorities, or otherwise, to carry on its business in
the places and in the manner presently conducted and proposed to be
conducted, except for such failures to be so qualified or authorized,
qualified and licensed that have not had and will not have a Material
Adverse Effect.
4.2. Capitalization.
4.2.1. Capital Stock of the Company; Options, Etc. The authorized
capital stock of the Company consists and will consist as at the Closing
solely of 50,000 shares of Class A Common Stock, 150,000 shares of Class B
Common Stock, par value $0.01 per share ("Class B Common Stock"), 50,000
shares of Class C Common Stock, par value $0.01 per share ("Class C Common
Stock"; the Class A Common Stock, Class B Common Stock and Class C Common
Stock being referred to collectively herein as "Common Stock"), and 50,000
shares of Preferred Stock, par value $0.01 per share ("Preferred Stock"),
of which 35,000 shares have been designated Series A Preferred Stock
("Series A Preferred Stock") and 10,000 shares have been designated Series
B Preferred Stock ("Series B Preferred Stock"). As of the date of this
Agreement, the Company has outstanding 20,000 shares of Class A Common
Stock, 62,727.28 shares of Class B Common Stock, 17,272.72 shares of Class
C Common Stock and 12,788.12393 shares of Class A Preferred Stock, owned of
record as set forth in Exhibit 4.1.3A hereto, all of which have been
validly issued and are fully paid and nonassessable. After giving effect to
the consummation of the Closing, the Company will have no outstanding
capital stock except for 20,000 shares of Class A Common Stock, which shall
be owned of record as set forth in Exhibit 4.1.3B hereto, all of which will
be validly issued, fully paid and
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nonassessable. When issued and paid for as provided for in this Agreement,
the Investor Securities will be subject to no Lien except restrictions on
transfer imposed by this Agreement, the other Related Agreements and
applicable securities laws and Liens, if any, created by you. Except as
described in Exhibits 4.2.1A and 4.2.2 hereto, no Subject Entity has
outstanding, and except as described in Exhibits 4.2.1B and 4.2.2 hereto,
immediately after giving effect to the Closing no Subject Entity will have
outstanding, in each case other than as created by or pursuant to this
Agreement, (a) any Equity Securities, or (b) any Contractual Obligation to
repurchase or otherwise acquire or retire any of its Equity Securities.
4.2.2. Subsidiaries. All of the outstanding shares of capital stock
of each Subsidiary have been duly and validly authorized and issued, and
are fully paid, nonassessable and owned, beneficially and of record, as set
forth in Exhibit 4.2.2 hereto, subject to no Lien or restriction except
Liens securing the Senior Indebtedness, Liens securing the Notes and
restrictions on transfer imposed by this Agreement and the other Related
Agreements and applicable securities laws, and except as described in
Exhibit 4.2.2.
4.2.3. Reservation of Class A Common Stock. The shares of Class A
Common Stock issuable upon exercise or conversion of the Warrants have been
duly authorized and reserved for issuance by all necessary corporate action
on the part of the Company, and such shares, when issued upon such exercise
or conversion (as applicable), will be duly and validly issued, fully paid
and nonassessable.
4.2.4. Issuance of Securities. All outstanding securities of each
Subject Entity have been, and all securities of each Subject Entity
outstanding on the Closing Date will have been, issued in accordance with
all applicable Legal Requirements, including without limitation the
Securities Act and state "blue sky" laws.
4.3. Reports, Financial Statements and Other Documents.
4.3.1. Financial Information. You have been furnished with true,
complete and correct copies of each of the following:
(a) The consolidated and consolidating balance sheets of the Subject
Entities as of December 31, 1994 and the related consolidated and
consolidating statements of earnings and shareholders equity and
cash flows for the fiscal year then ended, accompanied by the
notes thereto and (with respect to such consolidated statements)
the report thereon of Ernst & Young, LLP, and similar financial
statements as at the end of and for the preceding fiscal year
accompanied by the notes thereto and auditors' report thereon.
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(b) The unaudited consolidated and consolidating balance sheets of
the Subject Entities as of September 30, 1995 and the related
unaudited consolidated and consolidating statements of earnings
and stockholders equity and cash flows for the fiscal quarter and
portion of the fiscal year then ended.
(c) Monthly unaudited consolidated and consolidating financial
statements of the Subject Entities for internal use for the
months of October and November, 1995.
(d) The budgeted consolidated and consolidating financial statements
of the Subject Entities for the periods ended December 31 of each
of 1995 and 1996.
(e) Pro forma projections of consolidated financial results of the
Subject Entities for each of the fiscal years ended December 31,
1997 through 2000.
(f) The pro forma consolidated capitalization of the Subject
Entities, as of the Closing Date, as if the Closing Date occurred
on December 31, 1995.
The financial statements (including the notes thereto, if any)
referred to in clauses (a) and (b) above were properly prepared in
accordance with generally accepted accounting principles consistently
applied (except as to changes described therein and except, in the case of
the financial statements described in clause (b) above, for the absence of
footnotes), and such financial statements and the financial statements
referred to in clause (c) above present fairly the financial condition of
the Persons covered thereby at the respective dates thereof and the results
of their operations for the periods covered thereby subject, in the case of
interim financial statements, to normal year-end adjustments and the
absence of footnotes.
Except as described in Exhibit 4.3.1, the budgeted, projected and pro
forma information referred to in clauses (d), (e) and (f) above was
prepared in good faith, was reasonable to the Company when prepared and
continues to be reasonable as of the Closing Date, based upon the
assumptions stated therein, it being understood that the Company is not
warranting the actual results of operations of the Subject Entities, which
will depend in part upon the occurrence of the assumptions stated therein,
general economic conditions and the normal and ordinary competitive and
operating risks associated with the business of the Subject Entities, which
are not within the control of the Subject Entities.
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The Company is not aware of any fact which casts doubt on the validity
in any material respect of the pro forma capitalization referred to in
clause (f) above. After giving effect to the transactions contemplated
hereby, the Company does not and will not have any material contingent
liabilities which are not referred to in said pro forma capitalization or
on the financial statements referred to above or the notes thereto.
4.3.2. Other Agreements. The Company has furnished or caused to be
furnished to you (i) true, correct and complete executed or conformed
copies of the documents listed in Sections 4.3.2.1 through 4.3.2.3 hereof,
inclusive, which have been executed on or prior to the date hereof and of
any amendments thereto, modifications thereof or waivers granted
thereunder, and (ii) true, correct and complete copies of the documents
listed in Sections 4.3.2.1 through 4.3.2.3 hereof, inclusive, which have
not yet been executed, in the exact form in which they will be executed on
or prior to, and will be in effect on, the Closing Date. This Agreement,
the Investor Securities, each Guarantee Agreement, each Employment
Agreement, the Tag-Along Agreement, the Intercreditor Agreement and the
Registration Agreement are referred to collectively herein as the
"Specified Related Agreements," and the Specified Related Agreements
together with the documents listed in Sections 4.3.2.1 through 4.3.2.3
hereof, inclusive, are referred to collectively herein as the "Related
Agreements". References to any one of the Related Agreements shall mean
such Related Agreement in the form so furnished to you, without regard to
any amendment, modification, waiver, change, limitation or termination of
such document which is made or otherwise becomes effective after the date
hereof and prior to the payment in full of all obligations in respect of
Notes, unless such amendment, modification, waiver, change, limitation or
termination has been made in compliance with Section 9.2 hereof, and shall
include other documents, exhibits and schedules which are attached thereto
or incorporated therein by reference.
4.3.2.1. Bank Credit Agreement Documents.
(a) Loan Agreement dated as of January 3, 1996 between
Numatics, Incorporated and certain of its Subsidiaries party thereto
from time to time, the lenders party thereto from time to time, and
The First National Bank of Boston, as Managing Agent, and NBD Bank, as
Administrative Agent
(b) Promissory Notes executed by the Company and each of the
Subsidiaries referred to in (a) above.
(c) Security Agreements and Mortgages executed by the
Company and its Subsidiaries
(d) Guarantee Agreement executed by Numatech, Inc.
(e) Guarantee Agreement executed by Numation, Inc.
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(f) Guarantee Agreement executed by Micro-Filtration, Inc.
(g) Guarantee Agreement executed by MicroSmith, Inc.
(h) Guarantee Agreement executed by Ultra Air
Products, Inc.
(i) Pledge Agreement
(j) Guarantee Agreement of the Company
(k) any other present or future guarantee agreements or
documents granting a security interest or lien executed by the Company
or any of its Subsidiaries
The "Bank Credit Agreement" means the documents listed in this Section
4.3.2.1, (together with any accompanying security documents), as any
of the foregoing may be amended, restated, renewed, extended,
restructured, supplemented, or otherwise modified from time to time in
accordance with Section 9.2.2 hereof.
4.3.2.2. Repurchase Agreements.
(a) Agreement dated October 10, 1995 between Norwest Equity
Partners IV, Greylock Investments Limited Partnership, Greylock
Limited Partnership, Heller Financial, Inc. and Numatics, Incorporated
(b) Agreement dated October 31, 1995 between State Treasurer of
the State of Michigan et al. and Numatics, Incorporated
(c) Exercise of Option
(d) Mutual Termination Agreement
(e) Promissory Note issued by Numatics, Incorporated to Norwest
Equity Partners IV
(f) Collateral Pledge Agreement
4.3.2.3. Other Agreements.
(a) Employment Agreement with John H. Welker
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(b) Noncompetition Agreements with John E. Acuff; David K. Dodds;
Henry Fleischer; Bruce W. Hoppe; David King; Donald E. McGeachy;
Robert P. Robeson; and Philip Robinson
(c) Amended Stock Transfer Agreement dated January 3, 1996
(d) Amended and Restated Deferred Compensation Plan dated
December 28, 1995
(e) Termination of Trust
(f) Stock Purchase and Transfer Restriction Agreement by and
among Robert L. McKay and Numatics, Incorporated, dated January 24,
1995, as amended by the First Amendment dated January 24, 1995.
(g) Stock Purchase and Transfer Restriction Agreement among
Robert B. and Pamela S. Nuckles and Numatics, Incorporated, dated as
of July 31, 1992.
(h) Stock Purchase and Transfer Restriction Agreement among
William S. and Dawn C. Smith and Numatics, Incorporated, dated
September 25, 1995.
(i) Stock Transfer Agreement among Jeffrey R. Schneid, Numatics,
Incorporated and Numation, Inc. dated September 1, 1994.
(j) Stock Transfer Agreement among Richard L. Dalton, Jr.,
Numatics, Incorporated and Numatech, Inc.
(k) Numatics, Incorporated Voting Agreement
No Subject Entity is a party to or bound by any Contractual Obligation (i)
relating to Indebtedness, or (ii) affecting the Equity Securities of any Subject
Entity or the voting thereof, which, in either case, is not a Related Agreement
or referred to in one or more of the Related Agreements.
4.4. Changes in Condition. Since December 31, 1994, there has been no
Material Adverse Change, and since December 31, 1994, no Subject Entity has
entered into any material transaction outside of the ordinary course of business
except as described on Exhibit 4.4 hereto or as disclosed elsewhere herein.
4.5. Incorporation by Reference. Each of the representations and
warranties made by any Subject Entity in any of the agreements listed in Section
4.3.2.1 to which such Subject Entity is a party or in any document delivered
pursuant thereto at the Closing or otherwise is
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incorporated herein by reference with the same force and effect as if fully set
forth herein together with the definitions of the defined terms used therein,
mutatis mutandis, so that references to the recipient of any such
representations and warranties shall be deemed to be references to you. Each
such representation and warranty so incorporated herein by reference is true and
correct on the date hereof as if made on and as of the date hereof and is hereby
confirmed directly by the Company to you (without regard to any limitation on
the survival of representations and warranties). The Company has no reason to
believe and does not believe that any of the representations and warranties made
by any Person (other than the Subject Entities) in any of the other Related
Agreements or in any document delivered pursuant thereto at the Closing or
otherwise is not true and correct in all material respects.
4.6. No Legal Obstacle to Agreement. Neither the execution and delivery
of this Agreement or any other Related Agreement, nor the consummation of any
transaction referred to herein or therein or contemplated hereby or thereby, nor
the fulfillment of the terms hereof or thereof or of any agreement or instrument
referred to in this Agreement or any other Related Agreement, has constituted or
resulted in or will constitute or result in (i) a breach of the provisions of
any Contractual Obligation to which any Subject Entity is party or by which it
is bound or of its Charter or By-laws, or (ii) assuming the accuracy of your
representation, and warranties in Section 5 hereof, a violation of any Legal
Requirement applicable to any Subject Entity, or (iii) the creation under any
Contractual Obligation of any Lien upon any of the assets of any Subject Entity.
No approval, authorization or other action by any Governmental Authority or any
other Person is required to be obtained by any Subject Entity in connection with
the execution, delivery and performance of this Agreement or any other Related
Agreement or the Investor Securities or the transactions contemplated hereby or
thereby, except for such approvals as will have been obtained and shall be in
full force and effect as of the Closing Date, and copies of which shall have
been furnished to you at or prior to the Closing.
4.7. Foreign Trade Regulations; Government Regulations; Margin Stock.
4.7.1. Foreign Trade Regulations. Neither the execution and delivery
of this Agreement or any other Related Agreement, nor the issuance and sale
of the Investor Securities by the Company hereunder and the application of
the proceeds thereof, has constituted or resulted in or will constitute or
result in the violation of any Foreign Trade Regulation.
4.7.2. Governmental Regulation. Neither the Company nor any
corporation controlling the Company or under common control with the
Company is subject to regulation under the Public Utility Holding Company
Act of 1935, the Investment Company Act of 1940, the Interstate Commerce
Act or the Federal Power Act, or is subject to any Legal Requirement (other
than Legal Requirements applicable to borrowers or issuers of securities
generally) which regulates the incurring of Indebtedness by the Company, or
any of its Affiliates, for money borrowed or the issuing by any of them of
any equity security. No approval or authorization of any governmental
authority
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is required to permit the execution, delivery or performance by the Company
of this Agreement or the consummation of any of the transactions
contemplated hereby.
4.7.3. Margin Stock. The Company does not own any Margin Stock.
4.8. Litigation. There is no Action against any Subject Entity, pending
(or, to the knowledge of the Company, threatened), except for such of the
foregoing as will not, individually or in the aggregate, result in any material
liability or expense or otherwise result in any Material Adverse Effect. There
is no Action, pending (or, to the knowledge of the Company, threatened), which
seeks rescission of, seeks to enjoin the consummation of, or questions the
validity of, this Agreement or any other Related Agreement or any of the
transactions contemplated hereby or thereby. No judgment, decree or order of
any Governmental Authority has been issued against any Subject Entity which will
have any Material Adverse Effect.
4.9. Solvency. The Company, both before and after giving effect to this
Agreement and the transactions contemplated hereby, is and will be solvent
(within the meaning contemplated by Section 548 of Title 11 of the United States
Code and any similar state statute which may be applicable), has and will have
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
and will have 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.
4.10. Disclosure. Except as otherwise updated or disclosed to you in
writing, neither this Agreement nor any agreement, certificate, statement or
document furnished by or on behalf of the Company in connection herewith,
contains any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements contained herein, in light of the
circumstances in which they were made, not misleading. There is no fact known
to the Company which currently has, or in the future is reasonably likely to
have (so far as the Company can now foresee), a Material Adverse Effect.
5. Investment Representations. You hereby represent and warrant to the
Company with respect to the purchase by you of the Investor Securities as
follows; provided, however, that nothing contained in this Section 5 shall
prevent you from transferring such Investor Securities in compliance with the
provisions of Section 12 hereof; and provided, further, that the disposition of
your property shall at all times be and remain in your control.
5.1. Accredited Investor. You are an "accredited investor" as such term
is defined in Rule 501(a) of Regulation D of the Securities Act. You have a net
worth in excess of $1,000,000 and after the purchase of the Notes and Warrants
contemplated herein, you will have less than 10% of your assets invested in
securities of the Company. You are an institutional buyer for purposes of the
Massachusetts Uniform Securities Act. You have not and are not obligated to pay
any commission to any person in connection with the purchase of the Notes or the
Warrants.
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5.2. Experience. You have substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so you are capable of evaluating the merits and risks of your
investment in the Company and have the capacity to protect your own interests in
making your investment in the Company.
5.3. Investment. You are acquiring the Investor Securities for
investment for your own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. You
understand that the Investor Securities to be purchased have not been, and will
not be registered under the Securities Act by reason of a specific exemption
from the registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona fide nature of your investment
intent and the accuracy of your representations as expressed herein.
6. Conditions to Purchase. Your obligation to purchase any of the Investor
Securities pursuant to this Agreement is subject to compliance by the Company
with its agreements herein contained, and to the satisfaction, simultaneously
with or prior to the Closing, of the following conditions, which may be waived
by you in the exercise of your sole discretion:
6.1. Related Agreements. The Related Agreements shall have been duly
authorized, executed and delivered and shall be in full force and effect in the
respective forms referred to in Section 4.3.2 hereof with no term or condition
thereof having been amended, modified or waived without your prior written
consent, and the financing contemplated by the Bank Credit Agreement shall have
been effected or shall be effected simultaneously with the Closing hereunder
substantially in accordance with the terms thereof. All material covenants and
conditions contained in the Related Agreements which are to be performed or
complied with at or prior to closing under the Related Agreements shall have
been performed, complied with or (subject to the provisions of the immediately
preceding sentence) waived prior thereto.
6.2. Legal Opinions. You shall have received from Miller, Canfield,
Paddock and Stone, P.L.C., counsel to the Company, its opinion in form and
substance reasonably satisfactory to you.
6.3. Representations and Warranties; Officers' Certificate. The
representations and warranties contained in Section 4 hereof shall be true and
correct on and as of the Closing with the same force and effect as though made
on and as of the Closing; no Default shall have occurred on or prior to the
Closing (other than a Default which you shall have waived in writing or shall
have stated in writing to have been cured to your reasonable satisfaction); and
you shall have received on the Closing Date a certificate to these effects
signed by the President and the Chief Financial Officer of the Company.
6.4. Subsidiary Guarantee Agreements. Each Guarantee Subsidiary of the
Company shall have duly authorized, executed and delivered to you a Guarantee
Agreement in substantially
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the form of Exhibit 6.4 hereto (each, together with each Guarantee Agreement
executed and delivered pursuant to Section 9.9 hereof, a "Guarantee Agreement").
6.5. Security Agreements. The Company and each Guarantee Subsidiary of
the Company shall have satisfied the condition described in Section 2.5(c) of
the Bank Credit Agreement, and NBD Bank, as Collateral Agent, the holders of the
Senior Indebtedness, and you shall have entered into an intercreditor agreement
(the "Intercreditor Agreement") in substantially the form of Exhibit 6.5.
6.6. Employment and Noncompetition Agreements. The Company and John H.
Welker shall have duly executed and delivered to each other an Employment and
Noncompetition Agreement in form and substance reasonably satisfactory to you
(the "Employment Agreement"). The Company and each of John E. Acuff, David K.
Dodds, Donald E. McGeachy, Robert P. Robeson, Henry Fleischer, Bruce W. Hoppe,
David King, and Philip Robinson, shall have duly executed and delivered to each
other Noncompetition Agreements in form and substance reasonably satisfactory to
you (each the "Noncompetition Agreement").
6.7. Tag-Along and Drag-Along Agreement. The Company and its stockholders
shall have duly executed and delivered to you a Tag-Along and Drag-Along
Agreement in substantially the form of Exhibit 6.7 hereto (the "Tag-Along
Agreement").
6.8. Registration Agreement. The Company and each other party thereto
shall have duly executed and delivered to you a Registration Agreement in
substantially the form of Exhibit 6.8 hereto (the "Registration Agreement").
6.9. Solvency Opinion. You shall have received an opinion, in form and
substance, and from an investment banking firm, reasonably satisfactory to you,
as to the solvency of the Company and of the Subject Entities immediately after
the consummation of the transactions contemplated hereby and by the other
Related Agreements.
6.10. Key Man Insurance. The Company will have in full force and effect
at the Closing Date the insurance policy described in Section 9.10 hereof.
6.11. Proper Proceedings. All proper corporate proceedings shall have
been taken by each Subject Entity to authorize this Agreement and the
transactions contemplated hereby.
6.12. Legality; Governmental Authorization. Neither the purchase of the
Investor Securities nor the consummation of any of the transactions contemplated
hereunder shall be prohibited by any Legal Requirement, or shall subject you to
any penalty, special tax, or other onerous condition. All necessary consents,
approvals, licenses, permits, orders and authorizations of, and registrations,
declarations and filings with, any governmental or administrative agency or any
other Person with respect to any of the transactions contemplated by this
Agreement or the
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other Related Agreements shall have been duly obtained or made and shall be in
full force and effect.
6.13. Payment of Transaction Costs. At the time of the Closing, the
Company shall have paid all fees, expenses, and disbursements incurred by you at
or prior to the time of the Closing in connection with the transactions
contemplated by this Agreement and the Related Agreements (not to exceed
$150,000), including, without limitation, the reasonable fees, expenses, and
disbursements of your counsel.
6.14. General. All instruments and legal and corporate proceedings in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to you, and you shall have
received copies of all documents, including without limitation records of
corporate proceedings and opinions of counsel, which you may have reasonably
requested in connection therewith, such documents where appropriate to be
certified by proper corporate or governmental authorities.
7. Repurchase of Warrants and Common Stock. The Company and you shall have
the rights and obligations set forth in Exhibit 7 hereto to purchase and sell
and to redeem and have redeemed the Warrants and the Class A Common Stock
constituting Investor Securities.
8. Covenants Applicable While Any Investor Securities Are Outstanding. The
Company covenants that so long as any of the Investor Securities remains
outstanding it will comply with the following provisions; provided, however,
that as long as any Investor Securities remain outstanding, the covenants
contained in Sections 8.3.3 and 8.3.4, clauses (i), (iii) and (iv) of Section
8.3.5 and Sections 8.4, 8.5.3 and 8.9 hereof shall expire and shall be of no
further force of effect after the later of (x) January 31, 2004 or (y) the
payment in full in cash of all obligations under or in respect of the Notes such
that no Notes remain outstanding:
8.1. Charter Amendments. The Charter and By-laws of the Company shall
not be amended, modified or supplemented in a manner that poses a material risk
of having, directly or indirectly, any Material Adverse Effect or any material
adverse effect on any then outstanding Investor Securities or on the rights,
remedies or interests of any holder thereof under this Agreement or any of the
other Related Agreements.
8.2. Right to Attend Board Meetings. The Company will give to (i) you (so
long as you hold any Investor Securities), and (ii) any holder of 25% or more of
either (x) the aggregate principal amount of the Notes then outstanding, or (y)
Investor Securities representing (either directly or indirectly, through
exercise, conversion or otherwise) 25% or more of the shares of Common Stock
representing Investor Securities then outstanding (or obtainable upon exercise
or conversion of other Investor Securities) (each Person referred to in clause
(i) or (ii) being referred to herein as a "Major Holder"): (a) the same notice
of the time, place and subject matter of any proposed meeting of its board of
directors or any committee thereof or of any Significant Subsidiary's board of
directors or any committee thereof as is given to the directors attending such
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meeting, and (b) the same notice of the date and subject matter of any proposed
action by written consent of its board of directors or any committee thereof or
of any Significant Subsidiary's board of directors or any committee thereof as
is given to the directors who are being asked to execute such consent. Each
such notice shall include true and complete copies of all documents furnished to
any director in connection with such meeting or consent. The Major Holders as a
group will be entitled to send two Persons (designated by the Required Holders)
to attend any such meeting, or if a meeting is held by telephone conference to
have two Persons (designated by the Required Holders) participate therein, but
the foregoing right of attendance or participation shall not in and of itself
include the right to vote on matters presented to the board of directors. The
board of directors may exclude such Persons from the portion of any meeting
during which the Investors or Investor Securities are to be discussed. The
Company will call and hold a meeting of the board of directors of the Company at
least once each fiscal quarter. At least one such meeting each fiscal year
shall include a discussion of financial results, and at least one such meeting
each fiscal year shall include a discussion of annual financial results and
presentation and approval of an annual budget for the following fiscal year.
8.3. Financial Statements. Each Subject Entity will maintain a system of
accounting in which full, true and correct entries will be made of all dealings
and transactions in relation to its business and affairs in accordance with
generally accepted accounting principles.
8.3.1. Annual Statements. The Company will furnish to each holder of
Investor Securities as soon as available, and in any event within 120 days
after the end of each fiscal year of the Company, (i) the consolidated and
consolidating balance sheet of the Subject Entities as at the end of such
fiscal year and the consolidated and consolidating statements of income,
stockholders' equity and cash flows for such year of the Subject Entities,
together with comparative figures for the immediately preceding fiscal
year, accompanied by the reports or certificates of independent certified
public accountants of recognized standing, to the effect that such
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior years (except as to changes described therein with which such
accountants concur) and fairly present the financial condition of the
Subject Entities at the dates thereof and the results of their operations
for the periods covered thereby, (ii) the statement of such accountants
that they have caused the provisions of this Agreement to be reviewed and
that in the course of their audit of the Company nothing has come to their
attention to lead them to believe that any Default hereunder exists, or, if
such is not the case, specifying such Default or possible Default and the
nature thereof, it being understood that the examination of such
accountants cannot be relied upon to give them knowledge of any such
Default except as it relates to accounting or auditing matters, (iii) so
long as any Note remains outstanding, computations by the Company
demonstrating, as of the close of such fiscal year, compliance with
Sections 9.4 through 9.8 hereof, inclusive, and (iv) the certificate of the
President or the Chief Financial Officer of the Company that such officers
have caused the provisions of this Agreement to be reviewed and have no
knowledge of any Default, or if any such officer has such
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knowledge, specifying such Default, and the nature thereof, and what action
the Company has taken, is taking or proposes to take with respect thereto.
8.3.2. Quarterly Reports. The Company will furnish to each holder of
Investor Securities as soon as available and, in any event, within 45 days
after the end of each of the first three fiscal quarters of each fiscal
year of the Company, (i) the consolidated and consolidating balance sheet
of the Subject Entities as at the end of such quarter and the consolidated
and consolidating statements of income, stockholders' equity and cash flows
for the fiscal quarter and portion of the fiscal year then ending of the
Subject Entities (all in reasonable detail), accompanied by the
corresponding figures for the corresponding portions of the previous fiscal
year, (ii) a certificate of the President or the Chief Financial Officer of
the Company that such statements have been properly prepared in accordance
with generally accepted accounting principles consistently applied (except
as to changes described therein and except for the absence of footnotes
thereto) and fairly present the financial position of the Subject Entities
at the dates thereof and the results of their operations for the periods
covered thereby, subject only to normal year-end audit adjustments, (iii)
so long as any Note remains outstanding, computations by the Company
demonstrating, as of the close of such fiscal quarter, compliance with
Sections 9.4 through 9.8 hereof, inclusive, and (iv) the certificate of the
President or the Chief Financial Officer of the Company that such officers
have caused the provisions of this Agreement to be reviewed and have no
knowledge of any Default, or if such officer has such knowledge, specifying
such Default and the nature thereof and what action the Company has taken,
is taking or proposes to take with respect thereto.
8.3.3. Monthly Reports. As soon as practicable, and in any event
within 30 days after the end of each calendar month of each fiscal year
(other than the last month of each fiscal quarter of the Company), the
Company will furnish to each Major Holder the operating reports of the
Subject Entities as of the end of such month in the form customarily
prepared by management for internal use.
8.3.4. Annual Budgets. Not later than 30 days prior to the end of
each fiscal year of the Company, the Company will furnish to each Major
Holder a proposed month by month operating and capital budget for the
following fiscal year of the Subject Entities, including projected cash
flows. Together with each report furnished pursuant to Section 8.3.1, 8.3.2
or 8.3.3 hereof, the Company shall furnish to each Major Holder a budgetary
analysis demonstrating the status of compliance by the Subject Entities for
such month with the operating and capital budget for that year previously
furnished to such Major Holder.
8.3.5. Other Reports. The Company will furnish to each Major Holder
(i) all management letters furnished to the Company by its auditors, (ii)
promptly after the sending or making available for filing of the same,
copies of all reports and financial statements which the Company shall send
or make available to the holders of its securities,
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and all registration statements, proxy statements and all reports, if any,
which the Company shall file with the Securities and Exchange Commission,
(iii) all material reports, certificates and other written information
provided to any lender by any Subject Entity, including without limitation
all such information furnished to holders of Senior Indebtedness; and (iv)
a description of all transactions between the Subject Entities and any
holder of the Equity Securities of the Company, other than those disclosed
in Exhibit 8.5.
8.3.6. Notice of Litigation, Defaults, etc. The Company will promptly
give each Major Holder written notice of any Action to which any Subject
Entity may hereafter become a party which after giving effect to applicable
insurance may result in any Material Adverse Change. Promptly upon any
officer of the Company obtaining knowledge of any Default or of any default
or event of default under any agreement relating to Indebtedness, the
acquisition or disposition by the Company of a significant amount of assets
other than in the ordinary course of business; resignations of any of the
Company's directors, and changes in the Company's fisal year, the Company
will furnish to each Major Holder a notice specifying the nature and period
of existence thereof and in the case of a default or event of default what
action the Company has taken, is taking or proposes to take with respect
thereto. Promptly after the receipt thereof, the Company will provide to
each Major Holder copies of any reports submitted by independent
accountants as to adequacies in accounting controls. The Company will give
each Major Holder prior written notice of any proposed change in its
independent certified public accountants.
8.3.7. Other Information. From time to time upon request of any Major
Holder, the Company will furnish to such Major Holder such other
information regarding the business, affairs, operations, prospects, and
condition, financial or otherwise, as such Major Holder may reasonably
request. One representative designated by the Required Holders shall have
the right during normal business hours and upon reasonable notice to
examine the books and records of the Subject Entities, to make copies,
notes and abstracts therefrom, and to make an independent examination of
such books and records, for the purpose of verifying the accuracy of the
reports delivered by any of them pursuant to this Section 8.3, and of
ascertaining compliance with this Agreement.
Each holder of Investor Securities understands that some of the information
furnished to it pursuant to this Section 8.3 may be received by it prior to the
time such information shall have been made public, acknowledges the limitations
placed on the uses of such information by federal securities laws, and agrees
that it will make all reasonable efforts to keep all information so furnished to
it pursuant to this Section 8.3 confidential and will make no use or disclosure
to other Persons of such information until such information shall have become
public; provided, however, that it shall not be precluded from making disclosure
regarding such information (i) to counsel, accountants or other professional
advisors, (ii) to any lender to the Company, (iii) in connection with the
enforcement of any rights hereunder, (iv) as required by law or applicable
regulation (provided that such holder will try to give advance notice of such
disclosure to the Company to the extent practical or legally permissible under
the circumstances) or (v) to any parents or
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corporate affiliates or to any prospective purchaser of Investor Securities (so
long as such Person agrees to keep such information confidential in accordance
with this Section 8.3).
8.4. Conduct of Business. Each Subject Entity will engage only in the
business conducted by it on the date hereof or in businesses that are logical
extensions of or ancillary to the fluid power business.
8.5. Transactions with Affiliates; Certain Compensation Payments.
8.5.1. Transactions Not at Arm's Length. Except as contemplated in
Exhibit 8.5.1, no Subject Entity shall effect any transaction with any
Affiliate on a basis less favorable to such Subject Entity than would be
the case if such transaction had been effected with a Person which was not
an Affiliate; provided, however, that the foregoing shall not apply to
transactions among the Company and its Wholly Owned Subsidiaries.
8.5.2. Compensation of John H. Welker. No Subject Entity shall pay
any salary, bonus or other compensation to John H. Welker except in
accordance with the provisions of the Employment Agreement.
8.5.3. Compensation of Employee Stockholders. 1Exhibit 8.5.3 lists
the salary, bonus, and other compensation currently paid in 1995 by the
Subject Entities to employees who are also holders of the Equity Securities
of the Company. No Subject Entity shall increase the salary, bonus, and
other compensation paid to any such person except for reasonable increases
(i) in the ordinary course of business, (ii) which reflect a change in such
person's position or status with the Subject Entities or (iii) which, in
the good faith judgment of the board of directors of the Company, reflect
such person's special contributions to the business of the Subject
Entities.
8.6. Limitations on Issuance of Equity Securities. The Company will not
issue any of its Equity Securities to any Person; provided, however, that the
Company may (i) issue the Investor Securities, (ii) grant options to purchase
not more than an aggregate of 2,000 shares of Class A Common Stock (subject to
appropriate adjustments for stock splits) and issue shares of Class A Common
Stock in connection therewith to employees of the Subject Entities, and (iii)
subject to compliance with the provisions of Section 8.7 hereof (if applicable),
issue shares of Class A Common Stock to persons not Affiliates of the Company
for consideration not less than fair market value of such shares. Except as
disclosed in Exhibit 4.2.2, all of the outstanding Equity Securities of each
Subsidiary of the Company shall at all times be owned, beneficially and of
record and free and clear of all Liens, by the Company, except for Liens
permitted hereunder.
8.7. Equity Participation Rights. The Company shall not issue or sell any
of its Equity Securities, or enter into any Contractual Obligation providing for
the issuance (contingent or otherwise) of, any of its Equity Securities (each an
"Issuance" of "Subject Securities"), except in compliance with the following
provisions of this Section 8.7.
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8.7.1. Right of Participation.
8.7.1.1. Not fewer than thirty days prior to the consummation of
the Issuance, a notice (the "Participation Notice") shall be furnished
by the Company to each holder of Equity Securities constituting
Investor Securities. The Participation Notice shall include:
(a) The principal terms of the proposed Issuance, including without
limitation the amount and kind of Subject Securities to be
included in the Issuance, the maximum and minimum (which shall be
not less than 90% of such maximum) price per unit of the Subject
Securities and the name and address of the Persons to whom the
Subject Securities will be Issued (collectively, the "Proposed
Subscriber"); and
(b) An offer by the Company to issue, at the option of such holder of
Equity Securities constituting Investor Securities, to such
holder of Equity Securities constituting Investor Securities, up
to such holder's Applicable Percentage of the Subject Securities
which would be otherwise issued in the Issuance, on the same
terms and conditions as the Subject Securities are purchased by
the Proposed Subscriber; provided, however, that if the Proposed
Subscriber is purchasing the Subject Securities for noncash
consideration, the holders of Equity Securities constituting
Investor Securities may pay in cash the fair market value (as
agreed to by the Company and such holder) of such noncash
consideration.
8.7.1.2. If a holder of Investor Securities desires to accept
the offer contained in the Participation Notice, it shall send, within
twenty days after the effectiveness of the Participation Notice, a
written commitment to the Company specifying the amount of Subject
Securities (not in any event to exceed such holder's Applicable
Percentage of the Subject Securities to be included in the Issuance)
which such holder desires to be issued. If any holder of Investor
Securities has not so accepted such offer, such holder shall be deemed
to have waived (for itself and any transferee or assignee of its
Investor Securities) all of its rights with respect to this Issuance,
and the Company shall thereafter be free to issue the Subject
Securities to the Proposed Subscriber, at a price no less than 95% of
the minimum price set forth in the Participation Notice and on
otherwise no more favorable terms in any material respect than as set
forth in the Participation Notice, without any further obligation to
such holder. If, prior to consummation, the terms of such proposed
Issuance shall change with the result that the price shall be less
than 95% of the minimum price set forth in the Participation Notice,
it shall be necessary for a separate Participation Notice to have been
furnished, and the terms and provisions of this Section 8.7 separately
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complied with, in order to consummate such Issuance pursuant to this
Section 8.7.
The acceptance of such holder shall be irrevocable except as
hereinafter provided, and such holder shall be bound and obligated to
acquire in the Issuance on the same terms and conditions, with respect
to each unit of Subject Securities issues in the Issuance, such amount
of Subject Securities as such holder shall have specified in its
written commitment.
If at the end of the ninetieth (90th) day following the date of
the effectiveness of the Participation Notice the Company has not
completed the Issuance, any holder of Investor Securities who has
accepted the offer in a Participation Notice shall be released from
its obligations under the written commitment, the Participation Notice
shall be null and void, and it shall be necessary for a separate
Participation Notice to have been furnished, and the terms and
provisions of this Section 8.7 separately complied with, in order to
consummate such Issuance pursuant to this Section 8.7.
8.7.1.3. The Company may condition the participation of any
holder of Investor Securities in an Issuance upon the purchase by it
of any securities (including without limitation debt securities) other
than Subject Securities ("Other Securities") in the event that the
participation of the Proposed Subscriber in such Issuance is so
conditioned. In such case, each holder of Investor Securities shall
acquire in the Issuance, together with the Subject Securities to be
acquired by it, Other Securities in the same proportion to the Subject
Securities to be acquired by it as Other Securities are acquired by
the Proposed Subscriber in proportion to the Subject Securities
acquired in the Issuance by the Proposed Subscriber, on the same terms
and conditions, as to each unit of Subject Securities and Other
Securities issued to the Proposed Subscriber, as the Proposed
Subscriber shall be issued units of Subject Securities and Other
Securities.
8.7.1.4. Each holder of Investor Securities and its Affiliates
shall take or cause to be taken all such reasonable actions as may be
necessary or reasonably desirable in order expeditiously to consummate
each Issuance pursuant to this Section 8.7 and any related
transactions, including, without limitation, executing, acknowledging
and delivering consents, assignments, waivers and other documents or
instruments with governmental authorities; and otherwise cooperating
with the Company; provided, however, that no holder of Investor
Securities or any Affiliate thereof shall be required to agree to any
amendment or modification of, or waiver under, or other change to,
this Agreement, the Investor Securities or any other Related
Agreement.
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8.7.1.5. All costs and expenses incurred by any holder of
Investor Securities or the Company in connection with any proposed
Issuance of Subject Securities (whether or nor consummated), including
without limitation all attorney's fees and charges, all accounting
fees and charges and all finders, brokerage or investment banking
fees, charges or commissions, shall be paid by the Company; provided,
however, that if a holder of Investor Securities or any of its
Affiliates retains separate legal counsel or other advisors in
connection with such proposed Issuance, the fees and expenses of such
separate attorneys or other advisors shall be borne by such holder.
8.7.1.6. The closing of an Issuance pursuant to Section 8.7
shall take place at such time and place as the Company shall specify
by notice to each participating holder of Investor Securities. At the
closing of any Issuance under this Section 8.7, such holders of
Investor Securities shall be delivered the notes, certificates or
other instruments evidencing the Subject Securities (and, if
applicable, Other Securities) to be issued to it, registered in the
name of such holder of its designated nominee, free and clear of any
Liens, with any transfer tax stamps affixed, against delivery by such
holders of the applicable consideration.
8.7.2. Excluded Transactions. Notwithstanding the preceding
provisions of this Section 8.7, the preceding provisions of this Section
8.7 shall not restrict:
(a) Any Issuance of Equity Securities pursuant to clause (ii) of the
proviso to Section 8.6 hereto;
(b) Any Issuance of Common Stock upon the exercise or conversion of
any Investor Securities or any Equity Securities outstanding on
the date hereof or issued after the date hereof in compliance
with the provisions of this Section 8.7; and
(c) Any Issuance of Common Stock pursuant to a public offering
registered under the Securities Act, other than shares issued
pursuant to an employee plan registered on Form S-8 or any
similar plan or form.
(d) Any Issuance of Common Stock pursuant to a stock split or pro
rata stock dividend of the type described in Section 2.2.2 of the
Warrants.
8.7.3. Termination. The foregoing provisions of this Section 8 shall
terminate immediately following the closing of a public offering if,
immediately after giving effect thereto, there is outstanding Common Stock
not held by Affiliates of the Company which (x) is freely tradeable and the
sale of which is not in any way subject to Rule 144 (including without
limitation Rule 144(k) under the Securities Act) and (y) has an
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aggregate public market value of not less than $50 million, (a "Qualifying
Public Offering").
8.8. Registration Statements. No Subject Entity will file any
registration statement under the Securities Act covering any offering of debt or
equity securities unless it shall first have given each holder of Investor
Securities 60 days advance written notice thereof. Each holder of Investor
Securities shall have the right, at any time when in its sole and exclusive
judgment it is or might be deemed to be a controlling person of any Subject
Entity for purposes of the Securities Act, (i) to participate in the preparation
of such registration statement and to require the inclusion therein or deletion
therefrom of material which in its judgment should be included or deleted, as
the case may be, (ii) to retain counsel and independent public accountants to
assist it in such participation, and (iii) to obtain an opinion from the
Company's counsel and a "cold-comfort" letter from the Company's auditors, each
in customary form, each addressed to it and covering such matters as it may
reasonably specify in connection with such registration statement. Unless a
reference to a holder of Investor Securities by name is required by any
provision of the Securities Act or the rules and regulations promulgated
thereunder, no such registration statement or other document shall refer to such
holder by name without the prior written consent of such holder. The indemnity
and contribution provisions set forth in Section 8 of the Registration Agreement
shall apply mutatis mutandis to any registration statement or other document
referred to in this Section 8.8, except that references therein to the Selling
Holders shall be deemed to be references to each holder of Investor Securities.
8.9. Repurchase. The Company shall not, nor shall it subject itself to
any obligation to, repurchase or otherwise acquire or retire any of its Equity
Securities except as contemplated by Exhibit 7 hereto and by the Stock Transfer
Agreement; provided, however, that the aggregate amount of all payments made in
respect of acquisitions under the Stock Transfer Agreement plus the aggregate
amount of all payments made in respect of Indebtedness incurred in connection
with repurchases of Equity Securities under the Stock Transfer Agreement shall
not exceed $500,000 during any fiscal year of the Company plus during the fiscal
year ending December 31, 1997, an additional $500,000 if Adjusted Net Operating
Income for the fiscal year ending December 31, 1996 was not less than the amount
specified with respect to such fiscal year in the table below and plus during
the fiscal years ending December 31, 1998 and thereafter, an additional $500,000
if both (x) aggregate Adjusted Net Operating Income for the two complete fiscal
years of the Company most recently ended was not less than the sum of the
amounts specified with respect to such fiscal years in the table below and (y)
aggregate Adjusted Net Operating Income for the fiscal years of the Company
beginning with the fiscal year ending December 31, 1996 and ending with the
complete fiscal year of the Company most recently ended was not less than the
sum of the amounts specified with respect to such fiscal years in the table
below:
Fiscal Year Ending December 31, Amount
------------------------------- ------
1996 $28,136,000
1997 $30,787,000
1998 $35,693,000
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1999 $41,418,000
2000 $48,044,000
2001 $53,364,000
2002 $59,821,000
8.10. Certain Tax and other Valuation Matters. The Company hereby agrees
with you that (i) for the purposes of Sections 1271 through 1275 of the Code,
the price at which each of the Senior Subordinated Notes and the Warrants would
have been issued had they been issued apart from the investment unit consisting
of Investor Securities is equal to the allocated cost thereof set forth in
Section 2.1.1 and 2.2 hereof, (ii) for such purposes, the price at which each
PIK Note is issued is the stated principal amount thereof, and (iii) each such
price will be appropriately used by the Company for income tax purposes.
8.11. Lawsuits only in Massachusetts. The Company (and its successors
and assigns) shall not commence any proceeding arising out of or based upon any
Specified Related Agreement in any court other than the state courts of the
Commonwealth of Massachusetts or federal courts located in the Commonwealth of
Massachusetts.
9. Covenants Applicable While Any Notes Are Outstanding.
9.1. Incorporation of Certain Covenants. The Company will comply, and
will cause the Subject Entities to comply, with all of the covenants and
provisions set forth in Sections 5.1(a), 5.1(b), 5.1(c), 5.1(f), 5.1(g), 5.2(g),
5.2(h) (provided that sales of assets the net proceeds of which are actually
applied to permanently pay down the Senior Indebtedness shall be permitted
without limit), 5.2(n), 5.2(o), 5.2(p), 5.2(r) (excluding the Bank Credit
Agreement), and 5.2(s) of the Bank Credit Agreement as in effect at the Closing,
all of which covenants and provisions, together with the definitions of the
defined terms used therein, are hereby incorporated herein by reference as fully
as if set forth herein in their entirety, mutatis mutandis, so that references
therein to "you" shall be deemed to be references to the Required Holders;
provided, however, that, notwithstanding the precatory language set forth in the
preamble to Sections 5.1 and 5.2 of the Bank Credit Agreement, for the purposes
hereof, all of such covenants and provisions shall be in full force and effect
for so long as any of the Notes shall be outstanding. Each such covenant
incorporated herein by reference (together with each related definition) shall
remain unmodified notwithstanding any modification or termination of such
covenant (or such definition); provided, however, that if the lenders party
thereto and the Company agree to amend any such Section of the Bank Credit
Agreement and if the Required Holders consent to such amendment in writing,
references in this Section 9.1 shall be deemed to be references to such Sections
of the Bank Credit Agreement as and to the extent amended with the consent of
the Required Holders.
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9.2 Amendments to Certain Agreements.
9.2.1. Other Than Senior Indebtedness. The Subject Entities will not
at any time consent to any amendment or modification or assignment of, or
grant any waiver of or fail to enforce any of its rights pursuant to, any
of the Related Agreements listed in Sections 4.3.2.2 and 4.3.2.3 if such
amendment, modification, waiver or failure has or poses a material risk of
having, directly or indirectly, any Material Adverse Effect or any material
adverse effect on any then outstanding Investor Securities or on the
rights, remedies or interest of any such holder hereunder or any of the
other Related Agreements other than the Bank Credit Agreement.
9.2.2. Senior Indebtedness. The Company shall not enter into, or
agree to any renewal, extension, refinancing, refunding, amendment or
modification of any of its rights pursuant to, the Bank Credit Agreement or
any other Contractual Obligation relating to Senior Indebtedness (including
without limitation swaps and other interest rate protection arrangements)
if any such renewal, extension, refinancing, refunding, amendment or
modification or any agreement or instrument creating or evidencing such
renewal, extension, refinancing, refunding, amendment or modification (a)
permits the aggregate principal amount of all Senior Indebtedness of the
Company outstanding at any time to exceed $125,000,000, (b) permits the
aggregate principal amount of all Senior Indebtedness of the Company
outstanding at any time which may be borrowed, repaid and reborrowed prior
to the stated maturity thereof ("Revolving Credit Debt") to exceed
$50,000,000, (c) increases the rate of interest or default interest on, or
fees or other amounts payable in respect of, any such Senior Indebtedness
such that the Yield to Maturity on all Senior Indebtedness calculated
immediately after giving effect to such increase (but including any fees
payable in connection therewith) exceeds by more than 1.00% (one hundred
basis points) the Initial Yield to Maturity on Senior Indebtedness
calculated immediately prior to giving effect to such increase, (provided,
that no change in the method of calculating any default rate of interest
shall be made so as to increase the excess of such rate over the rate which
would otherwise be in effect), (d) could alter the maturity of any such
Senior Indebtedness to a time earlier than that specified in the Bank
Credit Agreement or (e) could, in conjunction with all previous such
renewals, extensions, refinancings, refundings, amendments or
modifications, result in altering the dates that payment is due of more
than six payments due under such Senior Indebtedness (other than Revolving
Credit Debt) such that the date that any such payment is due is altered to
a date later than one year from the date originally specified with respect
to such payment in the Bank Credit Agreement as in effect on the date of
this Agreement. For purposes of this Section 9.2.2(e), multiple payments
due on the same date under more than one term loan shall be considered one
payment.
9.3 Fiscal Year. The fiscal year of the Company, which ends on the last
day of December of each year, will not be changed without the prior written
consent of the Required Holders, which consent shall not be unreasonably
withheld.
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9.4 Restrictions on Indebtedness. No Subject Entity will create, incur
or otherwise become or remain liable with respect to any Indebtedness except the
following, so long as, in each such case, such Indebtedness is incurred in
compliance with Section 9.8 hereof:
9.4.1. Indebtedness specified on Exhibit 9.4.1 hereto; provided,
however, that no amendment to the terms of such Indebtedness, and no
optional prepayment of such Indebtedness shall be made without the prior
written consent of the Required Holders.
9.4.2. Senior Indebtedness; provided, however, that (i) the aggregate
principal amount of all Senior Indebtedness at any one time outstanding
shall not exceed $125,000,000 and (ii) the aggregate principal amount of
all Revolving Credit Debt at any one time outstanding shall not exceed
$50,000,000.
9.4.3. Indebtedness in respect of the Notes.
9.4.4. Indebtedness of the Subject Entities (x) in respect of
Capitalized Lease Obligations and (y) secured by purchase money Liens
permitted by Section 9.6.3 hereof; provided, however, that the aggregate
principal amount of all Indebtedness permitted by this Section 9.4.4 shall
not exceed $6 million at any one time outstanding.
9.4.5. Indebtedness in respect of Guarantees permitted by Section 9.5
hereof.
9.4.6. Indebtedness incurred in connection with the repurchase
pursuant to the Stock Transfer Agreement of Equity Securities issued by the
Company; provided, however, that (i) all such Indebtedness shall be
subordinated to the prior payment in full of the Notes on terms no less
favorable to the holders of the Notes as are enjoyed by the holders of
Senior Indebtedness with respect to the Notes, (ii) no principal of, or
interest on, such Indebtedness shall be due and payable until the latest of
five years from the date of issuance, January 31, 2004 or one year after
the payment in full in cash of all obligations in respect of the Notes
(provided, that voluntary payments of interest on and principal of such
Indebtedness shall be permitted subject to the limitations contained in
Section 8.9 hereof), (iii) the interest rate on such Indebtedness shall not
exceed the lowest such rate which avoids the imputation of interest under
the Code and (iv) no such Indebtedness shall be issued unless, immediately
after giving effect thereto, there shall exist no Default and the
incurrence of such Indebtedness shall have been permitted under Section 9.8
hereof (if applicable).
9.4.7. Indebtedness of any Subsidiary of the Company to the Company.
9.4.8. Additional Indebtedness of the Subject Entities not otherwise
permitted by this Section 9.4; provided, however, that, both immediately
prior to and immediately after giving effect to the incurrence thereof, no
Default shall exist; and provided, further,
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that the aggregate principal amount of all Indebtedness permitted by this
Section 9.4.8 shall not exceed $500,000 at any one time outstanding.
9.4.9. Additional Indebtedness of the Company; provided, however,
that, both immediately prior to and after giving effect to the incurrence
thereof, no Default shall exist; and provided, further, that (i) all such
Indebtedness (including without limitation the Company's obligations under
its Amended and Restated Deferred Compensation Plan) shall be subordinated
to the prior payment in full of the Notes on terms no less favorable to the
holders of the Notes as are enjoyed by the holders of Senior Indebtedness
with respect to the Notes, (ii) no principal of such Indebtedness shall be
due and payable until the later of five years from the date of issuance or
one year after the payment in full in cash of all Notes.
9.5 Restrictions on Guarantees. The Subject Entities will not become or
remain liable with respect to any Guarantee of any obligation of any other
Person except the following:
9.5.1. Guarantees by Subsidiaries of the Company of the Notes.
9.5.2. Guarantees by Subsidiaries of the Company of Senior
Indebtedness.
9.5.3. Endorsements for collection or deposit in the ordinary course
of business.
9.5.4. Guarantees of amounts payable under indemnity, performance or
similar bonds in the ordinary course of business.
9.5.5. Guarantees by the Company of the obligations of Subsidiaries
of the Company.
9.6 Restrictions on Liens. The Subject Entities will not create or
incur or suffer to be created or incurred or to exist any Lien of any kind upon
any of its property or assets of any character, whether now owned or hereafter
acquired, or upon the income or profits therefrom; provided, however, that the
Subject Entities may create or incur or suffer to be created or incurred or to
exist:
9.6.1. Liens securing the Indebtedness permitted by Sections 9.4.1,
9.4.2 and 9.4.3 hereof.
9.6.2. Liens on the assets of the Subject Entities existing on the
Closing Date and listed in Exhibit 9.6.2 hereto.
9.6.3. Purchase money Liens (including mortgages, conditional sales,
Capitalized Leases and any other title retention or deferred purchase
devices) on property
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of the Company existing or created at the time of acquisition thereof, and
the renewal, extension and refunding of any such Lien in an amount not
exceeding the amount thereof remaining unpaid immediately prior to such
renewal, extension or refunding; provided, however, that the aggregate
principal amount of Indebtedness (including Indebtedness in respect of
Capitalized Lease Obligations) secured by each such Lien in each item of
property shall not exceed the cost (including all such Indebtedness secured
thereby, whether or not assumed) of the item subject thereto; and provided,
further, that the aggregate principal amount of all such Indebtedness shall
not exceed the amount specified in Section 9.4.4 hereof.
9.6.4. Liens to secure taxes, assessments and other governmental
charges or claims for labor, material or supplies to the extent that
payment thereof shall not be in arrears or shall be contested in good faith
by appropriate proceedings.
9.6.5. Deposits or pledges made in connection with, or to secure
payment of, workers' compensation, unemployment insurance, old age pensions
or other social security or in connection with contests, bids, governmental
contracts, performance bonds and similar obligations to the extent that
payment thereof shall not be in arrears or shall be contested in good faith
by appropriate proceedings.
9.6.6. Liens in respect of judgments or awards to the extent that
such judgments or awards are being appealed in good faith by the Company or
which have been in force for less than the applicable appeal period.
9.6.7. Liens of carriers, warehousemen, mechanics and materialmen,
and other Liens arising by operation of law in the ordinary course of
business, to the extent that payment of the obligation secured thereby
shall not be in arrears or shall be contested in good faith by appropriate
proceedings.
9.6.8. Encumbrances in the nature of zoning restrictions, easements,
rights or restrictions of record on the use of real property and landlord's
and lessor's liens under leases on the premises rented, which do not
materially detract from the value of such property or impair the use
thereof in the business of the Subject Entities.
9.6.9. Deposits or pledges made in connection with, or to secure
payment of, indemnity, performance or other similar bonds incurred in the
ordinary course of business.
9.7. Restrictions on Distributions. No Subject Entity shall make, pay or
declare any Distribution; provided, however, that so long as immediately prior
to and after giving effect thereto there shall be no Default, the Subject
Entities shall be permitted to make, pay and declare the following
Distributions:
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9.7.1. Distributions permitted or required by Section 10 hereof or
Exhibit 7 hereto.
9.7.2. Distributions consisting of the acquisition by the Company and
its Wholly Owned Subsidiaries, in accordance with the provisions of the
Related Agreements, of Equity Securities of Subsidiaries of the Company
held by Persons other than the Company and its Wholly Owned Subsidiaries.
9.7.3. Distributions consisting of the regular and periodic payment
of interest on Indebtedness permitted by Section 9.4.9, provided that cash
payments of interest on such Indebtedness shall not exceed a per annum rate
of 10%.
9.7.4. Distributions consisting of payments permitted by Section 8.9
hereof.
9.8. Debt Incurrence Test. At no time during any period specified in the
table below shall any Subject Entity incur any Indebtedness if, immediately
after giving effect to such incurrence and the application of the proceeds
thereof, the aggregate principal amount of all outstanding Indebtedness of the
Subject Entities would exceed an amount equal to (i) Net Operating Income for
the four consecutive fiscal quarters most recently ended with respect to which
the Company has furnished the financial statements required by Sections 8.3.1
and 8.3.2 hereof multiplied by (ii) the multiple set beside such period in such
table; provided, however, that the limitation contained in this Section 9.8
shall not apply to the incurrence by the Company of Indebtedness permitted by
Section 9.4.6 hereof if such Indebtedness is being incurred in connection with
the death, total and permanent disability, or retirement upon reaching the age
of 65 of the person from whom (or from whose estate) the applicable Equity
Securities are being purchased:
Period Multiple
Fiscal year ended March 31, 1996 5.50
Fiscal year ended June 30, 1996 5.50
Fiscal year ended September 30, 1996 5.40
Period beginning October 1, 1996 and ending December 30, 1997 5.00
Period beginning December 31, 1997 and ending December 30, 1998 4.75
Period beginning December 31, 1998 and ending December 30, 1999 4.30
Period beginning December 31, 1999 and ending December 30, 2000 3.60
Period beginning December 31, 2000 and ending December 30, 2001 3.00
Periods beginning on December 31, 2001 and thereafter 2.50
9.9. Execution of Guarantee Agreements and Security Agreements by
Guarantee Subsidiaries. No Subject Entity shall hold any Equity Security in any
Person which is a Guarantee Subsidiary of the Company unless such Person shall
have, prior to or concurrently with such Person becoming a Subsidiary, duly
authorized, executed and delivered to the holders of
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Notes each of a Guarantee Agreement and a Security Agreement, together with such
other agreements, certificates and other documents, including without limitation
financing statements, mortgages, deeds of trust and opinions of counsel, as the
Required Holders of Notes shall have reasonably requested in connection
therewith.
9.10. Key Man Insurance. The Company will have in full force and effect
as the owner thereof at all times from and after the Closing Date key man life
insurance policies with insurers reasonably satisfactory to you covering the
life of John H. Welker in the aggregate amount of $7,500,000 prior to June 30,
1996 and will use its best eforts to increase the amount of such coverage to
$15,000,000 on and after June 30, 1996.
10. Defaults.
10.1. Events of Default; Remedies. If any of the following events
(each such event herein termed an "Event of Default") shall happen, that is
to say:
10.1.1. The Company shall fail to make any payment in respect of
principal of or interest or premium on any of the Notes as the same shall
become due whether at maturity or by acceleration or otherwise and such
failure shall continue for a period of five Business Days; or
10.1.2. Any Subject Entity shall fail to perform or observe any of
the covenants, agreements or provisions set forth or incorporated by
reference in Section 8.1, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.11 or 9
(exclusive of 9.10) hereof, and, in the case of covenants, agreements or
provisions incorporated by reference in Section 9.1 hereof, such failure
shall continue beyond the period of grace, if any, specified in the Bank
Credit Agreement (provided, however, that no such period shall exceed
thirty days after such failure unless the Required Holders of the Notes in
their sole discretion shall specifically agree in writing); or
10.1.3. Any Subject Entity shall fail to perform or observe any
other covenant, agreement or provision to be performed or observed by it
under this Agreement or any other Related Agreement not listed in Section
4.3.2.1, and in each such case such failure shall not be rectified or cured
to the reasonable satisfaction of the Required Holders within thirty days
after the occurrence of such failure; or
10.1.4. Any representation or warranty of or with respect to any
Subject Entity contained in or made in connection with this Agreement or
any other Related Agreement not described in Sections 4.3.2.2 or 4.3.2.3,
including without limitation any representation or warranty incorporated by
reference into such agreements, shall prove to have been materially false
on the Closing Date or, if earlier, the date as of which it was made; or
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10.1.5. Any Subject Entity shall fail to make any required payment on
or in respect of any Senior Indebtedness or on or in respect of any other
Indebtedness of any Subject Entity, whether because funds are not legally
available therefor or otherwise, or any Subject Entity shall fail to
perform or observe any of the covenants or provisions required to be
performed or observed by it pursuant to any agreement relating to Senior
Indebtedness or any other such Indebtedness, and, in the case of Senior
Indebtedness, (a) any security interest in or other Lien on any property
securing any such Senior Indebtedness shall be enforced, or (b) any such
Senior Indebtedness shall have become due or payable prior to its stated
maturity for any reason whatsoever, and, in the case of any other such
Indebtedness, the aggregate principal amount thereof shall exceed $500,000;
or
10.1.6. A final judgment which, in the aggregate with other
outstanding final judgments against the Subject Entity, exceeds $1,000,000
after giving effect to any applicable insurance, shall be rendered against
any Subject Entity if (i) within 30 days after entry thereof, such judgment
shall not have been discharged or stayed pending appeal, or (ii) within 30
days after expiration of any such stay, such judgment shall not have been
discharged; or
10.1.7. (a) John H. Welker shall cease for any reason whatsoever,
other than his death or disability, to be and continuously to perform the
duties of chief executive officer of the Company and to devote
substantially all of his professional time and efforts to the operations of
the Subject Entities; or (b) John H. Welker shall cease, by virtue of his
death or disability, to be and continuously to perform the duties of chief
executive officer of the Company and to devote substantially all of his
professional time and efforts to the operations of the Subject Entities and
no successor shall have been approved in writing by the Required Holders in
their sole discretion, and shall have commenced to perform the duties of
chief executive officer of the Company, within one year after such
cessation, provided that if any satisfactory successor shall have been so
approved and shall have commenced performance of such duties within such
period, the name of such successor or successors shall be deemed to have
been inserted in place of John H. Welker in this Section 10.1.7.
10.1.8. John H. Welker and Members of the Immediate Family of John
H. Welker shall at any time own collectively less than 51% of the then
outstanding capital stock of the Company; provided, that this Section
10.1.8 shall not apply from and after (i) the closing of any Qualifying
Public Offering, or (ii) the date that John H. Welker shall cease to be the
chief executive officer of the Company.
10.1.9. Any Subject Entity shall:
(a) commence a voluntary case under Title 11 of the United
States Code as from time to time in effect, or authorize, by
appropriate proceedings
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of its board of directors or other governing body, the commencement of
such a voluntary case;
(b) have filed against it a petition under said Title 11 which
shall not have been dismissed within 30 days after the date on which
said petition is filed, or file an answer or other pleading within
said 30-day period admitting or failing to deny the material
allegations of such a petition, or seeking, consenting to or
acquiescing in the relief therein sought, or fail to controvert timely
the material allegations of any such petition;
(c) have entered against it an order for relief in any
involuntary case commenced under said Title 11;
(d) 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;
(e) have entered against it any order by a court of competent
jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering
or approving its liquidation, reorganization or any modification or
alteration of the rights of its creditors, or (iii) assuming custody
of, or appointing a receiver or other custodian for, all or a
substantial part of its property; or
(f) 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;
then and in each and every such case,
(1) if such Event of Default shall not be based solely upon a
failure to observe a covenant with respect only to Warrants or Common
Stock constituting Investor Securities, any holder or holders of more
than 50% of the outstanding principal amount of the Notes may proceed
to protect and enforce its or their rights by suit in equity, action
at law and/or other appropriate proceeding either for specific
performance of any covenant, provision or condition contained or
incorporated by reference in this Agreement or in any other Specified
Related 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 10.1.9 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
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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 to the extent not
prohibited by applicable law that cannot be 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
(2) if such Event of Default shall be based upon a failure to
observe a covenant with respect to Warrants or Common Stock
constituting Investor Securities, any holder or holders of more than
50% of the outstanding Warrants and shares of Common Stock which
constitute Investor Securities (calculated on the assumption that all
Warrants have been exercised) may proceed to protect and enforce its
or their rights by suit in equity (including without limitation a suit
for rescission), action at law and/or other appropriate proceeding
either for specific performance of any covenant, provision or
condition contained or incorporated by reference in this Agreement or
in any other Specified Related Agreement or any term of the Charter of
the Company, or in aid of the exercise of any power granted in this
Agreement or in the Charter of the Company; and
(3) if such Event of Default is described in Section 10.1.7, the
holders of Warrants and Common Stock constituting Investor Securities
may exercise their "put" rights in accordance with the provisions of
Exhibit 7 hereto.
The Company hereby agrees that the holders of the Warrants and shares of Common
Stock constituting Investor Securities have no adequate remedy at law, for
monetary compensation or otherwise, for the damages that would be suffered if
the Company were to fail to comply with its obligations hereunder and under the
other Specified Related Agreements, and that the Company therefore agrees that
the holders of the Warrants and of shares of Common Stock constituting Investor
Securities shall be entitled to obtain specific performance of the obligations
of the Company herein and therein contained.
10.2. Annulment of Defaults. An Event of Default shall not be deemed to
be in existence for any purpose of this Agreement if the Required Holders shall
have waived such event in writing or stated in writing that the same has been
cured to their reasonable satisfaction. No waiver or statement of satisfactory
cure pursuant to this Section 10.2 shall extend to or affect any subsequent or
other Event of Default not specifically identified in such waiver or statement
of satisfactory cure or impair any of the rights of any of you or the rights of
any holder of Investor Securities upon the occurrence thereof.
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10.3. Waivers. The Company hereby waives to the extent not prohibited by
provisions of applicable law which cannot be waived (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 Investor Securities in the
enforcement of its rights under the provisions of this Agreement or any other
Related Agreement, (c) any and all notices of every kind and description which
may be required to be given by any statute or rule of law, and (d) any defense
of any kind (other than payment) which it may now or hereafter have with respect
to its obligations and liability under this Agreement or any other Related
Agreement.
10.4. Course of Dealing. No course of dealing between the Company on the
one hand, and you or any holder of the Investor Securities on the other hand,
shall operate as a waiver of any of your or its rights under this Agreement or
any other Related Agreement or the Charter of the Company. No delay or omission
in exercising any right under this Agreement or the Charter of the Company shall
operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a waiver of or bar to any right or remedy on
any other occasion. No waiver or statement of satisfactory cure or consent
shall be binding upon you or any holder of any Investor Securities unless it is
in writing and signed by one or more of you or of the holders of the Investor
Securities as may be required by the provisions of this Agreement.
11. Payment on Investor Securities; Transfer; Replacement.
11.1. Home Office Payment. All payments made in respect of the Investor
Securities held by you shall be made in federal or other immediately available
funds in lawful money of the United States for credit, not later than 12:00
noon, Boston time, to you at your account set forth on Schedule I hereto
accompanied by sufficient information to identify the source and application
thereof or by such other method or at such other address as a holder of Notes
shall have from time to time given timely notice of to the Company.
11.2. Registration, Transfer and Exchange of Notes. The Company shall
keep at its principal office a register in which shall be entered the names and
addresses of the registered holders of Notes issued by it and particulars of the
respective Notes held by them and of all transfers of such Notes. References to
the "holder", "Holder" or "holder of record" of any Note shall mean the payee
thereof unless the payee shall have presented such Note to the issuer thereof
for transfer in compliance with the applicable provisions of Section 12 hereof
and the transferee shall have been entered in said register as a subsequent
holder, in which case such terms shall mean such subsequent holder. The
ownership of the Notes shall be proven by such register.
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 12 hereof)
transfer at said office of the issuer thereof. Within a reasonable time
thereafter and without expense (other than transfer taxes, if any) to such
holder, such issuer shall issue, at its expense, in exchange therefor another
Note or Notes, dated the date
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to which interest has been paid on the surrendered Note, for the same aggregate
principal amount as the unpaid principal amount of the Note 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 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 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 issuer will pay
shipping and insurance charges, from and to each holder's principal office,
involved in the exchange or transfer of any Note.
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 issuer. The registered holder of record shall be deemed
to be the owner of the Note for all purposes of this Agreement and, subject to
the provisions hereof, shall be entitled to the principal, premium, if any, and
interest evidenced by or payable on such Note free from all equities or rights
of set-off or counterclaim between the issuer and the transferor of such holder
of record or any previous holder of record thereof, and shall execute an
agreement agreeing to be bound as a party to the Intercreditor Agreement. All
notices given hereunder to the holder of record shall be deemed validly given if
given in the manner specified in Section 15 hereof.
11.3. Transfer, Exchange, Exercise and Conversion of Warrants. The Company
shall keep at its principal office a register in which shall be entered the
names and addresses of the holders of the Warrants and particulars of the
Warrants held by them and of all transfers, exchanges, conversions and
redemptions of Warrants. Upon surrender at such office or such other place as
shall be duly specified by the company of any Warrant for redemption,
conversion, exercise, exchange or (subject to compliance with the applicable
provisions of this Agreement, including without limitation the conditions set
forth in Section 12 hereof) transfer, the Company shall issue at its expense one
or more new Warrants in such denomination or denominations as may be requested,
and registered as such holder may request. Any Warrant 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 holder's principal office, upon any transfer,
exchange, conversion or redemption provided for in this Section 11.3.
11.4. Transfer and Exchange of the Capital Stock. The Company shall keep
at its principal office a register in which shall be entered the names and
addresses of the holders of the capital stock of the Company and particulars of
the respective shares of capital stock held by them and of all transfers,
exchanges, conversions and redemptions of such capital stock. Upon surrender at
such office or such other place as shall be duly specified by the Company of any
certificate representing shares of capital stock, for conversion, exchange or
(subject to compliance with the applicable provisions of this Agreement,
including without limitation the conditions set forth in Sections 12 hereof)
transfer, the Company shall issue, at its expense, one or more new certificates
in such denomination or denominations as may be requested, and registered as
such holder may request. Any certificate representing shares of capital stock
surrendered for
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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, to each holder's principal office, upon any transfer, exchange or
conversion provided for in this Section 11.4.
11.5. Replacement of Lost Securities. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of a
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 a security held by you or another institutional holder or by the
nominee of you or such other institutional holder, of 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 the security for
cancellation to the Company at its principal office, the Company at its expense
will execute and deliver or will cause to be executed and delivered in lieu
thereof a new security of like tenor. Any security in lieu of which any such new
security has been so executed and delivered or caused to be executed and
delivered by the Company shall not be deemed to be an outstanding security for
any purpose.
12. Restrictions on Transfer. Investor Securities shall be transferable only
upon satisfaction of the applicable conditions specified in this Section 12.
12.1. Restrictive Legend. Except as otherwise permitted by Section 12.3
hereof, each Senior Subordinated Note shall bear a legend in substantially the
form of the legend set forth at the beginning of Exhibit 2.1 hereto, each PIK
Notes shall bear a legend in substantially the form of the legend set forth at
the beginning of Exhibit A to Exhibit 2.1 hereto, each Warrant shall bear a
legend in substantially the form of the legend set forth at the beginning of
Exhibit 2.2 hereto, and each certificate representing shares of capital stock
constituting Investor Securities shall bear a legend in substantially the
following form:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or under the securities laws of any
state, and may not be sold, or otherwise transferred, in the absence of
such registration or an exemption therefrom under such Act and under any
such applicable state laws. Furthermore, such shares may be sold or
otherwise transferred only in compliance with the conditions specified in
the Securities Purchase Agreement dated as of January 3, 1996 among the
issuer hereof and the other parties thereto, and are subject to certain
call and sell-back provisions set forth in such Agreement (including the
Exhibits thereto). Such shares may be sold or otherwise transferred only in
compliance with, and are subject to the "Drag-Along" provisions of, the
Tag-Along and Drag-Along Agreement dated as of January 3, 1996 among the
Issuer hereof and the other parties thereto. Complete and correct copies of
such Agreements (including the Exhibits thereto) are available for
inspection at the principal office of the issuer hereof and will be
furnished without charge to the holder of such shares upon written
request."
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12.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to any
transfer of any Investor Securities other than pursuant to an effective
registration statement under the Securities Act, the holder thereof will give
not less than three Business Days' prior written notice to the Company of such
holder's intention to effect such transfer, describing in reasonable detail the
manner of the proposed transfer. No holder of Investor Securities shall transfer
any Investor Securities other than pursuant to an effective registration
statement under the Securities Act until (i) such holder delivers to the Company
an opinion, in form and substance reasonably acceptable to the Company, of Ropes
& Gray or other counsel reasonably acceptable to the Company addressed to the
Company to the effect that the proposed transfer may be effected without
registration of such Investor Securities under the Securities Act or applicable
state securities laws, and (ii) the transferee agrees in writing to be bound by
all of the terms of this Agreement and the Investor Securities to be
transferred, and thereupon such holder shall be entitled, within 30 days
thereafter, to transfer such Investor Securities in accordance with the terms of
this Agreement and the notice delivered by such holder to the Company. Each
Note, each Warrant and each certificate representing shares of capital stock
issued upon or in connection with any such transfer shall bear the restrictive
legend referred to in Section 12.1 hereof, in each case unless the restrictions
on transfer provided for in this Section 12 shall have ceased and terminated as
to such Investor Securities pursuant to Section 12.3 hereof.
12.3. Termination of Restrictions. The restrictions imposed by this
Section 12 upon the transferability of Investor Securities shall cease and
terminate as to any particular Investor Securities and any securities issued in
exchange therefor or upon transfer thereof when such Investor Securities are
being or have been sold pursuant to a Public Sale. Whenever any of such
restrictions shall cease and terminate as to any Investor Securities, the holder
thereof shall be entitled to receive, without expense, from the Company, new
certificates not bearing that part of the legend specified in Section 12.1
hereof that is no longer applicable.
12.4. Special Restriction. No Investor Security shall be transferred
(other than in a Public Sale) to any Person unless, concurrently with such
transfer, such Person certifies to the Company that such Person is not a
Competitor or a Customer. The term "Competitor" shall mean a Person which is
listed on Exhibit 12.4 hereto or which, collectively in the most recent two
complete fiscal years of such Person, derived at least 5% of its gross revenues
during such years from products which were directly competitive with products of
the Subject Entities. The term "Customer" shall mean a Person to which the
Company made sales in its two most recent fiscal years representing more than 1%
of the Company's gross revenues in each such year.
13. Definitions. For purposes of this Agreement:
13.1. Terms Defined Elsewhere. The following terms defined elsewhere in
this Agreement in the Sections set forth below shall have the respective
meanings therein defined:
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Term Definition
"Bank Credit Agreement" Section 4.3.2.1
"Class A Common Stock" Section 2.2
"Class A Preferred Stock" Section 4.2.1
"Class B Common Stock" Section 4.2.1
"Class B Preferred Stock" Section 4.2.1
"Class C Common Stock" Section 4.2.1
"Closing" Section 3.2
"Closing Date" Section 3.2
"Common Stock" Section 4.2.1
"Company" Preamble
"Competitor" Section 12.4
"Customer" Section 12.4
"Employment Agreement" Section 6.6
"Event of Default" Section 10.1
"Guarantee Agreement" Section 6.4
"Intercreditor Agreement" Section 6.5
"Investor Securities" Section 2.3
"Issuance" Section 8.7
"Major Holder" Section 8.2
"Margin Stock" Section 3.4
"Noncompetition Agreement" Section 6.6
"Notes" Section 2.1.3
"Other Securities" Section 8.7.1.3
"PIK Notes" Section 2.1.2
"Participation Notice" Section 8.7.1.1
"Preferred Stock" Section 4.2.1
"Proposed Subscriber" Section 8.7.1.1
"Put Notes" Section 7.2.1 of Exhibit 7
"Qualifying Public Offering" Section 8.7.3
"Related Agreements" Section 4.3.2
"Registration Agreement" Section 6.8
"Revolving Credit Debt" Section 9.2.2
"Security Agreement" Section 6.5
"Senior Subordinated Notes" Section 2.1.1
"Specified Related Agreements" Section 4.3.2
"Subject Securities" Section 8.7
"Tag-Along Agreement" Section 6.7
"Warrants" Section 2.2
Certain other terms are defined in the Exhibits hereto and are used therein with
the meanings so defined.
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13.2. Action. The term "Action" shall mean any claim, action, cause of
action or suit (in contract or tort or otherwise), arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
13.3. Adjusted Net Operating Income. The term "Adjusted Net Operating
Income" shall mean, for any period, Net Operating Income for such period after
excluding therefrom all amounts included therein as a result of the business or
operations of each acquisition of assets, a Person or a business (if any) made
after the date of this Agreement the purchase of which was funded, in whole or
in part, directly or indirectly, with proceeds of Equity Securities issued or
Indebtedness incurred in connection with, in anticipation of or as a result of
(including without limitation by the Person acquired), such acquisition, all of
the foregoing calculated on a pro forma basis and in conformity with generally
accepted accounting principles on a basis consistent with the financial
statements referred to in clause (a) of Section 4.3.1 hereof.
13.4. Affiliate. The term "Affiliate" (which shall be deemed to refer to
the Company unless another Person is specified) shall mean any Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with the Company (or such other specified Person) and shall include (i)
any Person who is an officer, director or beneficial holder of at least 5% of
the outstanding equity interest of the Company (or such other specified Person)
and Members of the Immediate Family of any such officer, director or holder,
(ii) any Person of which the Company (or such other specified Person) or an
Affiliate (as defined in clause (i) above) of the Company (or such other
specified Person) shall, directly or indirectly, either beneficially own at
least 5% of the outstanding equity interest or constitute at least a 5%
participant or shall be an officer or director of such Person, and Members of
the Immediate Family, if any, of such holder, director or officer, and (iii) in
the case of a specified Person who is an individual, Members of the Immediate
Family of such Person; provided, however, that you shall not be an Affiliate of
the Company for purposes of this Agreement.
13.5. Applicable Percentage. The term "Applicable Percentage" shall
mean, with respect to any holder of Investor Securities, the percentage of all
outstanding shares of Common Stock which would be held by such holder assuming
that all outstanding Equity Securities of the Company are converted into, or
exchanged or exercised for, shares of Common Stock in accordance with the terms
thereof.
13.6. Business Day. The term "Business Day" shall mean any day on which
banking institutions in Boston, Massachusetts and Detroit, Michigan are
customarily open for the purpose of transacting business.
13.7. By-laws. The term "By-laws" shall include all written rules,
regulations, procedures and by-laws and all other documents relating to the
management, governance or internal regulation of a Person other than an
individual, or interpretive of the Charter of such Person, each as from time to
time amended or modified.
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13.8. Capitalized Lease. The term "Capitalized Lease" shall mean any
lease which is or should be capitalized on the balance sheet of the lessee in
accordance with generally accepted accounting principles.
13.9. Charter. The term "Charter" shall include the articles or
certificate of incorporation, statute, constitution, joint venture or
partnership agreement or articles or other charter of any Person other than an
individual, each as from time to time amended or modified.
13.10. Code. The term "Code" shall mean the federal Internal Revenue
Code of 1986 or any successor statute, and the rules and regulations thereunder,
and in the case of any referenced section of any such statute, rule or
regulation, any successor thereof, collectively and from time to time amended
and in effect.
13.11. Commission. The term "Commission" shall mean the Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act, the Exchange Act or both.
13.12. Consolidated. The term "consolidated" shall mean, when used with
reference to any term, that term as applied to the accounts of the Company (or
other indicated Person) and each of its Subsidiaries, consolidated in accordance
with generally accepted accounting principles after eliminating all inter-
company items and with appropriate deductions for minority interests in
Subsidiaries.
13.13. Contractual Obligation. The term "Contractual Obligation" shall
mean, with respect to any Person, any contract, agreement, deed, mortgage,
lease, license, indenture, commitment, undertaking, arrangement or
understanding, written or oral, or other document or instrument, including,
without limitation, any document or instrument evidencing or otherwise relating
to any indebtedness but excluding the Charter and By-laws of such Person, to
which or by which such Person is a party or otherwise subject or bound or to
which or by which any property or right of such Person is subject or bound.
13.14. Default. The term "Default" shall mean an Event of Default as
defined in Section 10 or an event or condition with which the passage of time or
the giving of notice or both would become such an Event of Default.
13.15. Distribution. The term "Distribution" shall mean (i) the
declaration or payment of any dividend or other distribution on or in respect of
any Equity Security of any Subject Entity, other than dividends payable on
Common Stock solely in shares of Common Stock, (ii) the purchase, redemption or
other retirement of any Equity Security of any Subject Entity, whether directly
or indirectly through a Subsidiary or otherwise, and (iii) any payment of the
principal of, premium (if any) or interest on, or any other payment in respect
of, any Indebtedness permitted by Sections 9.4.6 and 9.4.9 hereof and any other
Indebtedness which is subordinated in any way to the Notes.
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13.16. Exchange Act. The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
13.17. Equity Securities. The term "Equity Securities" shall mean, with
respect to any Person which is not a natural person, all shares of capital stock
or other equity or beneficial interests issued by or created in or by such
Person, all stock appreciation or similar rights or grants of, or other
Contractual Obligation for, any right to share in the equity, income, revenues
or cash flow of such Person, and all securities or other rights, warrants or
other Contractual Obligations to acquire any of the foregoing, whether by
conversion, exchange, exercise, preemptive right or otherwise.
13.18. Foreign Trade Regulations. The term "Foreign Trade Regulations"
means (a) any act that prohibits or restricts, or empowers the President or any
executive agency of the United States of America to prohibit or restrict,
exports to or financial transactions with any foreign country or foreign
national, (b) the regulations with respect to certain prohibited foreign trade
transactions set forth at 15 C.F.R. Parts 730 et seq., 22 C.F.R. Parts 120-130
and 31 C.F.R. Parts 500 et seq. and (c) any order, regulation, ruling,
interpretation, direction, instruction or notice relating to any of the
foregoing, all as from time to time in effect.
13.19. Generally Accepted Accounting Principles. The term "generally
accepted accounting principles" shall mean generally accepted accounting
principles as defined by the Financial Accounting Standards Board, as in effect
on December 31, 1994 and as applied by the Subject Entities in their
consolidated financial statements dated December 31, 1994 referred to in clause
(a) of Section 4.3.1 hereof and consistently followed thereafter without giving
effect to any subsequent changes in such accounting principles; provided,
however, that for purposes of the financial statements to be delivered pursuant
to Section 8.3 hereof, "generally accepted accounting principles" shall mean
such principles as recognized by the Financial Accounting Standards Board, as
from time to time in effect.
13.20. Governmental Authority. The term "Governmental Authority" shall
mean any U.S. federal, state or local or any foreign government, governmental
authority, regulatory or administrative agency, governmental commission, court
or tribunal (or any department, bureau or division thereof) or any arbitral
body.
13.21. Guarantee. The term "Guarantee" shall mean (i) any guarantee of
the payment or performance of, or any contingent obligation in respect of, any
Indebtedness or other obligation of any other Person, (ii) any other arrangement
whereby credit is extended to one obligor on the basis of any promise or
undertaking of another Person (A) to pay the Indebtedness of such obligor, (B)
to purchase any obligation owed by such obligor, (C) to purchase or lease assets
(other than inventory in the ordinary course of business) under circumstances
that would enable such obligor to discharge one or more of its obligations, or
(D) to maintain the capital, working capital, solvency or general financial
condition of such obligor, and (iii) any liability as a general
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partner of a partnership or as a venturer in a joint venture in respect of
Indebtedness or other obligations of such partnership or venture.
13.22. Guarantee Subsidiary. Each Subsidiary of the Company that (i) is
incorporated in one of the states of the United States of America, or (ii) has
guaranteed any portion or all of the Senior Indebtedness.
13.23. Indebtedness. The term "Indebtedness" shall mean: (i) all debt for
borrowed money and similar monetary obligations evidenced by bonds, notes,
debentures, Capitalized Lease obligations or otherwise, including without
limitation obligations in respect of the deferred purchase price of properties
or assets, in each case whether direct or indirect other than obligations of the
Company for the balance of the purchase price of the stock of Ultra Air
Products, Inc. as further described in Schedule 9.4 to the extent such
Indebtedness does not exceed $2.5 million; (ii) all liabilities secured by any
Lien existing on property owned or acquired subject thereto, whether or not the
liability secured thereby shall have been assumed; and (iii) all reimbursement
obligations under outstanding letters of credit in respect of drafts which (a)
may be presented to the extent the aggregate amount thereof exceeds $4,000,000,
or (b) have been presented and have not yet been paid and are not included in
clause (i) above.
13.24. Initial Yield to Maturity. The term "Initial Yield to Maturity"
shall mean the Yield to Maturity on all Senior Indebtedness then outstanding
calculated on the basis of the Bank Credit Agreement as in effect on the date of
this Agreement but assuming that any Revolving Credit Debt has a maturity 5
years from the date of computation.
13.25. Investment. The term "Investment" shall mean (i) any share of
capital stock, evidence of Indebtedness or other security issued by any other
Person, (ii) any loan, advance, or extension of credit to, or contribution to
the capital of, any other Person, (iii) any purchase of the securities or
business or integral part of the business of any other Person, or commitment or
option to make such purchase if, in the case of an option, the consideration
therefor exceeds $1,000, including without limitation the entering into of local
marketing agreements and similar agreements, and (iv) any other investment;
provided, however, that the term "Investment" shall not include (a) current
trade and customer accounts receivable arising in the ordinary course of
business and payable in accordance with customary trade terms or prepaid assets
arising in the ordinary course of business, (b) advances to employees for travel
and relocation expenses, drawing accounts and similar expenditures, or (c)
demand deposits in banks or trust companies the entire principal amount of which
is subject to deposit insurance provided by the Federal Deposit Insurance
Corporation or the Federal Savings and Loan Insurance Corporation.
13.26. Legal Requirement. The term "Legal Requirement" shall mean any
federal, state, local or foreign law, statute, standard, ordinance, code, order,
rule, regulation, resolution, promulgation, or any order, judgment or decree of
any court, arbitrator, tribunal or governmental authority, or any license,
franchise, permit or similar right granted under any of the foregoing, or any
similar provision having the force and effect of law.
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13.27. Lien. The term "Lien" shall mean (a) any mortgage, pledge, lien,
charge, security interest or other similar encumbrance or restriction of any
kind upon any property or assets of any character, or upon the income or profits
therefrom or upon the transfer thereof; (b) any acquisition of or agreement to
have an option to acquire any property or assets upon conditional sale or other
title retention agreement, device or arrangement (including a capitalized
lease); or (c) any sale, assignment, pledge or other transfer for security of
any accounts, general intangibles or chattel paper, with or without recourse.
13.28. Material Adverse Change; Material Adverse Effect. The terms
"Material Adverse Change" and "Material Adverse Effect" shall mean,
respectively, any adverse change in or effect on the business, operations,
assets, prospects or condition, financial or otherwise, of any Subject Entity
which, when considered either singly or together with all other adverse changes
and effects with respect to which either such phrase is used in this Agreement,
is material to the Subject Entities considered as one enterprise.
13.29. Members of the Immediate Family. The term "Members of the Immediate
Family", as applied to any individual, shall include each parent, spouse, child,
brother, sister and the 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 the property of one or more such persons.
13.30. Net Operating Income. The term "Net Operating Income" shall mean,
with respect to any period, (i) the net income of the Subject Entities for such
period, plus (ii) to the extent deducted in computing such net income, (a) all
charges and expenses in the nature of interest (including without limitation
charges in the nature of interest on Capitalized Leases), (b) provisions for
income taxes (including the State of Michigan single business tax), depreciation
and amortization, (c) accretion of the liability accrued as of December 31, 1995
pursuant to Statement of Financial Accounting Standards No. 106 issued by the
Financial Accounting Standard Board, (d) accretion of the liability accrued as
of December 31, 1995 in connection with deferred compensation payable by virtue
of the amendment of the Company's deferred compensation plan entered into on
November 29, 1990, and (e) unrealized foreign currency gains and losses, all of
the foregoing calculated in conformity with generally accepted accounting
principles on a basis consistent with the financial statements referred to in
clause (a) of Section 4.3.1 hereof, and with appropriate deductions from each
such item for minority interests in subsidiaries.
13.31. Person. The term "Person" shall mean an individual, partnership,
limited liability company, corporation, association, trust, joint venture or
unincorporated organization, and any government, governmental department or
agency or political subdivision thereof.
13.32. Pro Forma Net Operating Income. The term "Pro Forma Net Operating
Income" shall mean, with respect to any period, Net Operating Income for such
period; provided, however, that if an acquisition or disposition of assets,
another Person or a business occurred during the period for which Pro Forma Net
Operating Income is to be determined, such
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determination shall be made on a pro forma basis, on the assumption that such
acquisition or disposition occurred on the day immediately preceding the first
day of such period.
13.33. Public Sale. The term "Public Sale" shall mean a distribution
pursuant to a registration statement under the Securities Act or, if the
securities sold are of a class which is publicly traded as evidenced by listing
with a national securities exchange, on the NASDAQ National Market or otherwise,
a sale to the public which is exempt from the registration requirements of the
Securities Act under Rule 144 thereunder or otherwise.
13.34. Required Holders. The term "Required Holders" shall mean, with
respect to any class or type of Investor Securities, the holder or holders at
the relevant time (excluding the Subject Entities) of more than 50% of the
outstanding principal amount or number of outstanding shares, as the case may
be, of the specified class or type of Investor Securities, or if no class or
type is specified, the holder or holders at the relevant time (excluding the
Subject Entities) of each of (i) more than 50% in outstanding principal amount
of the Notes, (ii) more than 50% of the outstanding shares of Common Stock which
constitute Investor Securities, and (iii) more than 50% of the outstanding
Warrants which constitute Investor Securities.
13.35. Securities Act. The term "Securities Act" shall mean the Securities
Act of 1933, as amended, or any successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
13.36. Senior Indebtedness. The term "Senior Indebtedness" shall have the
meaning assigned to such term in the Notes.
13.37. Significant Subsidiary. The term "Significant Subsidiary" shall
mean each Subsidiary of the Company which is (or would be on a pro forma basis)
a "significant subsidiary" of the Company, as such term is used in Regulation S-
X promulgated by the Commission.
13.38. Stockholder. The term "Stockholder" shall mean each Person who
holds any Equity Security of the Company.
13.39. Subject Entity. The term "Subject Entity" shall mean each of the
Company and each of its Subsidiaries.
13.40. Subordinated Indebtedness. The term "Subordinated Indebtedness"
shall have the meaning assigned to such term in the Notes.
13.41. Subsidiary. The term "Subsidiary" shall mean any Person of which
the Company or any other 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.
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13.42. Wholly Owned Subsidiary. The term "Wholly Owned Subsidiary" shall
mean any Subsidiary all of whose outstanding Equity Securities are owned by the
Company (or any other specified Person), directly or indirectly through a Wholly
Owned Subsidiary.
13.43. Yield to Maturity. The term "Yield to Maturity" shall mean, at any
time, the yield to maturity (calculated in accordance with generally accepted
financial practices) on all Senior Indebtedness at such time, including all
interest, fees and other amounts payable with respect thereto, calculated on the
following assumptions: (i) the only payment or prepayments of outstanding Senior
Indebtedness which will be made are those specified to be made on a fixed date;
(ii) where Revolving Credit Debt is available, the maximum principal amount
permitted to be outstanding at any time will be outstanding; (iii) where an
interest rate varies based upon a floating rate of interest, the rate of
interest in effect on the date of computation will remain constant; (iv) where
an interest rate varies on the basis of other events or conditions (including
without limitation the financial performance of the borrower), an equal
principal amount of Senior Indebtedness subject thereto will be subject to each
possible rate of interest; (v) the maturity of all Revolving Credit Debt is five
years from the date of computation; and (vi) all fees and other amounts paid
prior to the date of computation in lump sums rather than periodically over the
remaining life of the applicable Indebtedness were, in fact, made payable
ratably over such remaining life at the time of their original payment.
14. Expenses, Etc. Whether or not the transactions contemplated by this
Agreement shall be consummated, the Company hereby agrees to pay on demand all
reasonable out-of-pocket expenses incurred by you in connection with such
transactions and operations hereunder (other than expenses incurred in the
normal course of investment monitoring) and in connection with any amendments or
waivers (whether or not the same become effective) hereof and of the other
Related Agreements and all expenses incurred by any of you or any holder of any
Investor Securities issued hereunder in connection with the enforcement in good
faith of any rights hereunder, under any other Related Agreement or under the
Charter of the Company, including without limitation: (a) the cost and expenses
of preparing and duplicating this Agreement; (b) the cost of delivering to your
principal office, insured to your reasonable satisfaction, the Investor
Securities sold to you hereunder and any Investor Securities delivered to you in
exchange therefor or upon any conversion or substitution thereof, in any such
case insured to your satisfaction; (c) the reasonable fees, expenses and
disbursements of Ropes & Gray in connection with the transactions contemplated
by this Agreement; and (d) all taxes (other than taxes determined with respect
to income and transfer taxes that may be payable upon a transfer), 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 Investor Securities; provided, however, that you and each
holder of Investor Securities shall bear the fees and disbursements of counsel
for such of you or such holder in connection with all opinions rendered by such
counsel pursuant to Section 12 hereof.
The Company hereby further agrees to indemnify, exonerate and hold you and
each of your stockholders, officers, directors, employees and agents free and
harmless from and against
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any and all Actions, losses, liabilities and damages, and any investigation or
proceeding instituted by any Governmental Authority or any other Person, and
expenses in connection therewith, including without limitation reasonable
attorneys' fees and disbursements, incurred in any capacity by the indemnitee or
any of them as a result of, or arising out of, or relating to any transaction
financed or to be financed in whole or in part directly or indirectly with
proceeds from the sale by the Company of any of the Investor Securities, except
for any of such indemnified liabilities arising on account of any indemnitee's
gross negligence, willful misconduct or bad faith.
Each of the Company and you hereby agree to indemnify each other against
and hold each other 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 the Company or you, as the case may be, in connection with the
transactions contemplated by this Agreement, including without limitation
reasonable legal fees arising in connection with any such claim, demand or
liability; provided, however, that the Company shall bear the fees and expenses
referred to in the first paragraph of this Section 14.
The obligations of the Company to you under this Section 14 shall survive
the redemption, repurchase or transfer of any or all of the Investor Securities.
15. Notices. Any notice or other communication in connection with this
Agreement or the Investor Securities shall be deemed to be delivered if in
writing (or in the form of a telex or telecopy to be given only during the
recipient's normal business hours unless arrangements have otherwise been made
to receive such notice by telex or telecopy outside of normal business hours)
addressed as provided below and if either (a) actually delivered at said address
or (b) in the case of a letter, seven 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, to it at the address set forth on page 1, with a
courtesy copy (not necessary to constitute notice hereunder) to John J. Collins,
Jr., Miller, Canfield, Paddock and Stone, Suite 100, 1400 North Woodward ,
Bloomfield Hills, Michigan 48303-2014, or at such other address as such Person
shall have specified by notice actually received by you.
If to you, to your address set forth on page 1 hereof, or at such other
address as you shall have specified by notice actually received by the Company.
If to any other holder of record of any Investor Security, to it at its
address set forth in the relevant registers of the Company.
16. Survival of Covenants. All covenants, agreements, representations and
warranties made herein or in any other document referred to herein or delivered
to you pursuant hereto or in connection herewith shall be deemed to have been
material and relied on by you, notwithstanding any investigation made by you or
on your behalf, and shall survive the execution and delivery to you of this
Agreement and of the Investor Securities.
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17. 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 Required Holders. Any amendment or waiver
effected in accordance with this Section 17 shall be binding upon each holder of
any Investor Securities and the Company.
18. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH
CANNOT BE WAIVED, THE COMPANY AND YOU HEREBY WAIVE, AND COVENANT THAT IT AND YOU
WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR
CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY OTHER RELATED
AGREEMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY OBLIGATION HEREUNDER OR
THEREUNDER OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE HOLDERS OF INVESTOR SECURITIES OR THE COMPANY OR ANY OF THEM IN
CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE COMPANY AND
YOU ACKNOWLEDGE THAT THE PROVISIONS OF THIS SECTION 18 CONSTITUTE A MATERIAL
INDUCEMENT UPON WHICH THE COMPANY AND YOU HAVE RELIED, ARE RELYING AND WILL RELY
IN ENTERING INTO THIS AGREEMENT, AND SUCH OF THE RELATED AGREEMENTS TO WHICH THE
COMPANY AND YOU ARE A PARTY. You or the Company may file an original counterpart
or a copy of this Section 18 with any court as written evidence of the consent
of the Company and you to the waiver of its or your right to trial by jury,
respectively.
19. Service of Process. The Company and you, by execution hereof, (a) agree
that any legal proceeding arising out of or based upon this Agreement or any
Specified Related Agreement relating to the subject matter hereof or thereof
shall be brought in the state courts of The Commonwealth of Massachusetts or the
United States District Court located in the Commonwealth of Massachusetts, and
in no other court or jurisdiction, (b) hereby irrevocably submit to the
exclusive jurisdiction of the state courts of The Commonwealth of Massachusetts
and the United States District Court located in the Commonwealth of
Massachusetts for the purpose of any suit, action or other proceeding arising
out of or based upon this Agreement or any other Specified Related Agreement or
the subject matter hereof or thereof brought by the Company or you or any of the
Company's or your respective successors or assigns, and (c) hereby waive to the
extent not prohibited by law, and agree not to assert, by way of motion, as a
defense or otherwise, in any such proceeding, any claim that it or you is not
subject personally to the jurisdiction of the above-named courts, that its or
your property is exempt or immune from attachment or execution, that any such
proceeding brought in one of the above-named courts is improper or that this
Agreement or the subject matter hereof or thereof, may not be enforced in or by
such court. The Company and you hereby consent to service of process in any such
proceeding in any manner permitted by Chapter 223A or any other provision of the
General Laws of The Commonwealth
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of Massachusetts or the rules and regulations promulgated thereunder and agree
that service of process by registered or certified mail, return receipt
requested, at its or your address, as applicable, referred to in or specified
pursuant to Section 15 hereof, is reasonably calculated to give actual notice.
20. Miscellaneous. This Agreement, the other Related Agreements, and the
Charter of the Company 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 Commonwealth of
Massachusetts 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 jurisdiction. This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
Whether or not any express assignment has been made in this Agreement,
provisions of this Agreement that are for your benefit as the holder of any
Investor Securities are also for the benefit of, and enforceable by, all
subsequent holders of Investor Securities, except as otherwise expressly
provided herein.
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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 whereupon this
letter shall become and be a binding agreement between you and the Company.
Very truly yours,
SEAL Numatics, Incorporated
Attest: By: /s/ Robert P. Robeson
Title: ---------------------------
Title:
Accepted and Agreed to:
Harvard Private Capital
Holdings, Inc.
By:
---------------------------
Title:
By:
---------------------------
Title:
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 whereupon this
letter shall become and be a binding agreement between you and the Company.
Very truly yours,
SEAL Numatics, Incorporated
Attest: By:
Title: ---------------------------
Title:
Accepted and Agreed to:
Harvard Private Capital
Holdings, Inc.
By: /s/
---------------------------
Title: Authorized Signatory
By: /s/
---------------------------
Title: Authorized Signatory