INVESTMENT AGREEMENT
Published on November 14, 2001
EXHIBIT 10.2
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FIRST AMENDED AND RESTATED
INVESTMENT AGREEMENT
BY AND AMONG
SUNSOURCE INC.
SUNSOURCE INVESTMENT COMPANY, INC.
THE HILLMAN GROUP, INC.
AND
ALLIED CAPITAL CORPORATION
DATED AS OF SEPTEMBER 28, 2001
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TABLE OF CONTENTS
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EXHIBITS AND SCHEDULES
SCHEDULE 4.4 GOVERNMENTAL APPROVALS
SCHEDULE 4.5 BORROWERS' BUSINESS
SCHEDULE 4.6(C) PRO FORMA BALANCE SHEETS
SCHEDULE 4.7 INDEBTEDNESS
SCHEDULE 4.8 INSURANCE
SCHEDULE 4.9 OWNERSHIP AND CONTROL
SCHEDULE 4.10 MATERIAL ADVERSE CHANGES
SCHEDULE 4.12 LITIGATION
SCHEDULE 4.14 AFFILIATE TRANSACTIONS
SCHEDULE 4.19 EMPLOYEE BENEFIT MATTERS
SCHEDULE 4.21 LABOR MATTERS
SCHEDULE 4.26 INTELLECTUAL PROPERTY
SCHEDULE 7.2 LIENS
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This instrument and the rights and obligations evidenced hereby are subordinate
in the manner and to the extent set forth in that certain Subordination and
Intercreditor Agreement (the "Subordination Agreement") dated as of September
28, 2001 among SunSource Inc., SunSource Investment Company, Inc. and The
Hillman Group, Inc., Allied Capital Corporation and Heller Financial, Inc.
("Agent"), to the indebtedness (including interest) owed by The Hillman Group,
Inc. pursuant to that certain Credit Agreement dated as of September 28, 2001
among The Hillman Group, Inc., the lenders from time to time party thereto and
any additional agents for such lenders, as such Credit Agreement has been and
hereafter may be amended, supplemented or otherwise modified from time to time
and to indebtedness refinancing the indebtedness under that agreement as
contemplated by the Subordination Agreement; and each holder of this instrument,
by its acceptance hereof, irrevocably agrees to be bound by the provisions of
the Subordination Agreement.
FIRST AMENDED AND RESTATED
INVESTMENT AGREEMENT
THIS FIRST AMENDED AND RESTATED INVESTMENT AGREEMENT (this "Agreement")
is made as of September 28, 2001 by and among: (i) SunSource Inc., a Delaware
corporation (the "Company"), (ii) SunSource Investment Company, Inc., a Delaware
corporation ("SIC"); (iii) The Hillman Group, Inc., a Delaware corporation
("Hillman" and together with the Company and SIC, the "Borrowers" and each of
the Company, SIC and Hillman, a "Borrower") and (iv) Allied Capital Corporation,
a Maryland corporation ("Allied" or the "Lender").
RECITALS:
A. The Borrowers and Allied entered into that certain Investment
Agreement dated December 28, 2000 (the "Initial Investment Agreement"), pursuant
to which the Borrowers issued that certain Senior Subordinated Debenture dated
December 28, 2000 in the original principal amount of Thirty Million Dollars
($30,000,000) (the "Initial Debenture").
B. The parties hereto desire to amend and restate the terms of the
Initial Investment Agreement and related documents to provide for an additional
investment by Allied of Ten Million Dollars ($10,000,000) and to make such other
changes as are provided herein and therein.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Lender and its
respective successors and assigns with respect to their interest in all or any
part of any of the Debentures (as these terms are hereinafter defined)
(individually, a "Holder" and collectively, the "Holders"), the Borrowers hereby
agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"Act of Bankruptcy," when used in reference to any Person, means the
occurrence of any of the following with respect to such Person: (i) such Person
shall have made an assignment for the benefit of his or its creditors; (ii) such
Person shall have admitted in writing his or its inability to pay his or its
debts as they become due; (iii) such Person shall have filed a voluntary
petition in bankruptcy; (iv) such Person shall have been adjudicated a bankrupt
or insolvent; (v) such Person shall have filed any petition or answer seeking
for himself or itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future Applicable Law pertinent to such circumstances; (vi) such Person shall
have filed or shall file any answer admitting or not contesting the material
allegations of a bankruptcy, insolvency or similar petition filed against such
Person; (vii) such Person shall have sought or consented to, or acquiesced in,
the appointment of any trustee, receiver, or liquidator of such Person or of all
or any substantial part of the properties of such Person; (viii) 60 days shall
have elapsed after the commencement of an action against such Person seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future Applicable Law without such action
having been dismissed or without all orders or proceedings thereunder affecting
the operations or the business of such Person having been stayed, or if a stay
of any such order or proceedings shall thereafter be set aside and the action
setting it aside shall not be timely appealed; or (ix) 60 days shall have
expired after the appointment, without the consent or acquiescence of such
Person of any trustee, receiver or liquidator of such Person or of all or any
substantial part of the assets and properties of such Person without such
appointment having been vacated.
"Act of Dissolution," when used in reference to any Person (other than
an individual), shall mean the occurrence of any action initiating, or any event
that results in, the dissolution, liquidation, winding-up or termination of such
Person.
"Additional Investment" has the meaning specified in Section 2.1.
"Adjusted EBITDA" shall have the meaning set forth in the Senior Credit
Facility in effect on the Closing Date.
"Affiliate" means, when used with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Affiliate" shall also mean any beneficial owner of Capital Stock representing
10% or more of the total voting power of the voting Capital Stock (on a fully
diluted basis) of the Company or any of its Subsidiaries (whether or not
currently exercisable) and any Person who would be an Affiliate of such
beneficial owner pursuant to the first sentence hereof.
"Allied Investment" has the meaning specified in Section 2.1(a).
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"Applicable Law(s)" when used in the singular, shall mean any applicable
federal, state or local law, ordinance, order, regulation, rule or requirement
of any governmental or quasi-governmental agency, instrumentality, board,
commission, bureau or other authority having jurisdiction, and, when used in the
plural, shall mean all such applicable federal, state and local laws,
ordinances, orders, regulations, rules and requirements.
"Approval" has the meaning specified in Section 9.16(a).
"Asset Disposition" means any sale, lease (other than operating leases
entered into in the ordinary course of business), transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any of its Subsidiaries, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition") of (i) any shares of Capital Stock of a
Subsidiary of the Company, (ii) all or substantially all of the assets of any
division or line of business of the Company or any of its Subsidiaries, (iii)
any other assets of the Company or any of its Subsidiaries having a value, in
the aggregate with all other assets (except assets which are excluded under
clauses (a) through (e) below) transferred since December 28, 2000, in excess of
20% percent of the value of the Consolidated Total Assets of the Company and its
Subsidiaries as of the date of such disposition (provided, however, none of the
following shall be considered Asset Dispositions: (a) a disposition by a
Borrower to another Borrower or by a Subsidiary of a Borrower to a Borrower, (b)
the sale of Inventory in the ordinary course of business, and (c) sales or other
dispositions of obsolete, uneconomical, negligible, worn-out or surplus assets
in the ordinary course of business and in a commercially reasonable manner
(including but not limited to equipment and intellectual property).
"Audited Financials" has the meaning specified in Section 4.6(a).
"Borrowers' Business" means the (i) the business engaged in by the
Company and its Subsidiaries as of the Closing Date and similar and related
businesses (as described on Schedule 4.5) and (ii) such other lines of business
as may otherwise be consented to by an Approval by the Holders of the
Debentures.
"Business Day" means any day other than a Saturday, Sunday or day on
which banks in Washington, D.C. are authorized or required by law to close.
"Capital Lease" means any lease of (or other arrangement conveying the
right to use) real or personal property, the obligations of the lessee in
respect of which are required in accordance with GAAP to be capitalized on the
balance sheet of the lessee.
"Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof
which obligations are required to be classified and accounted for as Capital
Leases on a balance sheet of such Person under GAAP, and the amount of such
obligations is the capitalized amount thereof determined in accordance with
GAAP.
"Capital Stock" of any Person means any and all shares, interests,
participation or other equivalents (however designated) of capital stock of such
Person (if such Person is a corporation), any and all equivalent ownership
interests in such Person (if such Person is other
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than a corporation), any securities convertible into or exchangeable for any of
the foregoing and any and all warrants or options to purchase any of the
foregoing.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than 90 days from the date
of acquisition; (ii) time deposits, certificates of deposit and banker's
acceptances of any domestic commercial bank having capital and surplus in excess
of $200,000,000 having maturities of not more than 90 days from the date of
acquisition; (iii) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) and entered
into with any bank meeting the qualifications specified in clause (ii) above;
(iv) commercial paper having, at the time of acquisition thereof, the highest
credit rating obtainable from Standard & Poor's Ratings Services or Moody's
Investors Service, Inc. and maturing within ninety days after the date of
acquisition; and (v) money market funds which invest at least 90% of their
assets in the types of securities or instruments described in clauses (i), (ii),
(iii) and (iv) above.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time.
"Change of Control" means one or more transactions resulting in (a) the
liquidation, dissolution or winding up of the Company, (b) the Transfer of all
or substantially all of the assets of the Company, (c) a merger or consolidation
of the Company with another Person (other than another Borrower) where the
Company is not the surviving or successor entity; (d) one or more Persons (other
than the shareholders of the Company that are existing as of the Closing Date)
either (i) owning in the aggregate in excess of 50% of the then outstanding
Capital Stock of the Company or (ii) being able to elect a majority of the
Company's board of directors or otherwise to exercise, directly or indirectly, a
controlling influence over the management or policies of the Company, or (e) the
Company ceasing to own 100% of the capital stock of each of the other Borrowers.
"Charges" has the meaning specified in Section 9.9.
"Closing" has the meaning specified in Section 2.1(a).
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986 and the regulations
thereunder, as amended or otherwise modified from time to time.
"Common Stock" means any and all (as the context may require) of the
shares of the authorized common stock of the Company.
"Consolidated" means the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies (other than the Excluded
Subsidiaries).
"Consolidated Total Assets" means, with respect to the Company and its
Subsidiaries(other than the Excluded Subsidiaries), all assets of the Company
and its Subsidiaries (other than the Excluded Subsidiaries) that would, in
accordance with GAAP, be classified as total assets of the Company and its
Subsidiaries (other than the Excluded
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Subsidiaries), after deducting adequate reserves in each case in which a reserve
is proper in accordance with GAAP.
"Contracts" has the meaning specified in Section 4.15.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "Controlling" and "Controlled" have meanings correlative thereto.
"Covered Financing" means (a) the issuance of any Subordinated Debt of
any Credit Party or (b) the issuance of any Indebtedness convertible into
Capital Stock of the Company. "Covered Financing" shall exclude any financing
the sole purpose of which is to refinance, repay or redeem the Debentures and
any financing provided by the seller as part of a Permitted Acquisition.
"Credit Parties" means, collectively, the Borrowers and the Guarantors;
and a "Credit Party" means each Borrower or each Guarantor.
"Debentures" means the amended and restated senior subordinated
debenture dated September 28, 2001 in the aggregate original principal amount of
$40,000,000, from the Borrowers made payable to the Holders and evidencing the
Borrowers' repayment obligation for the investment by the Holders in the
Borrowers described in Section 2.1, together with all other debentures accepted
from time to time in substitution, renewal or replacement for all or any part
thereof including pursuant to Section 9.19.
"Default" means any event or condition that upon notice, lapse of time
or both would constitute an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
stated maturity of the Debentures.
"Dollars" or "$" means lawful money of the United States of America.
"Environmental Claim" means any action, suit, demand, demand letter,
claim, notice of non-compliance or violation, notice of liability or potential
liability, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law, any Environmental Permit or
Hazardous Material or arising from alleged injury or threat to health, safety or
the environment, including, without limitation, (a) by any governmental or
regulatory authority for enforcement, cleanup, removal, response, remedial or
other actions or damages and (b) by any governmental or regulatory authority or
third party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign statute,
law, ordinance, rule, regulation, code, order, writ, judgment, injunction,
decree or judicial or agency
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interpretation, policy or guidance relating to pollution or protection of the
environment, health, safety, natural resources, including, without limitation,
those relating to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA Affiliate" means any Person required at any relevant time to be
aggregated with the Company or any of its Subsidiaries under Sections 414(b),
(c), (m) or (o) of the Code.
"ERISA Event" means any of the following with respect to a Plan or
Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a Plan
or a Multiemployer Plan, (ii) a complete or partial withdrawal by the Company or
any ERISA Affiliate from a Multiemployer Plan that results in liability under
Section 4201 or 4204 of ERISA, or the receipt by the Company or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA, (iii) the distribution
by the Company or any ERISA Affiliate under Section 4041 or 4041A of ERISA of a
notice of intent to terminate any Plan or the taking of any action to terminate
any Plan, (iv) the commencement of proceedings by the PBGC under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by the Company or any ERISA Affiliate of a notice from any
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan, (v) the institution of a proceeding by any fiduciary of
any Multiemployer Plan against the Company or any ERISA Affiliate to enforce
Section 515 of ERISA, which is not dismissed within thirty (30) days, (vi) the
imposition upon the Company or any ERISA Affiliate of any liability under Title
IV of ERISA, other than for PBGC premiums due but not delinquent under Section
4007 of ERISA, or the imposition or threatened imposition of any Lien upon any
assets of the Company or any ERISA Affiliate as a result of any alleged failure
to comply with the Internal Revenue Code or ERISA in respect of any Plan, (vii)
the engaging in or otherwise becoming liable for a nonexempt Prohibited
Transaction by the Company or any ERISA Affiliate, (viii) a violation of the
applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit
rule under Section 401(a) of the Internal Revenue Code by any fiduciary of any
Plan for which the Company or any ERISA Affiliate may be directly or indirectly
liable or (ix) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Internal Revenue Code or Section 307 of ERISA, would
result in the loss of tax-exempt status of the trust of which such Plan is a
part if the Company or any ERISA Affiliate fails to timely provide security to
such Plan in accordance with the provisions of such sections.
"Events of Default" has the meaning specified in Article VIII.
"Excluded Subsidiaries" means, collectively, SunSub C, Inc. and its
Subsidiaries and SunSource Technology Services, L.L.C. and its Subsidiaries.
"Fixed Charge Coverage" shall have the meaning set forth in the Senior
Credit Facility in effect on the Closing Date.
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"Financial Officer" of any corporation or other entity means the chief
financial officer, treasurer or principal accounting officer of such corporation
or entity.
"Financials" means, collectively, the Audited Financials and the Interim
Financials, as defined in Section 4.6.
"Foreign Subsidiary" means a Subsidiary that is organized under the laws
of a jurisdiction other than the United States or any State thereof or the
District of Columbia.
"GAAP" means generally accepted accounting principles, consistently
applied, for the period or periods in question.
"Governmental Authority(ies)" means any Federal, state, local,
quasi-governmental instrumentality or foreign court, or governmental agency,
authority, instrumentality, agency, bureau, commission, department or regulatory
body.
"Guarantee Obligation" of or by any Person means any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or advance or supply funds for the purchase of) any security for the
payment of such Indebtedness, (b) to purchase or lease property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (c) to maintain working capital, equity capital
or any other financial statement condition or liquidity of the primary obligor
so as to enable the primary obligor to pay such Indebtedness; provided that the
term "Guarantee Obligation" shall not include endorsements for collection or
deposit in the ordinary course of business. The word "Guarantee" when used as a
verb shall have the correlative meaning.
"Guarantor" means each entity that becomes a Guarantor under the
Guaranty Agreement.
"Guaranty Agreement" means the Guaranty Agreement, if any, in form and
substance satisfactory to the Holders by any Subsidiaries of the Borrowers which
are, or may from time to time become, parties thereto, in favor of the Holders,
as amended, modified or otherwise supplemented from time to time.
"Hazardous Materials" means (a) petroleum or petroleum products,
petroleum by-products or petroleum breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas and (b)
any other chemicals, materials or substances designated, classified or regulated
as hazardous or toxic or as a pollutant or contaminant under any Environmental
Law.
"Holder" and "Holders" have the meaning provided in the Recitals hereto.
"Indebtedness" of any Person means, without duplication, all
obligations, contingent or otherwise, of such Person which in accordance with
GAAP should be classified upon the balance sheet of such Person as liabilities,
but in any event including: (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person upon which interest charges are
customarily paid or accrued, (c) all obligations of such Person evidenced by
bonds, debentures,
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notes or similar instruments, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property or
assets purchased by such Person, (e) all obligations of such Person issued or
assumed as the deferred and unpaid purchase price of property or services
(excluding trade accounts payable incurred in the ordinary course of business
that are not past due and which are classified as short term liabilities in
accordance with GAAP), (f) all obligations of others secured by (or having an
existing right, contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (g) all Guarantee Obligations by such Person of Indebtedness
of others, (h) all Capital Lease Obligations of such Person, (i) all obligations
of such Person in respect of interest rate protection agreements, foreign
currency exchange agreements or other interest or exchange rate hedging
arrangements, (j) all obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any Capital Stock in such
Person or any other Person, (k) all obligations of such Person, actual or
contingent, as an account party in respect of letters of credit or similar
facilities and bankers' acceptances; and (l) all obligations of any partnership
or joint venture as to which such Person is or may become personally liable to
the extent such obligations are deemed to be liabilities under GAAP.
"Indemnitee" has the meaning in Section 9.5(b).
"Initial Investment" has the meaning specified in Section 2.1(a).
"Intellectual Property" means, collectively, all of the Company's and
its Subsidiaries' now owned and hereafter acquired intellectual property,
including, without limitation the following: (a) all patents (including all
rights corresponding thereto throughout the world, and all improvements
thereon); (b) all trademarks (including service marks, trade names and trade
secrets, and all goodwill associated therewith), (c) all copyrights (including
all renewals, extensions and continuations thereof); (d) all applications for
patents, trademarks or copyrights and all applications otherwise relating in any
way to the subject matter of such patents, copyrights and trademarks; (e) all
patents, copyrights, trademarks or applications therefor arising after the date
of this Agreement; (f) all reissues, continuations, continuations-in-part and
divisions of the property described in the preceding clauses (a), (b), (c), (d),
and (e), including, without limitation, any claims by the Company or its
Subsidiaries against third parties for infringement thereof; and (g) all rights
to sue for past, present and future infringements or violations of any such
patents, trademarks, and copyrights.
"Interest" means any ownership or profit sharing interest (however
designated) in any general or limited partnership, trust, limited liability
company, private company or joint venture, and all agreements, instruments and
documents convertible, in whole or in part, into any one or more of the
foregoing.
"Interest Rate" means a fixed rate of interest equal to 18% per annum,
payable in accordance with the terms of the Debentures.
"Interim Financials" has the meaning in Section 4.6.
"Inventory" means "inventory" as defined in Article 9 of the UCC,
including all raw materials, work in process, parts, components, assemblies,
supplies and materials used or
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consumed in the Borrowers' Business, all goods, wares and merchandise, finished
or unfinished, held for sale or lease or leased or furnished or to be furnished
under contracts of service or hire.
"Investment Documents" means, collectively, the Loan Documents, the
Subordination Agreement and all other instruments and documents executed and
delivered in connection with the Transactions (but specifically excluding the
Senior Credit Facility and related documents).
"Investments" means, collectively, (a) ownership or purchase of any
Capital Stock or evidence of Indebtedness, Interest in or other security of
another Person, (b) any loan, advance, contribution to capital, extension of
credit (except for current trade and customer accounts receivable for Inventory
sold or services rendered in the ordinary course of business and payable in
accordance with customary trade terms) to another Person, (c) any joint venture,
(d) any interest rate hedge agreement or similar agreement or (e) any
acquisition after Closing of any business or business unit of another Person
(whether acquired by purchase of assets or securities), or any commitment or
option to acquire any of the foregoing items (a) through (e).
"Junior Trust Preferred Notes" means, collectively, (a) the No. 1
SunSource 11.6% Junior Subordinated Debenture due 2027, (b) the No. 2 SunSource
11.6% Junior Subordinated Debenture due 2027 and (c) the Guarantee Agreement
dated as of September 5, 1997 by SunSource for the benefit of the holders of the
11.6% Trust Preferred Securities of SunSource Capital Trust.
"Leases" has the meaning specified in Section 4.11(b).
"Licenses" shall mean, collectively, all rights, licenses, permits and
authorizations now or hereafter issued by any Governmental Authority reasonably
necessary in connection with the operation or conduct of the Borrowers'
Business.
"Lien" means any lien, security interest or other charge or encumbrance
of any kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.
"Litigation Schedule" has the meaning specified in Section 4.14(a).
"Loan Documents" means, collectively, this Agreement, the Debentures,
the Guaranty Agreement, if any, and all other instruments and documents executed
and delivered in connection therewith.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance, or
properties of the Credit Parties and their Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, prospects, management or condition, financial or
otherwise, of the Credit Parties and their Subsidiaries taken as a whole, (b)
the ability of the Credit Parties and their Subsidiaries taken as a whole, to
perform any of their obligations under any Investment Document, (c) the rights
and remedies of or benefits available to the Holders under any Investment
Document, or (d) the consummation of any transactions contemplated hereby or
thereby.
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"Maturity Date" means September 28, 2009.
"Maximum Rate" has the meaning specified in Section 9.9(e).
"Merger Agreement" means the Merger Agreement dated June 18, 2001 among
the Company, Allied, Allied Capital Lock Acquisition Corporation.
"Mexican Liquidation" means the liquidation by the Company of all or
substantially all of the stock and/or assets of SunSource Integrated Services de
Mexico for cash liquidation proceeds of at least $1,000,000.
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which the Company or any ERISA
Affiliate makes, is making or is obligated to make contributions, or has made or
been obligated to make contributions.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, excluding, however, any gain
(but not loss), together with any related provision for taxes on such gain (but
not loss), realized in connection with (a) any Asset Disposition (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Subsidiaries
or the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries.
"New Lending Office" has the meaning specified in Section 2.9(e).
"Non-U.S. Lender" has the meaning specified in Section 2.9(e).
"Obligations" means all indebtedness, advances pursuant to this
Agreement or otherwise, debts, liabilities and obligations, for the performance
of covenants, tasks or duties or for payment of monetary amounts (whether or not
such performance is then required or contingent, or such amounts are liquidated
or determinable) owing by the Borrowers to the Holders, and all covenants and
duties regarding such amounts, of any kind or nature, present or future, whether
or not evidenced by any note, agreement or other instrument, arising under this
Agreement or any of the other Investment Documents. The term includes all
principal, interest (including all interest that accrues after the commencement
of any case or proceeding in bankruptcy after the insolvency of, or for the
reorganization of any Borrower, whether or not allowed in such proceeding), any
premiums, penalties or charges imposed in connection with the prepayment of the
Debentures, fees, charges, expenses, attorneys' fees, and any other sum
chargeable to the Borrowers under this Agreement or any other Investment
Document.
"Other Taxes" has the meaning specified in Section 2.9(b).
"Permitted Acquisition" has the meaning specified in Section 7.10.
"Permitted Indebtedness" has the meaning specified in Section 7.1.
"Permitted Lien" has the meaning specified in Section 7.2.
10
"Person" means any natural person, corporation, business trust, limited
liability company, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
"PIK Amount" shall have the meaning set forth in the Debentures.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which the Company or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"Prohibited Transaction" means a prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Code.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Real Property" means, collectively, all real property owned by the
Company or its Subsidiaries or in which the Company or its Subsidiaries has a
leasehold interest and all real property hereafter acquired by the Company or
its Subsidiaries in fee or by means of a leasehold interest, including all real
property on which the Borrowers' Business is now or hereafter conducted,
together with all goods located on any such real property that are or may become
"fixtures" under the law of the jurisdiction in which such real property is
located.
"Receiver" means any receiver, trustee, custodian, liquidator, or
similar fiduciary.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
"Remedial Action" means (a) "remedial action" as such term is defined in
CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in the environment;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the environment; or (iii) perform studies and
investigations in connection with, or as a precondition to, (i) or (ii) above.
"Reportable Event" means (i) any "reportable event" within the meaning
of Section 4043(c) of ERISA for which the 30-day notice under Section 4043(a) of
ERISA has not been waived by the PBGC (including any failure to meet the minimum
funding standard of, or timely make any required installment under, Section 412
of the Internal Revenue Code or Section 302 of ERISA, regardless of the issuance
of any waivers in accordance with Section 412(d) of the
11
Internal Revenue Code), (ii) any such "reportable event" subject to advance
notice to the PBGC under Section 4043(b)(3) of ERISA, (iii) any application for
a funding waiver or an extension of any amortization period pursuant to Section
412 of the Internal Revenue Code, and (iv) a cessation of operations described
in Section 4062(e) of ERISA.
"Responsible Officer" of any corporation means its president, chief
executive officer, any executive officer or Financial Officer of such
corporation and any other officer or similar official thereof responsible for
the administration of the obligations of such corporation in respect of this
Agreement.
"Restricted Payment" means (i) any dividend or other distribution of any
nature, direct or indirect, on account of any class of equity securities of the
Company or any of its Subsidiaries, now or hereafter outstanding, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any class of equity securities of
the Company or any of its Subsidiaries, now or hereafter outstanding, (iii) any
payment made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire any class of equity securities of the Company
or any of its Subsidiaries, now or hereafter outstanding, and (iv) any loan,
advance, tax sharing payment or indemnification payment to, or investment in,
any Affiliate of the Company (other than the Borrowers); provided, however, that
the term "Restricted Payment" shall not include any distribution to any Person
of (w) any cash or preferred stock which any Borrower receives or is entitled to
receive, with respect to the sale of the assets of any Excluded Subsidiary; (x)
the interest of any Borrower in any Excluded Subsidiary, (y) any distribution of
cash or other property received by any Borrower from any Excluded Subsidiary or
(z) any redemption of Warrant Shares.
"Restricted Subsidiary" means a Subsidiary of the Company other than a
Borrower, an Excluded Subsidiary and a Subsidiary Guarantor.
"Senior Credit Facility" means the Credit Agreement dated as of
September 28, 2001 by and among Hillman, Heller Financial, Inc., as agent, and
the lender parties thereto, as the same may be amended, supplemented or
otherwise modified from time to time and any agreement refinancing all or any of
the debt or commitments thereunder, but only in each case to the extent the
Indebtedness thereunder continues to constitute Senior Debt as provided in the
definition thereof.
"Senior Debt" means all of the following: (a) the aggregate principal
indebtedness advanced from time to time under the Senior Credit Facility up to a
maximum aggregate principal amount that shall not exceed the sum of (i)
$120,000,000 plus (ii) the amount of Indebtedness incurred pursuant to Section
7.1(a)(xii) and designated as "Senior Debt" by the Credit Parties, (b) all
interest accrued and accruing on the aggregate principal outstanding under the
Senior Credit Facility from time to time (including, without limitation, any
interest accruing after maturity or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to any Credit Party, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding) ; (c) all other
reasonable fees or monetary obligations owed under the Senior Credit Facility;
and (d) all reasonable costs incurred by the Senior Lenders under the Senior
Credit Facility in commencing or pursuing any enforcement action(s) with respect
to the amounts described in clauses (a) through (c), including attorneys' fees
and disbursements. "Senior Debt" shall also include all amendments,
12
modifications and refinancings of the foregoing, provided such amendments,
modifications or refinancings do not increase the principal amount of Senior
Debt unless otherwise permitted under Section 7.1(a)(xii).
"Senior Lenders" means the lenders providing the Senior Debt under the
Senior Credit Facility.
"Solvent" means, as used to describe any Person, that such Person (a)
owns assets whose fair saleable value is greater than the amount required to pay
all of such Person's Indebtedness (including contingent debts), (b) is able to
pay all of its Indebtedness as such Indebtedness matures and (c) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
"Subordinated Debt" means any Indebtedness of the Company or any
Subsidiary thereof that is expressly subordinated and made junior in right and
time of payment to the Senior Debt and the Debentures.
"Subordination Agreement" means that the Subordination and Intercreditor
Agreement of even date by and among the Borrowers and certain of their
affiliates, Allied and Heller Financial, Inc., as agent for the Senior Lenders,
as the same may be amended, supplemented or otherwise modified from time to
time.
"Subsidiary" means, with respect to any Person (herein referred to as
the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity having ordinary voting power or more than 50% of the
general partnership interests are, at the time any determination is being made,
owned, controlled or held, or (b) that is, at the time any determination is
made, otherwise Controlled, by such Person.
"Subsidiary Guarantor" means a Guarantor that is a Subsidiary of the
Company.
"Taxes" has the meaning specified in Section 2.9(a).
"Total Indebtedness" shall have the meaning set forth in the Senior
Credit Facility in effect on the Closing Date.
"Transactions" has the meaning specified in Section 4.2.
"Transfer" means the sale, assignment, lease, transfer, mortgaging,
encumbering or other disposition, whether voluntary or involuntary, and whether
or not consideration is received therefor.
"Warburg Note" means that certain Subordinated Promissory Note issued by
Axxess Technologies, Inc. in favor of Warburg, Pincus Investors, L.P., in the
original principal amount of $11,000,000 dated April 7, 2000, and purchased by
Allied on June 30, 2001, together with any extensions thereof, any
payment-in-kind notes issued in connection therewith, securities issued in
exchange therefor or modifications or amendments thereto.
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"Warrant Shares" means all shares of Common Stock issuable upon the
exercise of the Warrants.
"Warrants" means, collectively, the warrants to purchase 285,000 shares
of Common Stock that were issued to Allied on December 28, 2000 pursuant to the
Initial Investment Agreement.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person of which securities (except for directors' qualifying shares) or other
ownership interests representing 100% of the equity or 100% of the ordinary
voting power or 100% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held by such Person or one or
more wholly owned subsidiaries of such Person or by such Person and one or more
wholly owned subsidiaries of such Person.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part 1 of Subtitle E of Title IV of ERISA.
SECTION 1.2 Terms Generally. The definitions in Section 1.1 apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun includes the corresponding masculine, feminine
and neuter forms. The words "include," "includes" and "including" are deemed to
be followed by the phrase "without limitation." All references herein to
Articles, Sections, Exhibits and Schedules are deemed references to Articles and
Sections of, and Exhibits and Schedules to, this Agreement unless the context
shall otherwise require. Any calculation of amounts, for purposes of financial
covenant definitions or otherwise, with reference to one or more items shall be
calculated without the duplication of any item in such calculation. Except as
otherwise expressly provided herein, (a) any reference in this Agreement to any
Investment Document means such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature are construed in accordance with GAAP, as in effect from time
to time.
ARTICLE II.
THE INVESTMENT
SECTION 2.1 Funding. On December 28, 2000, the Borrowers borrowed from
Allied the aggregate sum of $30,000,000 (the "Initial Investment"). At the
closing on the date hereof (the "Closing"), the Borrowers will borrow, and
Allied will lend to the Borrowers, the aggregate sum of $10,000,000 (the
"Additional Investment" and together with the Initial Investment, the "Allied
Investment"). The entire Additional Investment will be advanced at Closing.
SECTION 2.2 Senior Debt. The Holders' rights under the Debentures and
this Agreement will be subordinate as to right of payment only to the Senior
Debt pursuant to the Subordination Agreement.
SECTION 2.3 Repayment of Debentures. Subject to the terms of the
Subordination Agreement, all unpaid principal amounts and accrued and unpaid
interest under the Debentures, and all other obligations of the Borrowers to the
Holders due and owing hereunder shall be paid upon the earliest of (i) the date
of acceleration of the Debentures pursuant to Article VIII, (ii) the
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date of redemption pursuant to Section 2.6 or 2.7 and (ii) the Maturity Date, in
immediately available dollars, without set-off, defense or counterclaim.
SECTION 2.4 Interest on the Debentures. Subject to the provisions of
Section 2.5, the Debentures shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days assuming 12 equal 30 day
months) at the Interest Rate, payable in accordance with the Debentures.
SECTION 2.5 Default Interest. If (i) the Borrowers shall default in the
payment when due of the principal of or interest on the Debentures or any other
amount becoming due hereunder, whether at maturity or upon acceleration,
redemption or otherwise, or under any other Loan Document to which any Borrower
is a party or (ii) any Event of Default exists under Section 6.12 hereof, in
each case whether or not such default is declared, the Borrowers shall pay
interest currently in cash, to the extent permitted by law, on amounts due under
the Debentures so long as such Event of Default is continuing (after as well as
before judgment) at the Interest Rate plus 2%.
SECTION 2.6 Prepayment. The Borrowers may at any time and from time to
time prepay the Debentures, in whole or in part, upon at least 15 days but no
more than 60 days prior written or telecopy notice (or telephone notice promptly
confirmed by written or telecopy notice) to the Holders before 2:00 p.m,
Washington, D.C. time, without premium or penalty. Any partial prepayments shall
be made in increments of $500,000 and shall be applied pro rata to amounts
outstanding under the Debentures. On the date of prepayment, the Borrowers shall
pay to the holders of the Debentures being prepaid pursuant to this Section, the
price specified above, by wire transfer of immediately available funds to an
account designated by such Holder. Concurrently therewith, each Holder of
Debentures being prepaid shall deliver to the Company the original copy of its
Debenture or an affidavit of loss thereof in a form that is reasonably
satisfactory to the Company. Any offer made by the Borrowers pursuant to this
Section 2.6 shall be irrevocable so long as the specified conditions are met.
SECTION 2.7 Mandatory Prepayment of the Debentures.
(a) The Borrowers' obligations under the Debentures and this
Agreement are not assumable; upon a Change of Control, each Holder shall have
the right (but not the obligation) to require the Borrowers to (a) prepay the
Debentures held by such Holder for an amount equal to the then outstanding
principal balance, all accrued but unpaid interest thereon and all PIK Amounts,
if any, and (b) pay in full all of the other Obligations owing to such Holder,
which amount shall be calculated on the date of prepayment and be payable in
cash on such date. Any offer made by the Borrowers pursuant to this Section
2.7(a) shall be irrevocable so long as the Change of Control occurs.
(b) On the date of prepayment, the Borrowers shall pay to
the holders of the Debentures being prepaid pursuant to this Section, the price
specified above, by wire transfer of immediately available funds to an account
designated by such Holder. Concurrently therewith, each Holder of Debentures
being prepaid shall deliver to the Company the original copy of its Debenture or
an affidavit of loss thereof in a form that is reasonably satisfactory to the
Company.
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SECTION 2.8 Payments.
(a) The Borrowers shall make each payment (including
principal of or interest on the Debentures or other amounts) hereunder and under
any other Investment Document not later than 2:00 P.M., Washington, D.C. time,
on the date when due in immediately available dollars, without setoff, defense
or counterclaim. Each such payment shall be made to each Holder pursuant to
written instructions from such Holder to the Borrower, including pursuant to
wire transfer instructions.
(b) Whenever any payment (including principal of or interest
or PIK Amount on the Debenture or other amounts) hereunder or under any other
Loan Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest.
SECTION 2.9 Taxes.
(a) Any and all payments by or on behalf of the Borrowers
hereunder and under any Investment Document shall be made, in accordance with
Section 2.8, free and clear of and without deduction for any and all current or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding (i) income taxes imposed on the net
income of a Holder and (ii) franchise taxes imposed on the net income of a
Holder, in each case by the jurisdiction under the laws of which such Holder is
organized or qualified to do business or a jurisdiction or any political
subdivision thereof in which the Holder engages in business activity other than
activity arising solely from the Holder having executed this Agreement and
having enjoyed its rights and performed its obligations under this Agreement or
any Investment Document or any political subdivision thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities, collectively or individually, being called "Taxes"). If a Borrower
must deduct any Taxes from or in respect of any sum payable hereunder or under
any other Investment Document to a Holder, (i) the sum payable shall be
increased by the amount (an "additional amount") necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.9) such Holder shall receive an amount equal to the
sum it would have received had no such deductions been made, (ii) such Borrower
shall make such deductions and (iii) such Borrower shall pay the full amount
deducted to the Governmental Authority in accordance with applicable law.
(b) In addition, the Borrowers will pay to the relevant
Governmental Authority in accordance with applicable law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or under any
Investment Document, or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any Investment Document ("Other
Taxes").
(c) Subject to Section 2.9(f) below, the Borrowers jointly
and severally agree to indemnify each Holder for the full amount of Taxes and
Other Taxes paid by such Holder and any liability (including penalties, interest
and expenses (including reasonable attorney's fees and expenses)) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted by the relevant Governmental Authority. A
certificate as to the
16
amount of such payment or liability prepared by such Holder absent manifest
error, shall be final conclusive and binding for all purposes. Such
indemnification shall be made within 30 days after the date such Holder makes
written demand therefor. The Borrowers shall have the right to receive that
portion of any refund of any Taxes and Other Taxes received by a Holder for
which the Borrowers have previously paid any additional amount or indemnified
such Holder and which leaves the Holder, after the Borrowers' receipt thereof,
in no better or worse financial position than if no such Taxes or Other Taxes
had been imposed or additional amounts or indemnification paid to the Holder.
The Holder shall have sole discretion as to whether (and shall in no event be
obligated) to make any such claim for any refund of any Taxes or Other Taxes.
(d) As soon as practicable (and in any event within 60 days)
after the date of any payment of Taxes or Other Taxes by a Borrower to the
relevant Governmental Authority, such Borrower will deliver to each Holder, the
original or a certified copy of a receipt issued by such Governmental Authority
evidencing payment thereof.
(e) Any transferee of the Holders, with respect to the
investment, if organized under the laws of a jurisdiction other than the United
States, any State thereof or the District of Columbia (a "Non-U.S. Lender")
shall deliver, to the extent legally able to do so, to the Company two copies of
either United States Internal Revenue Service Form W-8BEN or Form W-8ECI or
other applicable form, or, in the case of a Non-U.S. Lender claiming any other
exemption from U.S. Federal withholding tax, a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a
Form W-8, a certificate representing that such Non-U.S. Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10% shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) of a Borrower and is not a
controlled foreign corporation receiving interest from a related person (within
the meaning of Section 864(d)(4) of the Code)), properly completed and duly
executed by such Non-U.S. Lender claiming exemption from U.S. Federal
withholding tax on payments by the Borrowers under this Agreement and the
Investment Documents. Such forms shall be delivered by each Non-U.S. Lender on
or before the date it becomes a party to this Agreement and on or before the
date, if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding the foregoing, no Non-U.S. Lender shall be required to deliver
any form pursuant to this paragraph (e) that such Non-U.S. Lender is not legally
able to deliver.
(f) The Borrowers shall not be required to indemnify any
Non-U.S. Lender or to pay any additional amounts to any Non-U.S. Lender, in
respect of United States Federal withholding tax pursuant to paragraph (a) or
(c) above to the extent that (i) the obligation to withhold amounts with respect
to United States Federal withholding tax existed on the date such Non-U.S.
Lender became a party to this Agreement or, with respect to payments to a New
Lending Office, the date such Non-U.S. Lender designated such New Lending Office
with respect to the Debentures; provided, however, that this paragraph (f) shall
not apply to (x) any Non-U.S. Lender as a result of an assignment,
participation, transfer or designation made at the request of a Borrower and (y)
to the extent the indemnity payment or additional amounts any Holder would be
entitled to receive (without regard to this paragraph (f)) do not exceed the
indemnity payment or additional amounts that the Person making the assignment,
participation
17
or transfer to such Holder would have been entitled to receive in the absence of
such assignment, participation, transfer or designation, or (ii) the obligation
to pay such additional amounts would not have arisen but for a failure by such
Non-U.S. Lender to comply with the provisions of paragraph (e) above or (iii)
such Non-U.S. Lender is treated as a "conduit entity" within the meaning of U.S.
Treasury Regulations Section 1.881-3 or any successor provision.
(g) Nothing contained in this Section 2.9 shall require a
Holder to make available any of its tax returns (or any other information that
it reasonably deems to be confidential or proprietary).
SECTION 2.10 Use of Proceeds. The proceeds of the Additional Investment
shall be used to repay the Warburg Note, and the remainder available shall be
used to pay certain transaction expenses and/or for working capital purposes for
the Company and its Subsidiaries or for general corporate purposes, including
Permitted Acquisitions.
ARTICLE III.
CONDITIONS
SECTION 3.1 Conditions to Closing. The obligations of Allied to enter
into this Agreement and to perform its obligations hereunder is subject to the
satisfaction of the following conditions on or prior to the Closing Date:
(a) The representations and warranties set forth in Article
IV hereof shall be true and correct on and as of the Closing Date.
(b) The Credit Parties shall be in compliance with all the
terms and provisions set forth herein and in each other Investment Document on
its part to be observed or performed, and at the time of and immediately after
the Closing, no Event of Default or Default shall have occurred and be
continuing.
(c) Allied shall have received the following items:
(i) a favorable written opinion of counsel to the
Credit Parties (A) dated the Closing Date, (B) addressed to Allied and
(C) covering such matters relating to the Investment Documents and the
Transactions as Allied shall reasonably request, and the Credit Parties
hereby request such counsel to deliver such opinion;
(ii) the Debentures, duly executed by the Borrowers
and each of the other Investment Documents, executed by each of the
parties thereto (other than Allied);
(iii) for each Credit Party (A) a copy of the
certificate or articles of incorporation, including all amendments
thereto, of the Credit Party, certified as of a recent date by the
Secretary of State of the state of its organization, and a certificate
as to the good standing of the Credit Party as of a recent date, from
such Secretary of State; (B) a certificate of the Secretary or Assistant
Secretary of the Credit Party dated the Closing Date and certifying (1)
that attached thereto is a true and complete copy of the by-laws of such
Credit Party as in effect on the Closing Date and at all times since a
date prior to the date of the resolutions described in clause (2) below,
(2) that attached thereto is a true and
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complete copy of resolutions duly adopted by the Board of Directors of
the Credit Party authorizing the execution, delivery and performance of
this Agreement and each other Investment Document to which such Person
is a party and that such resolutions have not been modified, rescinded
or amended and are in full force and effect, (3) that the certificate or
articles of incorporation of the Credit Party have not been amended
since the date of the last amendment thereto shown on the certificate of
good standing furnished pursuant to clause (A) above, and (4) as to the
incumbency and specimen signature of each officer executing this
Agreement or any other document delivered in connection herewith on
behalf of the Credit Party; and (C) a certificate of another officer as
to the incumbency and specimen signature of the Secretary or Assistant
Secretary executing the certificate pursuant to (B) above; and
(iv) all amounts due and payable on or prior to the
Closing Date, including, to the extent invoiced, reimbursement or
payment of all out-of-pocket expenses required to be reimbursed or paid
by the Borrowers hereunder.
(d) After giving effect to the transactions contemplated
hereby, the Borrowers and their respective Subsidiaries shall not have
outstanding any Indebtedness other than (A) the Senior Debt, (B) the extension
of credit under this Agreement and the Initial Investment Agreement, (C) the
Indebtedness set forth in the Financials and (D) the Indebtedness listed on
Schedule 4.7.
(e) Allied shall have received such other documents,
instruments and information as Allied may reasonably request.
SECTION 3.2 Closing Deliveries by Allied. On the Closing Date, Allied
shall (a) waive the requirement for mandatory prepayment due to a Change of
Control pursuant to the Merger Agreement and (b) deliver the Warburg Note for
cancellation by the Company against prepayment of the Warburg Note in the
aggregate amount of $8,500,000 plus all accrued and unpaid interest.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
In order to induce Allied to make the Additional Investment, each of the
Borrowers jointly and severally represents and warrants to Allied on the Closing
Date (which representations and warranties shall survive the execution and
delivery of this Agreement) that, except as set forth on the disclosure
schedules attached hereto, after giving effect to the Additional Investment:
SECTION 4.1 Organization; Powers. Each of the Credit Parties (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, (b) has all requisite corporate power
and authority to own its property and assets and to carry on its business as now
conducted and as proposed to be conducted, (c) is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required, except where the failure so to qualify would not reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect, and (d) has the corporate power and authority
19
to execute, deliver and perform its obligations under this Agreement and each
other agreement or instrument contemplated hereby, and to borrow hereunder.
SECTION 4.2 Authorization. The execution, delivery and performance by
each of the Credit Parties of each of the Investment Documents to which each of
the Credit Parties is or is to become a party and the obligations hereunder and
thereunder (collectively, the "Transactions") (a) have been duly authorized by
all necessary corporate action on the part of such Credit Party and (b) will not
(i) violate (A) (x) any provision of law, statute, rule or regulation, or (y)
the certificate or articles of incorporation or other constitutive documents or
by-laws of such Credit Party, (B) any order of any Governmental Authority
applicable to or binding upon such Credit Party or (C) any provision of any
material indenture, agreement or other instrument to which such Credit Party is
a party or by which such Person or any of such Person's Property is or may be
bound (including, without limitation, the Senior Credit Facility), (ii) result
in a breach of or constitute (alone or with notice or lapse of time or both) a
default under or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under any such indenture,
agreement or other instrument or (iii) result in the creation or imposition of
any Lien upon or with respect to any Property now owned or hereafter acquired by
such Credit Party.
SECTION 4.3 Enforceability. This Agreement has been duly executed and
delivered by the Borrowers and constitutes, and each other Investment Document
constitutes, a legal, valid and binding obligation of such Person enforceable
against such Person in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws relating to or affecting creditors' rights generally from
time to time in effect and to general principles of equity (including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing), regardless or whether considered in a proceeding in equity or at law
and the availability of the remedy of specific performance.
SECTION 4.4 Governmental Approvals. Except as specifically disclosed on
Schedule 4.4, each of the Credit Parties has all material governmental
authorizations, approvals, consents, permits, licenses, certifications and
qualifications, and has complied in all material respects with all applicable
requirements of the United States, and other jurisdictions where such Person
conducts business or owns property, to conduct its business as is presently
conducted and to own and operate its facilities as they are presently operated.
Except as identified on Schedule 4.4, no action, consent or approval or
registration or filing with or any other action by any Governmental Authority is
required in connection with the Transactions, except for such as have been made
or obtained and are in full force and effect.
SECTION 4.5 Borrowers' Business; Subsidiaries. The Company and each of
its Subsidiaries is as of the Closing exclusively engaged in the operation of
the Borrowers' Business. Schedule 4.5 sets forth as of the Closing Date a list
of all Subsidiaries of each Credit Party and the percentage ownership interest
of the Credit Party therein, as well as a list of all joint ventures and
partnerships of each Credit Party or any of its Subsidiaries with any other
Person. The shares of capital stock or other ownership interests so indicated on
Schedule 4.5 are fully paid and non-assessable and are owned by such Credit
Party or its Subsidiary free and clear of all Liens.
20
SECTION 4.6 Financial Condition.
(a) The Company has previously provided to Allied a true and
complete copy of the audited Consolidated and consolidating balance sheet of the
Company and its Subsidiaries as at December 31, 1998, December 31, 1999 and
December 31, 2000, and the related Consolidated and consolidating statements of
income and cash flow of the Company and its Subsidiaries for the fiscal year
then ended (the "Audited Financials"). The Audited Financials were prepared in
accordance with GAAP, are true and correct in all material respects and fairly
present the Company's and each of its Subsidiaries' operations and their cash
flows at such date and for the period then ended. The auditors have issued an
unqualified statement to the Company concerning the Audited Financials, a copy
of which is included with the Audited Financials.
(b) The Company has previously provided to Allied a true and
complete copy of the preliminary unaudited Consolidated and consolidating
balance sheet of the Company and its Subsidiaries as at August 31, 2001 and the
related preliminary unaudited Consolidated and consolidating statements of
income and Consolidated cash flow of the Company and its Subsidiaries for the 8
month period then ended (the "Interim Financials"). The Interim Financials were
prepared in accordance with GAAP (except that footnotes are omitted), are true
and correct in all material respects and fairly present the Company's and each
of its Subsidiaries' operations and their cash flows at such date and for the
period then ended, subject to normal and immaterial year-end adjustments.
(c) Attached to Schedule 4.6(c) are the pro forma
Consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of each of fiscal years 2001 through 2003, giving
effect to the incurrence of the full amount of Indebtedness contemplated under
this Agreement and the use of the proceeds thereof, and the related Consolidated
statements of projected cash flow, projected retained earnings and projected
income for such fiscal year (the "Projected Statements"). The Projected
Statements are based on estimates, information and assumptions believed by the
Credit Parties to be reasonable and the Credit Parties have no reason to
believe, in the light of conditions existing at the time of delivery, that such
projections are incorrect or misleading in any material respect.
SECTION 4.7 Indebtedness. Set forth in the Financials or listed on
Schedule 4.7 attached hereto is a complete and accurate list of all Indebtedness
of each of the Credit Parties as of the Closing Date. No Credit Party is in
default or alleged to be in default in any material respect with respect to any
of its Indebtedness listed in the Audited Financials or the Interim Financials.
SECTION 4.8 Insurance. The Company has made available to Allied
insurance certificates for all of the insurance maintained by the Company or any
of its Subsidiaries as listed on Schedule 4.8. The Company and its Subsidiaries
have insurance in such amounts and covering such risks and liabilities as may be
reasonable and prudent and as may otherwise be reasonably required by Allied.
Such insurance is in full force and effect and all premiums have been duly paid.
SECTION 4.9 Ownership and Control. Attached hereto as Schedule 4.9 is an
accurate and complete list of the following information: (a) the authorized
capitalization of each of the
21
Credit Parties as of the Closing Date; (b) the number of shares of each class of
the issued capital stock of each of the Credit Parties and the number of
outstanding shares thereof as of the Closing Date; (c) the name of each class of
all convertible securities, options, warrants and similar rights held with
respect to the capital stock of each of the Credit Parties, the number and class
of shares covered thereby and the exercise or conversion price thereof; (d) the
percentage of the outstanding shares of capital stock held by each of the Credit
Parties, and (e) all joint ventures and partnerships of each of the Credit
Parties with any other Person. All shares of capital stock of each of the Credit
Parties and all convertible securities, options, warrants and similar rights
held with respect to the Capital Stock of each of the Credit Parties have been
duly authorized, and are validly issued, are fully paid and nonassessable (in
the case of capital stock), and are owned of record as set forth on Schedule 4.9
attached hereto, free and clear of all Liens (other than Permitted Liens
permitted by Section 7.2). Except as listed in Schedule 4.9 attached hereto,
there are no outstanding options, warrants, convertible securities or other
stock purchase rights issued by each of the Credit Parties as of the Closing
Date, and there are no sale agreements, pledges, proxies, voting trusts, powers
of attorney or other agreements or instruments binding upon the shareholders of
each of the Credit Parties with respect to beneficial and record ownership of,
or voting rights with respect to, the capital stock of each of the Credit
Parties as of the Closing Date.
SECTION 4.10 No Material Adverse Change. Since the ending date of the
Interim Financials, other than as disclosed in Schedule 4.10 hereto, as of the
Closing Date there has occurred no Material Adverse Change.
SECTION 4.11 Title to Properties; Possession Under Leases.
(a) Each of the Credit Parties has good and marketable title
to, or valid leasehold interests in, all its material properties and assets free
and clear of Liens, other than Permitted Liens permitted by Section 7.2.
(b) All leases of Real Property and other material leases to
which any of the Credit Parties is a party or by which any of the Credit
Parties, or any of its assets is bound, together with all amendments or
supplements thereto (collectively, the "Leases") are as of the Closing Date
valid, binding and enforceable in accordance with their terms and remain in full
force and effect, except to the extent such failure to do so is not reasonably
likely to have a Material Adverse Effect. True and complete copies of each of
the Leases have been made available to the Lender prior to the Closing Date. No
Credit Party is in default or alleged to be in default in any material respect
with respect to any of its obligations under any of the Leases (nor would be in
default or alleged to be in default with the giving of notice, passage of time,
or both), and, to the knowledge of the Borrowers, no party other than the Credit
Parties is in material default with respect to such party's obligations under
any of the Leases (or would be in default or alleged to be in default with the
giving of notice, passage of time, or both). Each of the Credit Parties'
possession of any property leased by it has not been disturbed, nor has any
claim been asserted against such Credit Party that is or could be adverse to
such Credit Party's interests under any of the Leases. None of the Leases is
subject to any material rights of set-off, recoupment or similar deduction or
offset. No Credit Party has assigned or encumbered any of its rights, title or
interest in or under any of the Leases nor agreed to any oral modifications of
any of the provisions of any of the Leases.
22
SECTION 4.12 Litigation; Compliance with Laws.
(a) Except as set forth on Schedule 4.12 (the "Litigation
Schedule"), there are no actions, suits or proceedings at law or in equity or by
or before any Governmental Authority now pending or, to the best of knowledge of
the Borrowers, threatened against or affecting the Company or any of its
Subsidiaries or any business, Property or rights of the Company or any of its
Subsidiaries (i) that involve any Investment Document or the Transactions or
(ii) as to which there is a reasonable possibility of an adverse determination.
(b) Neither the Company nor any of its Subsidiaries nor any
of their respective material properties or assets is in violation of nor will
the continued operation of its material properties and assets as currently
conducted violate, any law, rule or regulation, or is in default with respect to
any material judgment, writ, injunction, decree or order of any Governmental
Authority, except with respect to Environmental Laws and other environmental
matters, which are addressed in Section 4.20 of this Agreement.
(c) Except for matters set out in the Litigation Schedule,
neither the Company nor any of its Subsidiaries is in breach of, default under,
or in violation of: (a) any Applicable Law, decree, or order of any Governmental
Authority, which breach, default or violation would reasonably be expected to
result in a Material Adverse Effect; or (b) any deed, lease, loan agreement,
commitment, bond, note, deed of trust, restrictive covenant, license, indenture,
contract, or other agreement, instrument or obligation to which it is a party or
by which it is bound or to which its assets are subject, which breach, default
or violation would reasonably be expected to result in a Material Adverse
Effect, except with respect to Environmental Laws and other environmental
matters, which are addressed in Section 4.20 of this Agreement.
SECTION 4.13 Contracts, Etc. All material contracts (including all those
representing 10% or more of the Company's Consolidated total revenue, profit or
volume) to which any of the Credit Parties is a party or by which any of the
Credit Parties or any of its assets is bound (collectively, the "Contracts") are
as of the Closing Date valid, binding and enforceable in accordance with their
terms and remain in full force and effect. True and complete copies of each of
the Contracts have been made available to Allied prior to the Closing Date. No
Credit Party is in default or, to the best knowledge of the Borrowers, alleged
to be in default in any material respect with respect to any of its obligations
under any of the Contracts (nor would be in default or alleged to be in default
with the giving of notice, passage of time, or both), and, to the best knowledge
of the Borrowers, no party other than Credit Parties is in default with respect
to such party's obligations under any of the Contracts (or would be in default
or alleged to be in default with the giving of notice, passage of time, or
both). No claim has been asserted against any of the Credit Parties that is or
could be materially adverse to its interests under any of the Contracts. None of
the Contracts is subject to any material rights of set-off, recoupment or
similar deduction or offset. No Credit Party has assigned or encumbered any of
its rights, title or interest in or under any of the Contracts nor agreed to any
oral modifications of any of the material provisions of any of the Contracts.
SECTION 4.14 No Side Agreements; Affiliate Transactions. There exists no
agreement or understanding calling for any payment or consideration from a
customer or supplier of the Company or any of its Subsidiaries to an officer,
director, shareholder or manager of any Credit Party with respect to any
transaction between any Credit Party or any of its Subsidiaries and a
23
supplier or customer. Except as set forth in Schedule 4.14, neither the Company
nor any of its Subsidiaries is a party to or bound by any agreement and
arrangement (whether oral or written) to which any Affiliate of the Company or
any such Subsidiary is a party except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than it could obtain in a comparable
arm's-length transaction with an unaffiliated Person.
SECTION 4.15 Investment Company Act; Public Utility Holding Company Act.
Neither the Company nor any of its Subsidiaries is (a) an "investment company"
as defined in, or subject to regulation under, the Investment Company Act of
1940, as amended or (b) a "holding company" as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935, as amended.
SECTION 4.16 Use of Proceeds. The Borrowers will use the proceeds of the
investment only for the purposes specified in Article II.
SECTION 4.17 Tax Returns. The Company and each of its Subsidiaries has
filed or caused to be filed all Federal, state, and local tax returns which are
required to have been filed by it or has filed extensions therefor except where
the failure to do so is not reasonably expected to result in a Material Adverse
Effect and has paid or caused to be paid all taxes as and when due and payable
by it and all assessments received by it, except taxes that are being contested
in good faith by appropriate proceedings and for which the Company and each of
its Subsidiaries shall have set aside on its books adequate reserves.
SECTION 4.18 No Untrue Statements or Material Omissions. None of the
statements contained in any report, financial statement, exhibit or schedule
furnished by or on behalf of the Borrowers to Allied in connection with the
negotiation of any Investment Document or included therein or delivered pursuant
thereto, contained or contains any untrue statement of material fact or omits
any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading as of the time when made or delivered.
SECTION 4.19 Employee Benefit Matters. Except as set forth on Schedule
4.19, there is no existing single-employer plan defined in Section 4001(a) of
ERISA as to which the Company or any of its Subsidiaries is, or immediately
after the Closing Date will be, an "employer" or a "substantial employer" as
defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively. The Company has
made available to Allied true and complete copies of each of the plans listed on
Schedule 4.19 attached hereto. There have been no "reportable events" as set
forth in Section 4043(c) of ERISA for which the 30-day notice under Section
4043(a) of ERISA has not been waived by the PBGC with respect to any such plan
or termination of any such plan which could result in any tax, penalty or
liability being imposed upon the Company or any of its Subsidiaries that would
reasonably be expected to result in a Material Adverse Effect. Except as
otherwise described on Schedule 4.19 hereto, to the best knowledge of the
Borrowers, neither the Company nor any of its Subsidiaries has participated in,
and the execution and delivery of this Agreement by the Company or any of its
Subsidiaries will not involve, any "prohibited transaction" (as defined in
Section 4975 of the Internal Revenue Code of 1986, as amended) that could
subject the Company or any of its Subsidiaries to any tax or penalty imposed by
Section 4975 of the Internal Revenue Code of 1986, as amended that would
reasonably be expected to result in a Material Adverse Effect. To the best
knowledge of the Borrowers, no predecessor-in-
24
interest to the Company or any of its Subsidiaries has participated in any
"prohibited transaction" (as defined in Section 4975 of the Internal Revenue
Code of 1986, as amended) that could subject the Company or any of its
Subsidiaries to any tax or penalty imposed by Section 4975 of the Internal
Revenue Code of 1986, as amended that would reasonably be expected to result in
a Material Adverse Effect. Neither Company nor any of its Subsidiaries nor, to
the best knowledge of the Borrowers, any predecessor-in-interest to the Company
or any of its Subsidiaries, has incurred any "accumulated funding deficiency",
as such term is defined in Section 302 of ERISA, to which the Company or any of
its Subsidiaries could be subject or for which it might be liable that would
reasonably be expected to result in a Material Adverse Effect. Except as
otherwise set forth on Schedule 4.19, neither Company nor any of its
Subsidiaries is, and immediately after the Closing will not be, a party to, and
none of the operations of the Company or any of its Subsidiaries is, or after
the Closing will be, covered by, a "multi employer plan", as defined in Section
3(37) of ERISA.
SECTION 4.20 Environmental Matters.
(a) Except as set forth on Schedule 4.20(a), the Company and
its Subsidiaries are in material compliance with all applicable Environmental
Laws, and all material Environmental Permits necessary for the existing
operations of the Companies and its Subsidiaries have been obtained and are in
effect.
(b) Except as set forth on Schedule 4.20(b)(1) and to the
knowledge of the Borrowers, there have been no Releases or threatened Releases
at the properties currently owned or operated by the Company or its Subsidiaries
as set forth in Schedule 4.20(b)(2) (the "Properties") or otherwise in
connection with existing operations of the Company or its Subsidiaries that are
in violation of or are reasonably likely to lead to any liability arising under
any Environmental Law, except for any such violations or liability that would
not have a Material Adverse Effect.
(c) Except as set forth on Schedule 4.20(c), neither the
Company nor any of its Subsidiaries has received any written notice of an
Environmental Claim in connection with the Properties or the existing operations
of the Company or any of its Subsidiaries or with regard to any Person whose
liabilities for environmental matters the Company or any of its Subsidiaries has
retained or assumed, in whole or in part, contractually, by operation of law or
otherwise, except in all such cases that would not have a Material Adverse
Effect.
(d) Except as set forth on Schedule 4.20(d) and to the
knowledge of the Borrowers, Hazardous Materials have not been transported from
the Properties, nor have Hazardous Materials been generated, treated, stored or
disposed of at, on or under any Properties in a manner that is reasonably likely
to give rise to any liability under any Environmental Law, except for any such
liability that would not have a Material Adverse Effect.
SECTION 4.21 Labor Matters. As of the Closing Date, there are no
strikes, lockouts or slowdowns against any Credit Party pending or, to the
actual knowledge of the Credit Parties, threatened. The hours worked by and
payments made to employees of any of the Credit Parties have not been in
violation of the Fair Labor Standards Act or any other applicable federal,
state, local or foreign law dealing with such matters. The consummation of the
Transactions has not
25
and will not give rise to any right of termination or right of renegotiation on
the part of any union under any collective bargaining agreement to which any of
the Credit Parties is bound.
SECTION 4.22 Public Disclosure. The Company has filed all reports or
information in compliance with the Securities Exchange Act of 1934 and none of
such reports or information filed by the Company during the 18 months preceding
the Closing Date (upon which Allied is entitled to rely in making the investment
pursuant to this Investment Agreement) contains any untrue statement of material
fact or omits to state a material fact necessary to make the statements therein
not misleading
SECTION 4.23 Solvency. Immediately after the Closing and after giving
effect to the application of the proceeds of the investment, each of the
Borrowers will be Solvent, able to pay its debts as they mature, have sufficient
capital to carry out its business and all businesses in which they are about to
engage and (i) as of the Closing Date, the fair present saleable value of their
assets, calculated on a going concern basis, is in excess of the amount of their
liabilities and (ii) subsequent to the Closing Date, the fair saleable value of
their assets (calculated on a going concern basis) will be in excess of the
amount of their liabilities.
SECTION 4.24 Licenses. The Company and each of its Subsidiaries (other
than Excluded Subsidiaries) have good title to all of the Licenses necessary to
operate the Borrowers' Business, except to the extent such failure to do so is
not reasonably likely to have a Material Adverse Effect.
SECTION 4.25 Brokers. Neither the Borrowers nor any of their
Subsidiaries has engaged the services of a broker in connection with the
Transactions.
SECTION 4.26 Intellectual Property. As of the Closing Date, the Company
and each of its Subsidiaries (other than Excluded Subsidiaries) owns or will own
or has rights to use all Intellectual Property necessary to continue to conduct
its business as now or heretofore conducted by it or proposed to be conducted by
it, and each patent, material trademark and material copyright and License owned
by the Company or any of such Subsidiaries is listed, together with application
or registration numbers, as applicable in Schedule 4.26. The Company and each of
its Subsidiaries (other than Excluded Subsidiaries) conducts its business and
affairs without infringement of or interference with any Intellectual Property
of any other Person and no Credit Parties has knowledge that another Person is
infringing or interfering with any Intellectual Property of the Company or such
Subsidiaries.
ARTICLE V.
INVESTOR REPRESENTATIONS
Allied represents and warrants to the Borrowers as follows:
SECTION 5.1 Investment. Allied is acquiring the Debentures for its own
account for investment and not with a view to, or for sale in connection with,
any distribution thereof, nor with any present intention of distributing or
selling the same; and Allied has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for
the disposition thereof.
26
SECTION 5.2 Authority. Allied has full power and authority to enter into
and to perform this Agreement in accordance with its terms. Allied represents
that it has not been organized, reorganized or recapitalized specifically for
the purpose of investing in the Debentures.
SECTION 5.3 Experience. Allied has carefully reviewed the
representations concerning the Borrowers contained in this Agreement and has
made detailed inquiry concerning the Borrowers, their business and their
personnel; the officers of the Borrowers have made available to Allied any and
all written information that Allied has requested and has answered to Allied's
satisfaction all inquiries made by Allied.
SECTION 5.4 Accredited Investor. Allied is an "Accredited Investor"
within the definition set forth in Rule 501(a) of the Securities Act.
ARTICLE VI.
AFFIRMATIVE COVENANTS
Until the Debentures and all expenses or other amounts payable under the
Loan Documents are repaid in full, unless the Holders shall otherwise consent in
writing, the Credit Parties jointly and severally covenant and agree with the
Holders to do all of the following:
SECTION 6.1 Existence; Businesses and Properties.
(a) Each of the Credit Parties will do or cause to be done
all things necessary to preserve and maintain its and its Subsidiaries' (other
than the Excluded Subsidiaries) legal existence prior to any sale of such
Subsidiaries otherwise permitted hereby.
(b) Each of the Credit Parties will, and will cause each of
its Subsidiaries (other than the Excluded Subsidiaries) to, do or cause to be
done all things necessary to obtain, preserve, renew, extend and keep in full
force and effect the rights, licenses, permits, franchises, authorizations,
patents, copyrights, trademarks and trade names material to the conduct of its
and such Subsidiaries' business; comply in all material respects with all
applicable laws, rules, regulations and decrees and orders of any Governmental
Authority, whether now in effect or hereafter enacted; and at all times maintain
and preserve all Property material to the conduct of such business and keep such
Property in good repair, working order and condition (ordinary wear and tear
excepted) and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times.
SECTION 6.2 Insurance. Each of the Credit Parties will keep its and each
of its Subsidiaries' insurable properties adequately insured at all times by
financially sound and reputable insurers; maintain such other insurance to such
extent and against such risks as is reasonable and prudent and as may otherwise
be reasonably required by the Holders, including commercial general liability
insurance against claims for personal injury or death or property damage
occurring upon, in, about or in connection with the use of any properties owned,
occupied or controlled by it; and maintain such other insurance as may be
required by law, in each case naming the Holders as a lienholder/mortgagee to
the extent of their interests, if any.
27
SECTION 6.3 Obligations and Taxes. Each of the Credit Parties will pay,
and cause its Subsidiaries to pay, its material Indebtedness (exclusive of the
Senior Debt) and other material obligations (exclusive of the Senior Debt)
promptly and in accordance with their terms and to pay and discharge promptly
when due all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits or in respect of its property, before the same
shall become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise that, if unpaid, might give rise to a Lien
upon such properties or any part thereof, provided, however, that such payment
and discharge shall not be required with respect to any such tax, assessment
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and any Credit Party and its
Subsidiaries, as applicable, shall have set aside on its books adequate reserves
with respect thereto in accordance with GAAP and such contest operates to
suspend collection of the contested obligation, tax, assessment or charge and
enforcement of a Lien.
SECTION 6.4 Financial Statements, Reports, etc. The Borrowers will
furnish to the Holders:
(a) within 90 days after the end of each fiscal year, the
Consolidated and consolidating balance sheets and related statements of
operations, stockholders' equity and cash flows, showing the financial condition
of the Company and its Subsidiaries, as of the close of such fiscal year and the
results of its operations during such year, such Consolidated statements to be
audited by an independent public accountant of recognized national or regional
standing acceptable to the Board of Directors, and accompanied by an opinion of
such accountant (which shall not be qualified in any material respect) that such
financial statements fairly present the financial condition and results of
operations of the Company and its Subsidiaries on a Consolidated basis in
accordance with GAAP;
(b) within 45 days after the end of each fiscal quarter of
each fiscal year, its quarterly and year-to-date Consolidated and consolidating
balance sheet and related statements of operations, stockholders' equity and
cash flows showing the financial condition of the Company and its Subsidiaries,
as of the close of such fiscal quarter and the results of its operations during
such fiscal quarter and fiscal year-to-date period, setting forth in each case
in comparative form the corresponding figures for the corresponding quarter and
fiscal year-to-date period of the preceding fiscal year and the corresponding
figures for the corresponding quarter and fiscal year-to-date period of the
annual forecast, all certified by its Financial Officer as fairly presenting in
all material respects the financial condition and results of operations of the
Company and its Subsidiaries on a Consolidated basis in accordance with GAAP
(but without footnotes), subject to normal year-end audit adjustments, together
with a quarterly management summary description of operations, together with
detailed calculations evidencing compliance with the financial ratios and
covenants set forth in Section 6.12;
(c) concurrently with any delivery of financial statements
under sub-paragraph (a) or (b) above, a certificate of the accounting firm or
Financial Officer of the Company opining on or certifying such statements (which
certificate, when furnished by an accounting firm, may be limited to accounting
matters and disclaim responsibility for legal interpretations) containing a
detailed calculation of the relevant items used to calculate compliance with the
financial covenants set forth in Section 6.12 and , certifying that no Event of
Default or Default has occurred or, if such an Event of Default or Default has
occurred,
28
specifying the nature and extent thereof and any corrective action taken or
proposed to be taken with respect thereto;
(d) to the extent that any Credit Party is or becomes
subject to such reporting requirements, promptly after the same become publicly
available, copies of all final periodic and other reports, proxy statements and
other materials filed by such Credit Party with the U.S. Securities and Exchange
Commission (the "SEC"), or any Governmental Authority succeeding to any or all
of the functions of said Commission, or with any national securities exchange,
or distributed to its shareholders (exclusive of proprietary information unless
(i) the Person that is the source of the information or report is a public
company and (ii) such Person would then be required to file such proprietary
information with the SEC), as the case may be;
(e) before each fiscal year, a copy of each Borrower's
annual budget (detailed on a monthly basis) for the next succeeding three fiscal
years, in a form consistent with past practices;
(f) promptly after entering into the same, copies of all
shareholders agreements, material employment agreements and other material
agreements of the Company or its Subsidiaries (other than the Excluded
Subsidiaries); and
(g) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of the
Company or any of its Subsidiaries, or compliance with the terms of any
Investment Document, as any Holder may reasonably request.
SECTION 6.5 Litigation and Other Notices. The Borrowers will furnish to
the Holders prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature
and extent thereof and the corrective action (if any) taken or proposed to be
taken with respect thereto;
(b) within 30 days of filing, the filing or commencement of
or any written threat or notice of intention of any Person to file or commence,
any action, suit or proceeding, whether at law or in equity or by or before any
Governmental Authority, against the Company, any of its Subsidiaries or any
Affiliate thereof;
(c) at least 30 days and no more than 60 days prior notice
of any Change of Control;
(d) within 30 days of filing, notice of any material filing
by the Company or any of its Subsidiaries with any Governmental Authority,
including, without limitation, the U.S. Internal Revenue Service, the U.S.
Environmental Protection Agency (and any state equivalent), the U.S.
Occupational Safety & Health Administration and the SEC;
(e) within 10 days of receipt, notice of default on any
material loans or leases to which any Credit Party is a party;
(f) within 10 days of receipt, any notices with respect to
the Junior Trust Preferred Notes, and
29
(g) any development that has resulted in, or would
reasonably be expected to result in, a Material Adverse Effect (including,
without limitation, any enforcement, remedial or other governmental regulatory
or other action instituted, completed or threatened in writing against the
Company or any of its Subsidiaries pursuant to any applicable Environmental Law,
and any claim made by any Person against the Company or any of its Subsidiaries
relating to liability in respect of Hazardous Materials, which in each case
would reasonably be expected to result in a Material Adverse Effect).
SECTION 6.6 Employee Benefits. Each of the Credit Parties will, and will
cause its Subsidiaries to, (a) comply in all material respects with the
applicable provisions of ERISA and the Code and (b) furnish to the Holders as
soon as possible after, and in any event within 10 days after any Responsible
Officer of such Credit Party or Subsidiary thereof or any ERISA Affiliate knows
that any ERISA Event has occurred that alone or together with any other ERISA
Event could reasonably be expected to result in liability of such Credit Party
or Subsidiary thereof, a statement of a Financial Officer of such Credit Party
setting forth details as to such ERISA Event and the action, if any, that such
Credit Party proposes to take with respect thereto.
SECTION 6.7 Maintaining Records; Access to Properties and Inspections.
Each of the Credit Parties will keep, and will cause its Subsidiaries to keep,
proper books of record and account in which full and correct entries in
conformity with GAAP are made of all dealings and transactions in relation to
its business and activities. Each of the Credit Parties will permit any
representatives designated by the Holders to visit and inspect the financial
records and the properties of such Credit Party and its Subsidiaries at
reasonable times during normal business hours and as often as reasonably
requested and to make extracts from and copies of such financial records, and
permit any representatives designated by the Holders to discuss the affairs,
finances and condition of such Credit Party and its Subsidiaries with the
officers thereof and independent accountants therefor. The Holders will provide
prior notice to the Company of any planned discussions with its independent
accountants and will permit an officer of the Company to be present. In
addition, the Company shall permit the Holders to conduct a review of the use of
the proceeds of the Debentures and shall certify in writing to the Holders that
the proceeds of the Debentures were used in accordance with Section 2.10 hereof.
SECTION 6.8 Compliance with Laws. Each of the Credit Parties will
comply, and cause its Subsidiaries to comply with all Federal, state, local and
foreign laws and regulations applicable to them. Without limiting the generality
of the foregoing, each of the Credit Parties will, and will cause its
Subsidiaries to comply, and cause all lessees and other persons occupying their
Properties to comply, in all material respects with all Environmental Laws and
Environmental Permits applicable to its operations and Properties; obtain and
renew all material Environmental Permits necessary for their operations and
Properties; and conduct in all material respects any Remedial Action in
accordance with applicable Environmental Laws; provided, however, that no Credit
Party shall be required to undertake any Remedial Action to the extent that
their obligation to do so is being contested in good faith and by proper
proceedings and appropriate reserves are being maintained with respect to such
circumstances.
SECTION 6.9 Preparation of Environmental Reports. If an Event of Default
caused by reason of a breach of Section 4.20 or Section 6.8 shall have occurred
and be continuing, then the Credit Parties shall, at the request of the Holders,
provide to the Holders within 45 days after such request, at the expense of the
Credit Parties, a Phase I environmental site assessment report
30
for any of the Company's or its Subsidiaries' properties described in such
request, prepared by an environmental consulting firm acceptable to the Holders
(and, if based upon the recommendation of such environmental consulting firm, a
Phase II environmental site assessment report) indicating the presence or
absence of Hazardous Materials and the estimated cost of any compliance, removal
or remedial action in connection with any Hazardous Materials on such
properties; without limiting the generality of the foregoing, if the Holders
determine at any time that a material risk exists that any such report will not
be provided within the time referred to above, the Holders may retain an
environmental consulting firm to prepare such report at the expense of the
Credit Parties, and each of the Credit Parties hereby grants and agrees to cause
any Subsidiary that owns any property described in such request to grant at the
time of such request, to the Holders such firm and any agents or representatives
thereof an irrevocable non-exclusive license, subject to the rights of tenants,
to enter onto their respective properties to undertake such assessment.
SECTION 6.10 Further Assurances. Each of the Credit Parties will
execute, and will cause their Subsidiaries to execute, any and all further
documents, agreements and instruments, and take all further action that may be
required under applicable law, or that the Holders may reasonably request, in
order to effectuate the transactions contemplated by the Investment Documents.
The Credit Parties shall deliver or cause to be delivered to the Holders all
such instruments and documents (including legal opinions) as the Holders may
reasonably request to evidence compliance with this Section.
SECTION 6.11 Maintenance of Office or Agency. Each of the Credit Parties
shall maintain an office or agency (i) where the Debentures may be presented for
payment, or for registration and transfer and for exchange as provided in this
Agreement; and (ii) where notices and demands to or upon such Credit Party in
respect of the Debentures may be served. The location of such office or agency
initially shall be the principal office of such Credit Party as set forth in
Section 9.1 hereof. Each of the Credit Parties shall give the Holders written
notice of any change of location thereof.
SECTION 6.12 Financial Ratios and Covenants. The Credit Parties shall
with respect to each period set forth below have complied or comply with and
maintain each of the following financial ratios and financial covenants, using
the information set forth in the financial statements provided by the Borrowers
in accordance with Section 6.4 above:
(a) Total Indebtedness to Adjusted EBITDA. A ratio of Total
Indebtedness to Adjusted EBITDA as of the last day of each month for the
twelve-month period then ended shall not be more than the following:
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(b) Fixed Charge Coverage. A Fixed Charge Coverage as of the
last day of each month for the twelve-month period then ended shall not be less
than the following:
Notwithstanding the foregoing, the financial covenant in this clause (b)
shall be calculated only quarterly to the extent provided in Section 4.5 of the
Senior Credit Facility in effect on the date hereof.
SECTION 6.13 Observation Rights.
(a) The board of directors of the Company shall hold a
general meeting (which may be held by conference call) or propose adoption of
resolutions by written consent of the board of directors at least quarterly for
the purpose of discussing the business and operations of the Company and its
Subsidiaries. The Company shall notify each of the Holders in writing of the
date and time for each general or special meeting of its board of directors or
any committee thereof or of the adoption of any resolutions by written consent
(describing in reasonable detail the nature and substance of such action) at
least one week prior to any general meeting and at the time notice is provided
to the directors of the Company of any special meeting, and concurrently deliver
to the Holders any materials delivered to directors of the Company, including a
draft of any resolutions proposed to be adopted by written consent. The Holders
shall be free during such one week period to contact the directors of the
Company and discuss the pending actions to be taken.
(b) The Company shall permit one authorized representative
of Allied (and its successors) to attend and participate in all meetings of its
board of directors and any committee thereof, whether in person, by telephone or
otherwise, and shall provide such representative with such notice and other
information with respect to such meetings as are delivered to the directors of
the Company. The Company shall pay such representative's reasonable travel
expenses (including, without limitation, the cost of airfare, meals and lodging)
in connection with the attendance of such meetings.
ARTICLE VII.
NEGATIVE COVENANTS
Until the Debentures and all expenses or other amounts payable under the
Loan Documents are repaid in full, unless the Holders shall otherwise consent in
writing, the Credit Parties jointly and severally covenant and agree not to do
any of the following without the prior written consent of the Holders:
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SECTION 7.1 Indebtedness.
(a) No Credit Party shall, nor will it permit any of its
Subsidiaries (other than Excluded Subsidiaries) to, directly or indirectly
incur, create, assume or permit to exist any Indebtedness other than the
following (together, the "Permitted Indebtedness"):
(i) the Senior Debt;
(ii) Indebtedness existing on the Closing Date and
set forth in the Financials or Schedule 4.6;
(iii) Indebtedness created hereunder and under the
other Investment Documents;
(iv) Indebtedness of any Credit Party or Subsidiary
of a Credit Party (other than any Excluded Subsidiary) to another Credit
Party so long as (i) after such transaction, the Person providing the
Indebtedness will be Solvent and (ii) no Default or Event of Default
then exists or will exist after such transaction;
(v) Indebtedness of any Credit Party or Restricted
Subsidiary to another Restricted Subsidiary so long as (i) after such
transaction, the Person providing the Indebtedness will be Solvent, (ii)
no Default or Event of Default then exists or will exist after such
transaction and (iii) the aggregate outstanding amount of all
Indebtedness incurred under this paragraph (a)(v) at any one time is
less than $1,000,000;
(vi) Indebtedness of the Company or its Subsidiaries
in respect of performance bonds, bid bonds, appeal bonds, surety bonds
and similar obligations, in each case provided in the ordinary course of
business;
(vii) Indebtedness arising from the honoring by a bank
or other financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of business,
provided that such Indebtedness is extinguished within five (5) Business
Days of its incurrence;
(viii) Indebtedness in respect of taxes, assessments,
governmental charges or levies, claims of customs authorities and claims
for labor, worker's compensation, materials and supplies to the extent
that payment therefor shall not at the time be required to be made in
accordance with the provisions of Section 7.2;
(ix) Indebtedness in respect of judgments or awards
that have been in force for less than the applicable period for taking
an appeal so long as execution is not levied thereunder or in respect of
which the Company or the applicable Subsidiary shall at the time in good
faith be prosecuting an appeal or proceedings for review and in respect
of which a stay of execution shall have been obtained pending such
appeal or review;
(x) endorsements for collection, deposit or
negotiation and warranties of products or services, in each case
incurred in the ordinary course of business;
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(xi) any Indebtedness that is expressly subordinate
to the Debentures pursuant to a written subordination agreement in form
and substance acceptable to the Holders;
(xii) any other Indebtedness incurred after December
31, 2000; provided that at the time of incurrence of such Indebtedness
(A) after giving pro forma effect to the incurrence, creation or
assumption of such Indebtedness and the use of the proceeds thereof, the
Total Indebtedness to Adjusted EBITDA Ratio as of the last day of last
full calendar month ending immediately prior to such incurrence shall
not exceed 3.5 to 1.0 as of the last day of each calendar month for the
12 months then ended; (B) the Borrowers shall, prior to such incurrence,
creation or assumption, have provided to the Holders calculations
showing compliance with this clause (xii), (C) the credit documentation
with respect to such Indebtedness shall not contain covenants or default
provisions relating to any Credit Party or any Subsidiary that are more
restrictive than the covenants and default provisions contained in the
Investment Documents, (D) the Credit Parties shall have provided a
certificate of the Financial Officer of the Company certifying that no
Default or Event of Default exists or would exist immediately after
giving effect thereto and (E) for purposes of this clause (xii), any
transaction (including any acquisition of stock, merger or
consolidation) pursuant to which any Person becomes a Subsidiary of a
Credit Party or its Subsidiary shall be deemed an assumption by the
Credit Party or its Subsidiary of any Indebtedness of such Person at
such time outstanding;
(xiii) Capital Lease Obligations and Indebtedness
secured by purchase money Liens up to $7,500,000 in the aggregate
outstanding at any one time;
(xiv) any Guarantee Obligation under any foreign
exchange contract, currency swap agreement, interest rate swap agreement
or other similar agreement or arrangement designed to alter the risks of
that Person arising from fluctuations in currency values or interest
rates, which are entered into solely for hedging purposes and not for
speculative purposes, provided that the Credit Party's maximum exposure
with respect thereto does not at any time exceed the original cost of
the hedging product plus the amount of all cash and Cash Equivalents
initially required to be posted to secure its liabilities with respect
thereto; and
(xv) any other Indebtedness not to exceed $2,000,000
in the aggregate at any time outstanding.
SECTION 7.2 Liens. No Credit Party shall, nor will it permit any of its
Subsidiaries (other than Excluded Subsidiaries) to, create, incur, assume or
permit to exist any Lien on any property or assets (including stock or other
securities of any Person, including any Subsidiary) now owned or hereafter
acquired by it or on any income or revenues or rights in respect of any thereof
except the following (the "Permitted Liens"):
(a) Liens securing the Senior Debt;
(b) Liens on Property of such Borrower or its Subsidiaries
existing on the Closing Date and set forth in Schedule 7.2 and any renewals or
extensions thereof; provided that
34
such Liens shall secure only those obligations that they secure on the Closing
Date and the amount of Indebtedness secured thereby shall not be increased;
(c) Liens for taxes, assessments or governmental charges
(excluding any Lien imposed pursuant to any of the provisions of ERISA) not yet
due or which are being contested in compliance with Section 6.3 but only if the
existence of such Lien being contested would not likely have a Material Adverse
Effect;
(d) Liens of landlords', carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business and securing obligations that are not more than 30
days delinquent or which are being contested in compliance with Section 6.3;
(e) pledges and deposits made in the ordinary course of
business to secure obligations under workers' compensation, unemployment
insurance and other social security laws or regulations or to secure public or
statutory obligations;
(f) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capital Lease
Obligations), liens to secure the performance of statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) zoning restrictions, easements, rights-of-way,
restrictions on use of real property and other similar encumbrances incurred in
the ordinary course of business which, in the aggregate, are not substantial in
amount and do not materially detract from the value of the property subject
thereto or materially adversely interfere with the use of such property for its
present purposes;
(h) Liens arising solely by virtue of any contractual or
statutory or common law provisions relating to banker's liens, rights to set-off
or similar rights and remedies as to deposit accounts or other funds maintained
with a creditor depository institution provided that (i) such deposit account is
not a dedicated cash collateral account and is not subject to restrictions
against access by the Borrower or any Subsidiary in excess of those set forth by
regulations promulgated by the Board of Governors of the Federal Reserve System
and (ii) such deposit account is not intended by the Borrower or such Subsidiary
to provide collateral to the depositary institution;
(i) Capital Lease Obligations and purchase money Liens on
equipment acquired in the ordinary course of the Borrower's Business with
respect to Indebtedness permitted under Section 7.1;
(j) judgment Liens not giving rise to an Event of Default;
(k) any Lien existing on any asset of any Person at the time
such Person becomes a Subsidiary of a Borrower in connection with a Permitted
Acquisition; provided that the Lien (A) shall be less than the fair market value
of the asset secured thereby and (B) shall not have been not created in
contemplation of such event;
35
(l) Liens which secure Indebtedness used to refinance the
Indebtedness secured by Liens described in subsections (b) or (i) above,
provided that such Liens do not encumber any additional assets and that the
amount of the Indebtedness does not exceed the amount being refinanced; and
(m) Liens on cash or Cash Equivalents securing a Guarantee
Obligation permitted under Section 7.1(a)(xiv).
SECTION 7.3 Sale and Lease-Back Transactions. No Credit Party shall, nor
will it permit any of its Subsidiaries (other than Excluded Subsidiaries) to,
enter into any arrangement, directly or indirectly, with any Person whereby it
or any of its Subsidiaries shall sell or transfer any property, real or
personal, used or useful in its or any of its Subsidiaries' business, whether
now owned or thereafter acquired, and thereafter rent or lease such property or
other property that it or any of its Subsidiaries intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
SECTION 7.4. Investments. No Credit Party shall, nor will they permit
any of its Subsidiaries (other than Excluded Subsidiaries) to, make any
Investments except:
(a) Investments existing on the Closing Date;
(b) Cash Equivalents;
(c) Investments in respect of interest rate protection
agreements entered into in the ordinary course of business and not for
speculative purposes;
(d) Investments consisting of extensions of trade credit in
the ordinary course of the Borrowers' Business; and
(e) loans and advances to employees in the ordinary course
of the business of such Borrower and its Subsidiaries (other than the Excluded
Subsidiaries) as presently conducted in the aggregate amount of all such
Investments under this clause (e) not to exceed $250,000 at any one time
outstanding;
(f) Investments in Credit Parties or Subsidiaries of a
Credit Party (other than the Excluded Subsidiaries), provided, however, that any
such Investments in Restricted Subsidiaries shall not exceed an aggregate amount
of $1,000,000 at any one time;
(g) Permitted Acquisitions;
(h) Investments made by any Credit Party in any Excluded
Subsidiary, provided that such Investments are made solely with the proceeds of
new capital contributions made by any Person who is a stockholder of the Company
as of the Closing Date to the Company concurrently therewith; and
(i) other Investments, provided that the aggregate amount
of all such Investments at any time does not exceed $3,000,000, (for purposes of
this clause (j), the amount of any Investment shall be the original cost of such
Investment plus the cost of all additions
36
thereto, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment); and
(j) other investment instruments approved in writing by
Holders.
SECTION 7.5 Mergers, Consolidations, Sales of Assets, Act of
Dissolution. Except in connection with Permitted Acquisitions,
(a) No Credit Party shall, nor will it permit any of its
Subsidiaries (other than Excluded Subsidiaries) to, merge or consolidate or
enter into any analogous reorganization or transaction with any Person or permit
any Subsidiary to do any of the foregoing; provided that any Subsidiary may be
merged with or liquidated into the Company or any Wholly Owned Subsidiary of the
Company (if the Company or such Wholly-Owned Subsidiary is the surviving
corporation).
(b) No Credit Party shall, nor permit any of its
Subsidiaries (other than the Excluded Subsidiaries) to, suffer an Act of
Dissolution (other than the Mexican Liquidation).
(c) No Credit Party shall, nor permit any of its
Subsidiaries (other than the Excluded Subsidiaries) to, change its form of
entity.
(d) No Credit Party shall, nor permit any of its
Subsidiaries (other than the Excluded Subsidiaries) to, consummate any Asset
Disposition without the consent of the Holders.
SECTION 7.6 Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends.
(a) No Credit Party shall, nor permit any of its
Subsidiaries (other than the Excluded Subsidiaries) to, declare or pay any
Restricted Payments (other than a dividend or distribution of any shares of its
common stock) unless the Credit Parties shall, prior to such declaration or
payment, have provided to the Holders calculations showing that the Fixed Charge
Coverage (after giving effect to such Restricted Payment on a pro-forma basis)
determined as of the last day of last full calendar month ending immediately
prior to such payment would not be less than 1.1 to 1.0; provided, however, that
any Subsidiary of a Credit Party may declare and pay a Restricted Payment to
such Credit Party. Notwithstanding anything herein to the contrary, (i) the
Company shall not make any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
class of equity securities of the Company, now or hereafter outstanding;
provided, however, so long as no Default or Event of Default the exists or would
be caused thereby, the Company may repurchase shares of Capital Stock from its
officers, directors and employees upon termination of their employment or other
relationship with the Company to the extent such repurchases do not exceed
$2,000,000 in any calendar year and (ii) subject to the provisions of Section
2.7, the Company may issue or sell Capital Stock to its officers, directors and
employees under option or incentive plans approved by the board of directors of
the Company.
(b) Except as provided in the Senior Credit Facility in
effect on the Closing Date, no Credit Party other than the Company shall, nor
permit any of its Subsidiaries (other than Excluded Subsidiaries) to, directly
or indirectly, create or otherwise cause or suffer to exist or
37
become effective any encumbrance or restriction on the ability of such Credit
Party or any such Subsidiary to (i) pay any dividends or make any other
distributions on its Capital Stock or any other interest or (ii) make or repay
any loans or advances to the Company or the parent of such Subsidiary.
SECTION 7.7 Transactions with Affiliates. Except as otherwise expressly
provided herein, no Credit Party shall, nor permit any of its Subsidiaries
(other than Excluded Subsidiaries) to, sell or transfer any Property to, or
purchase or acquire any Property from, or otherwise engage in any other
transactions with, any of its Affiliates other than another Credit Party, except
that the Credit Parties and their Subsidiaries may engage in the foregoing
transactions with Affiliates on terms that are fair and reasonable and no less
favorable to such Credit Party or such Subsidiary than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate. The Credit
Parties and their Subsidiaries may pay management fees to Allied so long as no
Event of Default under Section 7.1(a) has occurred and is continuing and so long
as the Credit Parties are in compliance with Section 6.12 on a pro forma basis
for the most recently ended month for which financial statements have been
delivered to the Holder hereunder, assuming that the management fee proposed to
be paid had been made on the last day of such month.
SECTION 7.8 Business of Borrowers and Subsidiaries.
(a) No Credit Party shall, nor permit any of its
Subsidiaries to, change its form of entity or engage at any time in any business
or business activity other than those substantially similar or related to the
Borrowers' Business and business activities reasonably incidental thereto.
(b) Except for Investments permitted under Section 7.4(f),
no Credit Party shall, nor permit any of its Subsidiaries to, acquire or create
any new Subsidiary unless such subsequently acquired or organized Subsidiary
joins this Agreement and the Debentures as a Borrower hereunder or the Guaranty
Agreement as a Guarantor thereunder. No Credit Party shall, nor permit any of
its Subsidiaries to, change the location of the operations of the Borrowers'
Business from the states in which they are presently conducted without the
consent of the Holders.
(c) No Credit Party shall, nor permit any of its Affiliates
to, directly or indirectly purchase or otherwise acquire, or offer to purchase
or otherwise acquire, any outstanding Debentures except by way of payment or
prepayment in accordance with the provisions hereof.
(d) Notwithstanding any provision hereof to the contrary,
no Credit Party shall permit a Restricted Subsidiary to, and no Restricted
Subsidiary shall, (i) incur Indebtedness under Section 7.1(a)(xi), (xii) or
(xiii) or (ii) acquire Capital Stock or property or assets of any other Person.
SECTION 7.9 Investment Company Act. No Credit Party shall, nor will it
permit its Subsidiaries to, become an investment company subject to registration
under the Investment Company Act of 1940, as amended.
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SECTION 7.10 Acquisitions. No Credit Party shall, nor permit its
Subsidiaries (other than Excluded Subsidiaries) to, acquire Capital Stock or
property or assets of any other Person unless the Credit Party or Subsidiary
making such acquisition complies with all of the following (each, a "Permitted
Acquisition"):
(a) The Capital Stock or property or assets acquired in such
acquisition relate to a business reasonably related to the business of the
Company or any of its Subsidiaries as of the Closing Date and businesses
reasonably related thereto and similar businesses;
(b) No Event of Default shall exist prior to or will be
caused as a result of such acquisition;
(c) The Credit Parties shall have provided the Holders with
at least 10 Business Days prior written notice of such acquisition, such notice
to include (i) a description of the assets or Capital Stock to be purchased,
(ii) the price and terms of such acquisition, (iii) in reasonable detail,
computations and a consolidated financial statement prepared on a pro forma
basis of the Company and its Subsidiaries immediately prior to and after giving
effect to such acquisition demonstrating compliance with Section 6.12 and
Section 7.1(a)(xii) as of the last day of last full calendar month ending
immediately prior to such acquisition as if such acquisition were effective on
the first day of the relevant period and (iv) such other information with
respect thereto as is reasonably requested by the Holders. For purposes of this
Section 7.10, the pro forma computations shall be with reference to the actual
financial results of the Credit Party or such Subsidiary and the Person being
acquired (which actual financial results must be audited if the aggregate
purchase price for the Person being acquired is greater than $7,500,000), with
only such adjustments as may be approved by the Holders; and
(d) Such acquisition shall consist of (i) at least 51% of
the Capital Stock of a Person or (ii) all of the assets of a Person or any
portion of the assets that constitute a division or operating unit of the
business of a Person, in each case, which the Board of Directors of the Credit
Party deems to be of strategic importance to the Credit Party, provided that, in
the event of subclause (i) above, the Credit Party, as the case may be, also
possesses the power to direct or cause the direction of the management or
policies of such entity and has the right to elect a majority of the members of
the board of directors of such entity.
Notwithstanding any provision to the contrary, the provisions of
paragraphs (a), (c) and (d) above shall be deemed to be satisfied with respect
to any acquisition permitted pursuant to Section 3.15(ii) of the Senior Credit
Facility in effect on the Closing Date.
SECTION 7.11 Employee Compensation. All executive compensation of any
Credit Party shall be approved by the respective board of directors (or other
similar body) of such Credit Party.
SECTION 7.12 Prepayments; Payments of Junior Trust Preferred Notes.
(a) Except for the Senior Debt, the Debentures, the Warburg
Note, Indebtedness owed to a Credit Party from a Subsidiary or as permitted
under paragraph (b) below, neither the Credit Parties nor any of their
Subsidiaries (other than Excluded Subsidiaries)
39
shall prepay any Indebtedness for borrowed money and the Company shall not pay
any amounts due under the Junior Trust Preferred Notes.
(b) The Company may make monthly payments of interest on the
Junior Trust Preferred Notes if and to the extent that the Credit Parties are in
compliance with Section 6.12(a) (after giving effect to such payment on a
pro-forma basis) determined as of the last day of the last full calendar month
ending immediately prior to such payment.
(c) In the event the Company is not permitted pursuant to
paragraph (b) above to make payments on the Junior Trust Preferred Notes, the
Credit Parties shall take all actions necessary to exercise their right to defer
interest due under the Junior Trust Preferred Notes until such payments are
otherwise permitted hereunder.
SECTION 7.13 Accounting Changes. No Credit Party shall, nor permit any
of its Subsidiaries (other than the Excluded Subsidiaries) to, make any
significant change in accounting treatment or reporting practices, except as
required or permitted by GAAP, or change its fiscal year from its current fiscal
year.
SECTION 7.14 Stay, Extension and Usury Laws. To the extent permitted
under applicable law, each of the Credit Parties covenants and agrees that they
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, and will use their best efforts to resist any
attempts to claim or take the benefit of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of their obligations under this Agreement or the
Debentures. To the extent permitted under applicable law, each of the Credit
Parties hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Holders, but will suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 7.15 Limitation on Foreign Operations. No Credit Party shall
permit (i) as of the last day of any fiscal quarter of the Company, the Credit
Parties and their domestic Subsidiaries to own directly assets (other than
Investments) representing less than 75% of the total consolidated assets of the
Company and its Subsidiaries determined on such date or (ii) as of the last day
of any fiscal quarter of the Company, the portion of Net Income of the Company
and its Subsidiaries on a Consolidated basis for the period of four consecutive
fiscal quarters then ended which is attributable to Foreign Subsidiaries of the
Credit Parties to exceed 25% of Net Income of the Company and its Subsidiaries
on a Consolidated basis for such period.
SECTION 7.16 Inconsistent Agreements; Charter Amendments. No Credit
Party shall (i) enter into any agreement or arrangement which would restrict in
any material respect the ability of such Borrower to fulfill its Obligations
under the Investment Documents, or (ii) supplement, amend or otherwise modify
the terms of their articles of incorporation or bylaws or any of the Investment
Documents if the effect thereof would reasonably be expected to have a Material
Adverse Effect.
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ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.1 Events of Default. If any of the following events ("Events
of Default") occur:
(a) any representation or warranty made or deemed made in or
in connection with any Investment Document or any representation, warranty or
certification contained in any report, certificate, financial statement or other
instrument furnished in connection with or pursuant to any Investment Document,
proves to have been materially incorrect when so made, deemed made or furnished;
(b) default is made in the payment of any principal of or
premium on the Debentures when and as the same shall become due and payable,
whether at the due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(c) default is made in the payment of any interest on the
Debentures or any other amount (other than an amount referred to in (b) above)
due under any Investment Document, when and as the same becomes due and payable,
and such default continues unremedied for a period of ten (10) Business Days;
(d) default is made in the due observance or performance by
the Borrowers or any of their Subsidiaries of any covenant, condition or
agreement contained in Section 6.12 or in Article VII;
(e) default is made in the due observance or performance by
the Borrowers or any of their Subsidiaries of any covenant, condition or
agreement contained in any Investment Document (other than those specified in
(b), (c) or (d) above) and such default continues unremedied for a period ending
the earlier of (i) a period of thirty (30) days from the date the Credit Parties
or any of their Subsidiaries knew or should have known of the occurrence of such
default and (ii) a period of thirty (30) days after notice thereof from the
Holders to the Borrowers,
(f) any event occurs that, after notice or the passage of
time, requires the prepayment of all or any portion of the principal amount of
the Junior Trust Preferred Notes;
(g) any default occurs (after giving effect to any
applicable notice and/or grace periods) under the Senior Debt or any other
Indebtedness of the Borrowers or any of their Subsidiaries in excess of $500,000
in aggregate principal amount (including the Senior Credit Facility), pursuant
to which the lenders of such Indebtedness have accelerated the maturity thereof;
(h) an Act of Bankruptcy or Act of Dissolution shall have
occurred with respect to any Borrower or any of its Subsidiaries (other than
Excluded Subsidiaries) which had income (determined in accordance with GAAP) for
the preceding four full calendar quarters in excess of $500,000 (other than the
Mexican Liquidation);
(i) one or more final non-appealable judgments for the
payment of money in excess of $250,000 to the extent not fully paid or
discharged (excluding any portion thereof that
41
is covered by a insurance policy issued by an insurance Company of recognized
standing and creditworthiness) is rendered against the Borrowers or any of their
Subsidiaries, and the same shall remain undischarged for a period of 15
consecutive days during which execution is not effectively stayed, or any action
is legally taken by a judgment creditor to levy upon assets or properties of the
Borrowers or their Subsidiaries to enforce any such judgment;
(j) an ERISA Event occurs that in the opinion of the
Holders, when taken together with all other such ERISA Events, could reasonably
be expected to result in liability of any Borrower or Subsidiary thereof in an
aggregate amount exceeding $500,000;
(k) any execution or attachment shall be issued whereby any
substantial part of the property of the Company or any of its Subsidiaries shall
be taken or attempted to be taken and the same shall not have been vacated or
stayed within 30 days after the issuance thereof; or
(l) any Guarantor shall repudiate or purport to revoke its
guaranty, or any guaranty of the Obligations hereunder for any reason shall
cease to be in full force and effect as to such Guarantor or shall be judicially
declared null and void as to such Guarantor;
then, and in every such event and subject to the terms of the Subordination
Agreement, (other than an Event of Default described in paragraph (h) above) and
at any time thereafter during the continuance of such event, the Holders may by
notice to the Company, take either or both of the following actions, at the same
or different times: (i) declare the principal amount then outstanding under the
Debentures to be forthwith due and payable in whole or in part, whereupon the
principal amount so declared to be due and payable, together with all PIK
Amounts and accrued interest thereon and all other liabilities of the Borrowers
accrued hereunder and under any other Investment Document, shall become
forthwith due and payable, without presentment demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Borrowers,
anything contained herein or in any other Investment Document to the contrary
notwithstanding; and (ii) in any event with respect to an Event of Default
described in paragraph (h) above, the principal of the Debentures then
outstanding, together with all PIK Amounts and accrued interest thereon and all
other liabilities of the Borrowers accrued hereunder and under any other
Investment Document, shall automatically become due and payable, without
presentment demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrowers, anything contained herein or in any
other Investment Document to the contrary notwithstanding.
SECTION 8.2 Waivers. The Borrowers waive presentment, demand, notice of
dishonor, and protest, and all demands and notices of any action taken by the
Holders under this Agreement, except as otherwise provided herein.
SECTION 8.3 Enforcement Actions. Subject to the terms of the
Subordination Agreement, the Holders may, at their option, collect all or any
portion of the Obligations or enforce against the Borrowers any of their
respective rights and remedies with respect to the Obligations including, but
not limited to: (i) commencing or pursuing legal proceedings to collect any
amounts owed with respect to or to otherwise enforce the Obligations; or (ii)
executing upon, or otherwise enforcing, any judgment obtained with respect to
the payment or performance of the Obligations.
42
SECTION 8.4 Costs. Subject to the terms of the Subordination Agreement,
the Borrowers shall pay all reasonable expenses of any nature, whether incurred
in or out of court, and whether incurred before or after the Debentures shall
become due at their maturity date or otherwise (including, but not limited to,
reasonable attorneys' fees and costs) which the Holders may reasonably incur in
connection with the collection or enforcement of any of the Obligations. The
Holders are authorized to pay at any time and from time to time any or all of
such expenses, to add the amount of such payment to the amount of principal
outstanding under the Debentures, and to charge interest thereon at the rate
specified in the Debentures.
SECTION 8.5 Set-off. Subject to the terms of the Subordination
Agreement, upon the occurrence and during the continuance of any Event of
Default, each Holder is hereby authorized at any time and from time to time
without notice to any Borrower (any such notice being expressly waived by such
Borrower) and, to the fullest extent permitted by law, to set off and to apply
any and all balances, credits, deposits (general or special, time or demand,
provisional or final), accounts or moneys at any time held and other
indebtedness at any time owing by such Holder to or for the account of such
Borrower against any and all of the obligations of the Borrowers now or
hereafter existing under this Agreement or any other agreement or instrument
delivered by such Borrower to such Holder in connection therewith, whether or
not such Holder shall have made any demand hereunder or thereunder and although
such obligations may be contingent or unmatured. The rights of the Holders under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which they may have. A Holder shall give
the Borrower notice of any set-off hereunder after such set-off has occurred.
SECTION 8.6 Remedies Non-Exclusive. None of the rights, remedies,
privileges or powers of the Holders expressly provided for herein are exclusive,
but each of them is cumulative with, and in addition to, every other right,
remedy, privilege and power now or hereafter existing in favor of each of the
Holders, whether pursuant to the other Investment Documents, at law or in
equity, by statute or otherwise.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.1 Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrowers, SunSource Inc., 3000 One Logan
Square, Philadelphia, Pennsylvania 19103, Attention: Joseph Corvino (Telecopy
No. 215-282-1309); with a copy to Piper Marbury Rudnick & Wolfe LLP, 1200
Nineteenth Street, N.W., Washington, D.C. 20036, Attention of Anthony H. Rickert
(Telecopy No. 202-223-2085); and
(b) if to Allied, Allied Capital Corporation, at its offices
at 1919 Pennsylvania Avenue, N.W., 3rd Floor, Washington, D.C. 20006, Attn: G.
Cabell Williams, Telecopy No. 202-659-2053; with a copy to Piper Marbury Rudnick
& Wolfe LLP, 1200 Nineteenth Street, N.W., Washington, D.C. 20036, Attention of
Anthony H. Rickert (Telecopy No. 202-223-2085).
43
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given (i) two
business days after being sent by registered or certified mail, return receipt
requested, postage prepaid or (ii) one business day after being sent via a
reputable nationwide overnight courier service guaranteeing next business day
delivery or (iii) on the date on which it is sent by facsimile transmission with
acknowledgement of receipt at the number to which it is required to be sent in
each case to the intended recipient as set forth above.
SECTION 9.2 Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrowers herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Investment Document shall be considered
to have been relied upon by the Holders and shall survive the making by the
Holders of the investment, regardless of any investigation made by the Holders
or on their behalf and shall continue in full force and effect as long as the
principal of or any accrued interest on the Debentures is outstanding and
unpaid. The provisions of Section 9.5 shall remain operative and in full force
and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of the
Debentures, the invalidity or unenforceability of any term or provision of this
Agreement or any other Investment Document, or any investigation made by or on
behalf of the Holders.
SECTION 9.3 Binding Effect. This Agreement shall become effective when
it shall have been executed by the Borrowers and Allied, and when Allied shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
SECTION 9.4 Successors and Assigns.
(a) Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the permitted successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of the Borrowers or the Holders that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
(b) The Borrowers shall not assign or delegate any of their
rights or duties hereunder without the prior written consent of the Holders, and
any attempted assignment or delegation without such consent shall be null and
void. The Holders may assign or delegate any of its rights or duties hereunder
or under the Debentures without limitation.
SECTION 9.5 Expenses; Indemnity.
(a) In connection with this amendment and restatement of the
Initial Investment Agreement, the Borrowers will pay to Allied Capital
Corporation closing points of $50,000 and a structuring fee of $25,000, and will
pay to A.C. Corporation, a $25,0000 administrative fee and all reasonable
out-of-pocket expenses incurred by Allied in connection with the preparation and
administration of this Agreement, or in connection with any amendments,
modifications or waivers of the provisions of the Investment Documents (whether
or not the transactions hereby shall be consummated) incurred by Allied in
connection with the
44
enforcement or protection of its rights in connection with this Agreement and
the other Investment Documents, including any suit, action, claim or other
activity of Allied to collect or otherwise enforce the Obligations or any
portion thereof, or in connection with the Transactions, including, without
limitation, the reasonable fees, charges and disbursements of Piper Marbury
Rudnick & Wolfe LLP, counsel for Allied, and, in connection with any such
enforcement or protection, the reasonable fees, charges and disbursements of any
other counsel for Allied.
(b) The Borrowers, jointly and severally, agree to indemnify
each Holder, and its respective directors, officers, employees and agents (each
such Person being called an "Indemnitee") against, and to hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees, charges and disbursements, incurred
by or asserted against any Indemnitee arising out of or in any way connected
with, or as a result of (i) the execution or delivery of this Agreement or any
other Investment Document or any agreement or instrument contemplated thereby,
the performance by the parties thereto of their respective obligations
thereunder or the consummation of the Transactions and the other transactions
contemplated thereby, (ii) the use of the proceeds of the investment, (iii) any
claim, litigation investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged
presence or Release of Hazardous Materials on any property owned or operated by
the Borrowers, or any Environmental Claim related in any way to any Borrower;
provided that such indemnity shall not as to any Indemnitee be available to the
extent it resulted from the gross negligence or willful misconduct of such
Indemnitee.
(c) The provisions of this Section 9.5 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement the consummation of the transactions contemplated hereby, the
repayment of the Debentures, the invalidity or unenforceability of any term or
provision of this Agreement or any other Investment Document, or any
investigation made by or on behalf of the Lender. All amounts due under this
Section 9.5 shall be payable on written demand therefor.
SECTION 9.6 Waiver of Consequential and Punitive Damages. Each of the
Borrowers and the Holders hereby waive to the fullest extent permitted by law
all claims to consequential and punitive damages in any lawsuit or other legal
action brought by any of them against any other of them in respect of any claim
among or between any of them arising under this Agreement, the other Investment
Documents, or any other agreement or agreements between or among any of them at
any time, including any such agreements, whether written or oral, made or
alleged to have been made at any time prior to the Closing Date, and all
agreements made hereafter or otherwise, and any and all claims arising under
common law or under any statute of any state or the United States of America,
including any thereof in contract, tort, strict liability or otherwise, whether
any such claims be now existing or hereafter arising, now known or unknown. In
making this waiver, the Holders and the Borrowers acknowledge and agree that
there shall be no claims for consequential or punitive damages made by the
Holders against any Borrower and there shall be no claims for consequential or
punitive damages made against the Holders by any Borrower. The Holders and the
Borrowers acknowledge and agree that this waiver of claims for consequential
damages and punitive damages is a material element of the consideration for this
Agreement.
45
SECTION 9.7 Applicable Law. THIS AGREEMENT AND THE OTHER INVESTMENT
DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN OTHER INVESTMENT DOCUMENTS)
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK (EXCLUDING CONFLICTS OF LAWS PROVISIONS).
SECTION 9.8 Waivers; Amendment.
(a) No failure or delay of a Holder in exercising any power
or right hereunder or under any other Investment Document shall operate as a
waiver thereof nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Holders hereunder and under
the other Investment Documents are cumulative and are not exclusive of any
rights or remedies that it would otherwise have. No waiver of any provision of
this Agreement or any other Investment Document or consent to any departure by
the Borrowers therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Borrowers in any case shall entitle the Borrowers to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrowers and the Holders.
SECTION 9.9 Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to the investment,
together with all fees, charges, warrants and other amounts which are treated as
interest on the investment under applicable law (collectively the "Charges"),
shall exceed the maximum lawful rate (the "Maximum Rate") which may be
contracted for, charged, taken, received or reserved by the Holders holding the
investment in accordance with applicable law, the rate of interest payable in
respect of the investment hereunder, together with all Charges payable in
respect thereof shall be limited to the Maximum Rate.
SECTION 9.10 Entire Agreement. This Agreement and the other Investment
Documents constitute the entire contract between the parties relative to the
subject matter hereof. Any other previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement and the
other Investment Documents. Nothing in this Agreement or in the other Investment
Documents, expressed or implied, is intended to confer upon any party other than
the parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Investment Documents.
SECTION 9.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER INVESTMENT
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF
46
ANY OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER INVESTMENT DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.11.
SECTION 9.12 Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Investment Document
should be held invalid, illegal or unenforceable in any way, the validity,
legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction). The parties shall endeavor in good faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
SECTION 9.13 Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract and shall become effective as provided in Section
9.3. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 9.14 Heading. Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of or to be taken into consideration in interpreting,
this Agreement.
SECTION 9.15 Jurisdiction; Consent to Service of Process.
(a) Each of the Borrowers hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any Maryland State court or Federal court of the United States
of America sitting in the State of Maryland, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Investment Documents, or for recognition or enforcement
of any judgment and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in the State of Maryland or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Holders may otherwise have to bring any action or proceeding
relating to this Agreement or the other Investment Documents against such
Borrower or their properties in the courts of any jurisdiction.
(b) Each of the Borrowers hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit action or proceeding arising out of or relating to
47
this Agreement or the other Investment Documents in any Maryland state or
Federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.1. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 9.16 Consents and Approvals; Defaults.
(a) Subject to the terms of Section 9.16(c), to the extent
that (i) the terms of this Agreement or any of the other Investment Documents
require the Borrowers to obtain the consent or approval of the Holders, (ii) the
Borrowers seek an amendment to or termination of any of the terms of this
Agreement or any of the Investment Documents, or (iii) the Borrowers seek a
waiver of any right granted to the Holders under this Agreement or any of the
Investment Documents, such consent, approval, action, termination, amendment or
waiver (each, an "Approval") shall be made by the Holders of Debentures
representing at least 51% of the aggregate principal amount outstanding under
all of the Debentures.
(b) Subject to the terms of Section 9.16(c), to the extent
that the terms of this Agreement or any of the other Investment Documents
require or permit the Holders to take any enforcement action, including but not
limited to declaring a payment default or other Event of Default or accelerating
amounts due under any of the Investment Documents, each Holder shall be
permitted to make such declaration or acceleration and to exercise all of its
rights and remedies under the Investment Documents individually as to the
obligations of the Borrowers and their Subsidiaries to such Holder subject to
the terms of the Subordination Agreement.
(c) Notwithstanding anything to the contrary contained in
Section 9.16(a) or 9.16(b), the Holders shall not, without the prior written
consent and approval of all of the affected Holders, amend, modify, terminate or
obtain a waiver of any provision of this Agreement or any of the Investment
Documents, which will have the effect of (i) reducing the principal amount of
any Debentures or of any payment required to be made to the Holders hereunder,
or modifying the terms of a payment or prepayment thereof; (ii) reducing the
Interest Rate, or extend the time for payment of interest under any Debentures;
or (iii) releasing the Borrowers, any Guarantor or other obligor from any
obligation under this Agreement or any of the other Investment Documents.
(d) Each Holder agrees that, for the benefit of the other
Holders, any proceeds received upon enforcement by such Holder of its rights and
remedies under this Agreement, will be divided, pro rata, among all Holders.
SECTION 9.17 Relationship of the Parties; Advice of Counsel. This
Agreement provides for the making of an investment by the Holders, in its
capacity as an investor, in the Borrowers, in their capacity as borrowers, and
for the payment of interest and repayment of principal by the Borrowers to the
Holders. The provisions herein for compliance with financial covenants, if any,
and delivery of financial statements are intended solely for the benefit of the
Holders to protect their interests as investors in assuring payments of interest
and repayment of
48
principal, and nothing contained in this Agreement shall be construed as
permitting or obligating the Holders to act as a financial or business advisor
or consultant to the Borrowers, as permitting or obligating the Holders to
control the Borrowers or to conduct the Borrowers' operations, as creating any
fiduciary obligation on the part of the Holders to the Borrowers, or as creating
any joint venture, agency or other relationship between the parties other than
as explicitly and specifically stated in this Agreement. The Holders are not
(and shall not be construed as) a partner, joint venturer, alter-ego, manager,
controlling person, operator or other business participant of any kind of the
Borrowers; neither the Holders nor the Borrowers intend that the Holders assume
such status, and, accordingly, the Holders shall not be deemed responsible for
(or a participant in) any acts or omissions of any Borrower or any of its
partners. Each of the Holders and each of the Borrowers represents and warrants
to the other that it has had the advice of experienced counsel of its own
choosing in connection with the negotiation and execution of this Agreement and
with respect to all matters contained herein.
SECTION 9.18 Confidentiality Each of the Holders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to (i) any permitted transferee of any of its
rights or obligations under this Agreement or (ii) any direct or indirect
contractual counterparty or prospective counterparty (or such contractual
counterparty's or prospective counterparty's professional advisor) to any credit
derivative transaction relating to obligations of the Company or its
Subsidiaries, (g) with the consent of the Borrowers, as applicable, (h) to the
extent such Information (i) becomes publicly available other than as a result of
a breach of this Section or (ii) becomes available to any Holder on a
nonconfidential basis from a source other than the Borrowers provided that such
source is not bound by a confidentiality agreement. For the purposes of this
Section, "Information" means all information received from the Borrowers or
their Subsidiaries relating to the Borrowers or their Subsidiaries or their
business, other than any such information that is available to any Holder on a
nonconfidential basis prior to disclosure by the Borrowers or their
Subsidiaries; provided that, in the case of information received from the
Borrowers or any Subsidiary after the Closing Date, such information is clearly
identified (in a reasonable manner) at the time of delivery as confidential. Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
SECTION 9.19 Registration and Transfer of Debentures.
(a) The Company will keep at its principal office a register
in which the Borrowers will provide for the registration of the Debentures and
their transfer. The Borrowers may treat any Person in whose name any Debenture
is registered on such register as the owner thereof for the purpose of receiving
payment of the principal of and interest on such Debenture
49
and for all other purposes, whether or not such Debenture shall be overdue, and
the Borrowers shall not be affected by any notice to the contrary from any
Person other than the applicable Holder. All references in this Agreement to a
"Holder" of any Debenture shall mean the Person in whose name such Debenture is
at the time registered on such register.
(b) Upon surrender of any Debenture for registration of
transfer or for exchange to the Company at its principal office, the Borrowers
at their expense will execute and deliver in exchange therefor a new Debenture
or Debentures, as the case may be, of the same type in denominations of at least
$100,000 (except a Debenture may be issued in a lesser principal amount if the
unpaid principal amount of the surrendered Debenture is not evenly divisible by,
or is less than, $100,000), as requested by the holder or transferee, which
aggregate the unpaid principal amount of such Debenture, registered as such
holder or transferee may request, dated so that there will be no loss of
interest on such surrendered Debenture and otherwise of like tenor.
(c) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Debenture and, in
the case of any such loss, theft or destruction of any Debenture, upon delivery
of an indemnity bond in such reasonable amount as the Company may determine (or
an unsecured indemnity agreement from the Holder reasonably satisfactory to the
Company), or, in the case of any such mutilation, upon the surrender of such
Debenture for cancellation to the Company at its principal office, the Borrowers
at their expense will execute and deliver, in lieu thereof, a new Debenture of
the same class and of like tenor, dated so that there will be no loss of
interest on (and registered in the name of the holder of) such lost, stolen,
destroyed or mutilated Debenture. Any Debenture in lieu of which any such new
Debenture has been so executed and delivered by the Borrowers shall be deemed to
be not outstanding for any purpose of this Agreement.
SECTION 9.20 Restatement of Initial Investment Agreement. Pursuant to
Sections 9.8 and 9.16 of the Initial Investment Agreement, the parties hereto
hereby amend and restate, in its entirety, the Initial Investment Agreement by
execution and delivery of this Agreement.
{Signatures next page}
50
IN WITNESS WHEREOF, the parties hereto have caused this First Amended
and Restated Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
COMPANY:
SUNSOURCE INC.
By: /S/ Joseph M. Corvino
Name:
Title:
SIC:
SUNSOURCE INVESTMENT COMPANY, INC.
By: /S/ Joseph M. Corvino
Name:
Title:
HILLMAN:
THE HILLMAN GROUP, INC.
By: /S/ James P. Waters
Name:
Title: V P Finance
LENDER:
ALLIED CAPITAL CORPORATION
By: /S/ Daniel L. Russell
Name:
Title: Principal
51